Every day in business we make choices that carry real risk. The next big investment, the hiring decision, or how to navigate a supply-chain shock. Some days it feels like clockwork: gather the data, run the numbers, and the optimal path clicks into place. Other days it’s pure fog – a swirl of incomplete information, gut feelings and second-guessing.
Karl Popper, the philosopher of science, gave us a simple but powerful metaphor in his 1966 lecture Of Clouds and Clocks. Picture every system on a spectrum. At one end are clocks – precise, regular, predictable machines like the solar system or a well-engineered financial model. At the other end are clouds – irregular swarms of gnats or market sentiment where each particle seems random yet the whole somehow holds together. Popper’s punchline? All clocks are clouds. Even the most precise mechanism has tiny irregularities – friction, quantum jitter, the unexpected. The old idea that everything, including human minds, is a flawless deterministic clock is simply wrong. Reality is a mix of both. This insight matters enormously for decision making and risk.
First, the clock trap. Many risk models and strategy frameworks treat decisions as pure mechanics. Input the variables – cash flows, probabilities, discount rates – and out pops the answer. Behavioural economists call it rational choice theory. In practice it leads to paralysis. You wait for perfect data that never arrives. Or you follow the spreadsheet slavishly and miss the second-order effects that actually matter. As Arthur Compton, the physicist who inspired Popper, once asked: if our actions are just atoms following immutable laws, why bother trying? Effort and responsibility become illusions.
This is a common trap in boardrooms. A beautifully engineered DCF model convinces everyone the deal is “low risk”. Then geopolitics or a competitor’s move turns the clock into smoke. The opposite danger is the cloud trap. Here decisions become pure emotion or intuition. “Trust your gut.” “Let the market decide.” In uncertain times this feels liberating but it is no better. Pure randomness offers no explanation for purposeful choice. You end up with impulsive bets or endless procrastination dressed up as mindfulness.
Popper’s solution sits in the middle, so called plastic controls. These are flexible, hierarchical systems with soft feedback – not rigid gears, not random fog. Think of a soap bubble. The soapy film gently shapes the chaotic air inside; the air pushes back. Mutual, adaptive control. In human decision making this means treating your mind as an evolutionary problem-solving engine. You form bold conjectures – creative guesses about what to do. You criticise them hard: “What if this fails? Does it fit our risk appetite? What are we missing?” Bad ideas die in your head rather than in the P&L account Fresh evidence or reflection lets you revise.
This is trial and error with purpose. Your intentions and theories exert real downward influence on events. Purposes shape behaviour; behaviour feeds back into better purposes.
Take a real-world example. A fund manager faces a volatile energy market (sound familiar?). Clock thinking says optimise the portfolio on historical correlations. Cloud thinking says follow the latest headline. Plastic control says: generate three scenarios, test them ruthlessly against known unknowns, run small experiments or pilot trades, and let the weakest option die. The final allocation emerges – reasoned, adaptable, alive.
The beauty of this view is its practicality for risk professionals. It explains why effort in thinking actually counts. Decisions are not illusions; they are the spearheads of problem-solving. It also builds humility. Every choice carries some cloudiness. You will never have perfect information. But progress comes from surviving criticism, not from chasing certainty.
Next time you face a high-stakes call, pause and ask, am I treating this as a clock (rigid rules and models), a cloud (pure instinct), or a genuine plastic system (creative conjecture plus fierce criticism)? The third path turns decision making from a source of anxiety into a genuine source of competitive edge.
We are not passive cogs in a machine or drifting mist. We are plastic controllers – capable of shaping outcomes through reason and creativity even in the face of genuine uncertainty. This the optimistic lesson Popper left us.
More on Popper’s Lecture
Gerald Ashley 
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