Society of Decision Professionals (SDP) and the Decision Analysis Society (DAS) invites you to join our June 2025 Webinar:
“I'm Smarter, But am I Better Off? Knightian Uncertainty in the Age of Artificial Intelligence”
Featuring: David Townsend, PhD - Virginia Tech
Abstract:
Strategic decision making in technology markets now unfolds at the intersection of human creativity and increasingly autonomous artificial-intelligence (AI) agents. In recent years, as we work to adapt decision strategies to this emerging era of AI, we increasingly confront a landscape in which demand can surge or evaporate overnight, production costs fall along AI-driven learning curves, and algorithmic rivals copy, undercut, or out-innovate incumbents at machine speed. My research work addresses these problems through an in-depth analysis of the implications of problems of Knightian uncertainty for this emerging AI era.
Knightian uncertainty captures the limits of prediction when data, interpretive patterns, and causal links are incomplete and the future is unknowable. In recent research, I revisit Knight’s original work, incorporating insights from his published and unpublished papers, to break Knightian uncertainty down into four critical decision problems:
Actor ignorance arises because even the most data-hungry founders—and their AI copilots—possess only partial, often biased, mental models of demand, cost and the strategic problems they are facing.
Practical indeterminism channels the tiny random shocks—an unexpected GPU shortage, unanticipated tariffs—into a cascading set of obstacles that through AI-optimized supply chains and pricing bots to produce outcomes no probabilistic average could anticipate.
Agentic novelty captures the constant appearance of new players and tactics: generative-AI breakthroughs slash development times, self-tuning algorithms discover unorthodox product features, and software agents negotiate partnerships in milliseconds, altering the very choice set open to human strategists.
Competitive recursion amplifies the problems, generating competitive responses to every move—from an algorithmic price cut to an automated feature rollout—changes the landscape that the next move will be computed on, triggering accelerating moves and countermoves among AI-enabled entrepreneurs.
By examining these four problems in the context of future AI-accelerated competition, my work is focused on exploring how various combinations of human judgement and adaptive algorithms remain robust when ignorance, indeterminism, novelty, and recursion interact. These insights offer decision professionals a richer language for framing decision problems through the lens of a Knightian uncertainty and a toolkit for designing decision strategies that remain resilient when the AI-accelerated future is fundamentally open-ended and unknowable.
Meet the Speaker:
David Townsend, PhD
Digges Family Professor Entrepreneurial Leadership, Pamplin College of Business,
Virginia Tech
David Townsend serves as the Digges Family Professor of Entrepreneurial Leadership in the Department of Management in the Pamplin College of Business at Virginia Tech, the Academic Director of the Apex Center for Entrepreneur. He also serves the Editor-in-Chief of Entrepreneur & Innovation Exchange, a leading global platform for translating academic research for practicing entrepreneurs, reaching more than 22 million readers across the globe in the 2024 – 2025 publication year. His research explores fundamental questions at the intersection of uncertainty, artificial intelligence, and entrepreneurial strategy.
Moderator:
Manel Baucells
Lynch Family Associate Professor of Business Administration at the Darden School of Business
Manel Baucells teaches Quantitative Analysis courses in Darden’s MBA and Executive Education programs. Manel research focuses on decision analysis, including search and learning, probability modeling, and incorporating psychological realism into consumer behavior models by considering factors such as reference price comparison, mental accounting, and satiation. He has served as department editor for the journal Management Science and is currently associate editor for Operations Research.
Manel has a broad international experience in business education. He has lectured MBA’s and executives in North America, Europe, China, Russia, Latin America, and Africa. He has held visiting research positions at Duke University, UCLA, London Business School, MIT, and Erasmus University. While at IESE, he won the Excellence in Course Development award as well as the Excellence in research award, both given by the Alumni Association.
Manel and Rakesh Sarin (UCLA) have published the book Engineering Happiness (UC Press), that has received the 2014 best publication award by the Decision Analysis society. The book applies principles of behavioral economics to improve life outcomes.