As it turns out, betting on decisions can improve the quality of the choices a leader makes. Most major decisions are fraught with uncertainty, hidden information, risks, and unintended consequences. Luck plays a bigger part in most decisions than leaders are generally comfortable to admit. But coming to grips with luck and uncertainty is exactly how the best leaders become better decision-makers.
I agree that thinking in terms of bets or probabilities can help. In addition to assessing decisions. Learning to use a decision tree with probabilities gives a great tool for complex situations.
Another consideration is the you should also think about WHY you are estimating probabilities. That is, what is the underlying decision (or is there one at all)? Sometimes your action/decision is fixed and the probabilities don’t affect anything. Examples are when the payoff is so high that the bet mist be made regardless of whether it s 70% or 30%. I recently had a case where we are one of three bidders on a major sale. Without more information, it was pointed out to me that this meant we only have a one in three chance of winning (67% chance of losing). Some of my team members felt it was important to mention this and “be realistic”. The only decision was whether to bid or not.
Focusing on the “realistic” bet was demotivating. If we have a 67% chance of losing, why stay up late refining our proposal and making if more clear and more compelling? Why make the effort to dig into costs to see if we can be more price competitive? Why try to come up with innovative ways to differentiate our solution. Just use the standard template and hope for the best, we are probably going to lose anyway, right?
Remember that you are just guessing at the bet probabilities. Dig deeper and look at how you can CHANGE the probabilities, not just decide to bet or not.
Don’t forget that saying the probabilities out loud affects how your team behaves so be intentional about it.
Good exercise. If it's true that you only had a 30% chance of winning a bid it might create the situation your team needed to ask, "What can we control that actually increase our probability to 50% even if there are two other bidders?"
The assurance of that “Bet” can really be justified in the design and manufacturability of the product.
Another way is product generation. While the current generation could be Labor intensive the learning curve and design of the second generation can be so improved through robotics and assembly free labor touch time that the cost improvement (opening the door for out the door sell lower) price cannot be matched.
Well, this is an interesting perspective. My first thought was - if we use bets as metaphors for decisions, doesn't that mean we can't be wrong, because being wrong means we loose? If we're fearful of being wrong and loosing, how then do we ensure people feel able to be humble, vulnerable and speak up?
But then, I thought - ok, I wonder if we should be thinking about this from the perspective of options appraisals and risk assessments instead? If so, then I can see that thinking about a decision as a bet is more helpful because when we make bets, someone could win, and someone could loose....
Thinking in probabilities might be a more exact way to say it than in bets.
You bring up an interesting point about whether we "can't be wrong." You question likely makes the point of the entry even deeper. Outcomes shouldn't be the key measurement as they are never 100%.
"...I believe in taking calculated risks, not gambling..." (Jones, 2018). I tend to agree with Steve Jones. He gives us a decent blueprint for success in business, perhaps even life with his book: NO OFF SEASON. Calculated risks and being nice are two traits that stood out to me. Regardless of our opinions/experiences about Allied Universal Security Services; I think we can all agree he gives us some solid food for thought.
I agree that thinking in terms of bets or probabilities can help. In addition to assessing decisions. Learning to use a decision tree with probabilities gives a great tool for complex situations.
Another consideration is the you should also think about WHY you are estimating probabilities. That is, what is the underlying decision (or is there one at all)? Sometimes your action/decision is fixed and the probabilities don’t affect anything. Examples are when the payoff is so high that the bet mist be made regardless of whether it s 70% or 30%. I recently had a case where we are one of three bidders on a major sale. Without more information, it was pointed out to me that this meant we only have a one in three chance of winning (67% chance of losing). Some of my team members felt it was important to mention this and “be realistic”. The only decision was whether to bid or not.
Focusing on the “realistic” bet was demotivating. If we have a 67% chance of losing, why stay up late refining our proposal and making if more clear and more compelling? Why make the effort to dig into costs to see if we can be more price competitive? Why try to come up with innovative ways to differentiate our solution. Just use the standard template and hope for the best, we are probably going to lose anyway, right?
Remember that you are just guessing at the bet probabilities. Dig deeper and look at how you can CHANGE the probabilities, not just decide to bet or not.
Don’t forget that saying the probabilities out loud affects how your team behaves so be intentional about it.
Good exercise. If it's true that you only had a 30% chance of winning a bid it might create the situation your team needed to ask, "What can we control that actually increase our probability to 50% even if there are two other bidders?"
Clever topic this AM!
The assurance of that “Bet” can really be justified in the design and manufacturability of the product.
Another way is product generation. While the current generation could be Labor intensive the learning curve and design of the second generation can be so improved through robotics and assembly free labor touch time that the cost improvement (opening the door for out the door sell lower) price cannot be matched.
Innovation, time and being Driven!
Great topic!
Have a Great week Ya’ll!
Well, this is an interesting perspective. My first thought was - if we use bets as metaphors for decisions, doesn't that mean we can't be wrong, because being wrong means we loose? If we're fearful of being wrong and loosing, how then do we ensure people feel able to be humble, vulnerable and speak up?
But then, I thought - ok, I wonder if we should be thinking about this from the perspective of options appraisals and risk assessments instead? If so, then I can see that thinking about a decision as a bet is more helpful because when we make bets, someone could win, and someone could loose....
Less of a metaphor, more of a framework.
Thinking in probabilities might be a more exact way to say it than in bets.
You bring up an interesting point about whether we "can't be wrong." You question likely makes the point of the entry even deeper. Outcomes shouldn't be the key measurement as they are never 100%.
Good morning,
"...I believe in taking calculated risks, not gambling..." (Jones, 2018). I tend to agree with Steve Jones. He gives us a decent blueprint for success in business, perhaps even life with his book: NO OFF SEASON. Calculated risks and being nice are two traits that stood out to me. Regardless of our opinions/experiences about Allied Universal Security Services; I think we can all agree he gives us some solid food for thought.
Thanks for your time.
One still has to determine where their risk tolerance resides, even when calculated.
Did Jones admit to be a card player, Joe? A non-gambling card player? :)
Haha.
That's a good one.