Our new world of sensors, smartphones, and connected devices means more data than ever — but does it also mean that it’s getting easier to make well-informed decisions? Quite the contrary, in fact. What’s more important than how much data you have is how it frames the way you think. Too often, leaders under pressure to appear decisive attempt to deal with complex issues with simple rules or analogies, selectively using data to justify poor judgment calls. But what if rather than trying to be right, you could be less wrong over time?
Develop a “Probabilistic” Approach to Managing Uncertainty
When faced with uncertainty, how should leaders react? Should they make a big bet, hedge their position, or just wait and see? We naturally tend to see situations in one of two ways: either events are certain and can therefore be managed by planning, processes, and reliable budgets; or they are uncertain, and we cannot manage them well at all. Fortunately, there is another approach. Imagine a billiard table. You put on a blindfold and your assistant randomly rolls a ball across the table. They take note of where it stops rolling. Your job is to figure out where the ball is. All you can really do at this point is make a random guess. Now imagine that you ask your assistant to drop some more balls on the table and tell you whether they stop to the left or right of the first ball. If all the balls stop to the right, what can you say about the position of the first ball? If more balls are thrown, how does this improve your knowledge of the position of the first ball? In fact, throw after throw, you should be able to narrow down the area in which the first ball probably lies. This is an example of probabilistic thinking. Developing a probabilistic mindset allows you to be better prepared for the uncertainties and complexities of the Algorithmic Age. Even when events are determined by an infinitely complex set of factors, probabilistic thinking can help us identify the most likely outcomes and the best decisions to make.