Adaptive Strategies Blog

You may not have noticed, but I took a week off. OK, maybe more. Went to the UK, rewrote my portion of a forthcoming book (I think you’ll like it). And I was just too tired to think. Been there? But I’m back.

I was browsing the books at my local Border’s shop and came across an interesting title, so I took my coffee and treated Border’s like a library. Anyway, the book (Inside the Mind of the Turtles) was written by Curtis Faith a former stock trader and he was writing about the mind of those people who make big bets every day. Interesting stuff.

I came across a section about managing risk and uncertainty – NOW he got my attention. His list of seven actions was nice advice and one of them (“take reasoned risks”) really caught my attention. How do you reason about uncertainty? I mean, it’s uncertain. Right? But the more I thought about it, the more I realized that instead of throwing our hands up in despair, we really do need to reason about risk during uncertain times. In fact, we need to do this more than ever.

Here are a few ways I think we might go about taking reasoned risks. I’d appreciate it if you would add to the list.

• Think in terms of ranges instead of point estimates. (I’m a small business owner, revenue for 2010 won’t be as high as 2008, but it won’t be zero. I think it’s reasonable to assume a budget built on falling into a 60 -80% of 2008 revenue. Now I can go by some equipment rather than wait for “the recovery.”)
• Learn from others. How are my competitors handling this uncertainty? What about companies in other industries? What about historical analogs?
• Focus on the future, not the past. My sales in 2008 are an interesting, but historical, data point. Who will need my services in 2010? What changes will my clients be dealing with? What trends will continue and what trends cannot continue? (Side Note: It seems to me that in 2007 and 2008 the entire building and mortgage industry assumed that housing values would escalate FOREVER. Didn’t you just know that trend had to abate?)
• Study the pressures for change affecting your industry and your customers’ industry. Which pressures might bring gentle change? Which pressures might trigger breakpoints?

By the way, I’ll tell you the other six actions if someone asks me. That way I’ll know that at least one person read this post.

Bye for now. Don’t forget to add to my list. How do you go about taking “reasoned” risks?

ATTENTION! ATTENTION PLEASE!

Please excuse me while I get up on my metaphorical soapbox and have a short rant.

We are becoming intellectually lazy and losing our ability to reason!! 50% of American households buy a newspaper today while over 100% bought a newspaper in 1950! (Over 100% because we had morning and evening editions then.)

OK, I’m down from the soapbox and I have a question for you. Is the above conclusion a good conclusion? Or am I simply A CRABBY OLD MAN ranting about the “younger generation?”

Not sure? Here, try this one instead. “People who drink green tea show a lower incidence of heart disease. Therefore, drinking green tea reduces the risk of heart disease.”

OK, maybe I am a crabby old man, but both examples show bad reasoning.

In the first instance I used emotion (bold type and double exclamation points) and then gave you an unrelated fact to “back up” my statement. Hmmm, do you ever see that kind of “reasoning” coming from our politicians, or talk-show hosts? Maybe in the current healthcare “debate?” In the second example I gave you a conclusion based on a related fact – but a fact that only showed correlation, not a cause.

If you want to be prepared for the future you have to reason well and good reasoning requires that we challenge the “facts” and assumptions that underlie our thinking. Good reasoning is informed through ongoing learning; and new data comes through the skill of observing. Finally, we test our reasoning and the results of our decisions when we reflect.

But let’s get back to the rant of intellectual laziness. (I like ranting, it comes with age.) Good thinking requires that we use evidence to support our conclusions. So here is my Prepared Mind question of the day: Where do you get your evidence for the decisions and actions that guide you and your daily life? Do you take the time to educate your thinking process? Are you willing to plow though a fifteen page article in Atlantic Monthly magazine or do you pick-up your “factoids” from USA Today? By the way, newspaper readership is down significantly, so where are we getting “the news.” And, for that matter, how much of the news on TV or the web or radio is really important news?

Reasoning is hard work and it takes time; so, sometimes, we get a bit lazy and let others do our reasoning for us. Or, we let opinions substitute for reasoning. And, more often than not, we form our opinions based on “received knowledge.” That is, we let others tell us what to think. We see this all the time in people who are devoted to a political or religious ideology. (Does Rush Limbaugh or (now Senator) Al Franken do your thinking for you?) When this happens we fall into the traps of never looking for disconfirming information or not considering other points of view.

Going back to my opening rant, I really do believe that we are becoming intellectually lazy. And I mean ALL of us, not just the younger generation. That’s my opinion and I’m sticking to it. Now it’s your job to prove me wrong. You can give me your opinion (which I’ll ignore because it does not support my opinion.) Or you can reason with me. It’s your choice.

Come on – REASON with me!!!!!