Decision making: The absurdity of being too certain as business leader

Over time having a track record of making wise decisions makes all the difference.

Photo credit: Shutterstock

“Doubt is not a pleasant condition, but certainty is an absurd one”- Voltaire.

What is the difference between success and failure in business? How is it that Karatina small trader Sarah thrives, and Ivy league educated Bob’s private equity firm went belly up? What is the leverage point factor that decides who is an insightful manager, and what makes a dismal business leader?

In one word: Choices. Over time, having a track record of making wise decisions makes all the difference. Wisdom means having an awareness of the value of uncertainty. Absolute certainty can be the domain of idiots.

Rely on gut feel or data?

When you make a management decision do you trust your intuition, or do you rely on the data, the equivalent of empirical observations?

In the 1970’s two psychologists, Daniel Kahneman and Amos Tversky, then unknown obscure academics wrote a series of original studies that were the undoing of assumptions about decision making.

In essence: their work showed the way is which the human mind consistently made mistakes, when forced to make judgements in uncertain situations. Their Nobel Prize winning theory forever altered our perception of reality, both in management and across the disciplines.

Dilemma faced by managers is - do you trust your gut feel intuition, or do you refer to the numbers? Do you allow an artificial intelligence algorithm to make the decision for you? After all, in our high tech Google world it’s an algorithm that determines what you are going to watch next on social media.

Do you divide everything into two?

The joke is: “There are two types of people. Those that divide everything into two and those that don’t.’ Perhaps the issue is not a binary ‘either or’ choice? Do you go with the hard numbers or trust your heart?

Perhaps the real issue, is to have an awareness of the thinking process. To think about thinking. Critical key point is to have a feedback mechanism. In systems theory, any bounded system eventually breaks down, becomes dysfunctional if it does not have a feedback mechanism that allows the system to adjust it’s behaviour, that occurs at the interface with the environment.

Blink: The Power of Thinking Without Thinking, a fascinating 2005 book by Canadian writer, Malcolm Gladwell's sheds light on the adaptive unconscious: mental processes that work rapidly and automatically from relatively little information. The good news is that intuition can be ‘spot on correct’, and unfortunately, can at times be desperately wrong, relying on a programme of hidden subconscious bias.

Surprise of black swan events

The recent Gen Z protests in Kenya have impacted society broadly, and the business community in particular are a black swan event. Nassim Nicholas Taleb coined the black swan theory as a metaphor that describes an event that comes as a total surprise, has a profound significant impact, often changing the course of history.

Invention of the wheel, Wall Street crashes, Harry Potter and the creation of the internet are all black swans. Yet with the benefit of hindsight, opportunistic pundits will tell you, they saw it coming – falsely rationalising after the fact. [Taleb’s term is based on a Latin expression which presumed that black swans did not exist.]

Both sports announcers, political and business pundits often radically revise their narrative to best fit what just happened. Historians do the same when they impose a false order on past fragments of random events. As Amos Tversky explains “the mind arranged historical events in ways that made past events feel a lot less uncertain, and a lot more predictable, than they actually were”.

Everyone in the same boat

We are all in this Noah like ark of business together. How do we make better decisions, create more informed insightful choices? Perhaps the answer is to be able to step back, to imagine watching ourselves from a distance, from across the room.

To put some cerebral space between our strongly held - ego driven - opinions that prop up our [undoubtedly prejudiced] world view, and have the humility to recognise that ‘perhaps we are wrong’. Guess it begins with listening, more than talking. And, to have an awareness of our thinking process, to understand how our central processing unit operates.

Recognise the possibility of foolishness generated by a mind-set of: absolute certainty. Don’t fall into the trap of Amos Tversky’s observation: “He who sees the past as surprise-free is bound to have a future full of surprises.”

David is a director at aCatalyst Consulting | [email protected]

PAYE Tax Calculator

Note: The results are not exact but very close to the actual.