Human behavior is often driven by fear, uncertainty and doubt.  That gut-wrenching feeling you get when walking down a dark alley is rooted in millions of years of human evolution. In the 21st Century, we try to mitigate those primal fears by increasing our knowledge and sense of control — efforts that explain why both insurance and lobbying are multi-billion-dollar industries.

Despite our attempts to control or foresee it, the future remains unknowable. Nowhere is that perhaps more true than when investing, where a brilliant idea may not necessarily translate into a lucrative one. Yet, successful investors have learned how to embrace uncertainty.

In an excellent essay entitled “Investing in the Unknown and Unknowable,” Harvard economist Richard Zeckhauser argues that conventional financial wisdom does not apply in what he calls UU (unknown and unknowable) situations.

Three takeaways stuck with us:

• Make investments when your upside is larger than your downside.
  This may seem obvious but is it really?
• Beware of asymmetrical information.
  In this situation, you have less Information than others who are key impactors of the investment’s success or failure. In your due diligence, be sure you’ve uncovered everything that is pertinent, that you know what the train looks like so you can see it coming. Avoid the overconfidence bug, and keep looking for the imbalance of data and insight. But if you’re the one holding all the cards — a “UU” investment might be the greatest opportunity for a big return.
• Stacking the odds:
  You know it’s time to invest when you have the right combination of skill and expected financial payout stacking the odds in your favor. The power of complimentary applied skills should not be undervalued and can quickly compound into greater success.

When faced with an investment opportunity that may qualify as containing many qualities of the “unknown and unknowable,” clear thinking may vastly improve investment decisions and yield substantial benefits, especially when competition Is limited and prices out of line. In this article, Zeckhauser clearly states that “learning to invest more wisely in a UU world may be the most promising way to significantly bolster your prosperity.”