It is finally over and the country is shocked at the outcome. Why?
Daily I see overconfidence in business. I see too much faith placed in forecasts. I see big bets placed on anticipated market growth. I see investment in businesses that are near bankruptcy. I see these things because people tend toward certainty. They start with a belief and then look for all evidence supporting that belief while ignoring anything that contradicts that belief.
We know in physics that at the atomic level everything is uncertain. The universe is a probabilistic place to live and yet we still cling to guesses while thinking them ‘certain’.
I have no desire to get into a discussion about the U.S. election. My caution is you, the business owner who holds a belief with certainty in anything. If you are certain your business is going to grow by 50% next year, I will tell you that the stronger you believe in a guess, the more likely it is wrong.
How are we supposed to plan anything if everything is uncertain?
It isn’t easy. If it was, we would all be billionaires. We can improve our chances of making better guesses by doing a few things like:
- Think. We do not do nearly enough thinking.
- Lot at data and be open to data that conflicts with what you want to hear.
- Listen to others. Don’t rely on one source for your advice but remember to not add extra credence to those who agree with you. Don’t fall victim to listening to only what you want to hear.
- Hedge your bets. That means that you should always have a backup plan that can go into action on short notice. What if some thing collapses your market? Are you ready now with an alternative? What if a competitor hits the market with comparable product at half the price? Are you ready today to deal with that?
There is always shock with failure. That’s because we do not plan for that possibility. If we plan with uncertainty in mind, we will survive the roughest storms ahead.
Want a real world example?
I spoke at a marijuana convention this past summer. The market in Oregon was blooming and it felt like a gold rush to get in to the industry. I said in my presentation, “what will you do if Trump is elected and decides that his justice department will not tolerate states breaking Federal law?” There was hearty laughter all around.
I’ll bet they aren’t laughing today.
The smart ones went to work on backup plans. There is a product made from marijuana called CBD. CBD has some potential health benefits, doesn’t get you high, is fully legal to sell in all 50 states and is very popular with consumers. Why not plan to move a high percentage of your business toward CBD production and novel ways of delivering CBD just in case the enforcement of existing laws shifts?
This same strategy applies to any product or service.
Takeaways?
- Forecasting is a nice word for guessing
- There is always a degree of uncertainty
- Hedge your bets
I want you to have a spectacular 2017 and you can. Just be smart.
Chris Reich, TeachU