Johns hopkins innovation factory entrepreneur development program #5

Session #5: Uncertainty

Presented by

Glenn Alpert

Entrepreneur Development Seminar


Uncertainty

• Uncertainty is a way of life for an entrepreneur.

• Many events that will happen to you will be non-linear or discontinuous.

When you are looking for opportunities, you tend to seek them out and

they are more likely to happen. Previous events can’t explain how the

next event occurs.

• If you previously worked in a job where not too much changed from

year to year, being an entrepreneur is a much different experience.

• Risk equates to uncertainty. If success were certain, everyone would do

it and the rewards would be driven down to 0 by oversupply of

entrepreneurs.


Uncertainty

How will uncertainty impact you?

• Will your business succeed?

• How will customers receive your product or service?

• Will you be able to sell your product?

• Will your product be widely adopted, or not?

• What will be the outcome of an important meeting?

• Will a particular person or company become a paying customer?

• Are you a genius or an imbecile?

• What will your entrepreneurial journey lead you towards?

• What to say and what to do in key situations?

• Will a plan work when you try to execute?

• What are a particular person’s intentions?


Uncertainty

• At the beginning, uncertainty is a way of life.

• The goal of an entrepreneur: continually reduce risk and uncertainty.

• Like drilling a tunnel through a mountain – it takes a lot of effort to drill

and cover new territory, and if you drill in the wrong direction, you may

not reach the other side.

• You get better at drilling over time, but you still need to reach the other

side or all you will have to show is a learning experience (which is still

good).

• Just get used to it!

Predictability

Profitability

Scalability

Repeatability

Validation

Creation

Confirmation

Ideation


Roadmap

Reduce Risk

Incre

ase V

alu

e

Credit: Harvard i-Lab


Causes

• Lack of information

• Lack of precedent

• Complex factors

• New situations

• Factors beyond your control

• Randomness

• Competition / someone working against you


Certainty vs. Uncertainty

Unknown

Unknowns

Known

Unknowns

Known

Knowns

Unknown

Knowns

• UU: We are not aware of

what we don’t know

• KU: We are aware of what

we don’t know

• KK: We are aware of what

we actually know

• UK: We are not aware of

what we actually know


Unknown Unknowns

https://www.youtube.com/watch?v=WWcunhUA0FU

29:20 – 31:10

https://www.youtube.com/watch?v=WWcunhUA0FU


Skill Mastery

Unconsciously

Incompetent

Consciously

Incompetent

Conscious

Competence

Unconscious

Competence

• UI: You aren’t even aware

that you are bad at the skill.

• CI: You know you’re bad at

the skill and can improve.

• CC: You are good at a skill

and you know it.

• UC: You are so good that

performing the skill is

automatic.


Managing Expectations

Things are as never good as they seem

Things are never as bad as they seem

• One of the most difficult aspects of the entrepreneurship experience is

the emotional roller coaster ride. One moment, you may be on top of

the world, and the next moment feel like nothing is going right or that

everything is going to fall apart.

• Expectations: suspend all of your future expectations so you are neither

disappointed if something doesn’t go your way, nor ecstatic if it does.

• Emotional state affects your ability to make decisions. Be aware of

decision fatigue, which results in poor decisions. The quality of your

decisions affects your future success in a real way.


Concrete Steps

• Distinguish between concrete steps forward and desired outcomes.

• It’s easy to assume that things will happen a certain way and people

make plans around the assumption that those steps will happen.

• Distinguish what is concrete, 90% of goals are desired outcomes and

only the very next step is a concrete plan or action.

• Keep an open mind for any possible outcome and learn from the

experience.


Key Assumptions Check

A Key Assumptions Check is useful at the beginning of any decision-

making process. Rechecking assumptions also can be valuable at any

time prior to finalizing judgments in order to insure that the assessment

does not rest on flawed premises.

Identifying hidden assumptions can be one of the most difficult challenges

faced during decision-making, as they are ideas held (often

unconsciously) to be true, are seldom examined, and almost never

challenged.

Checking for key assumptions requires you to consider how your analysis

depends on the validity of certain premises, which you may not routinely

question or believe to be false.

Credit: Analytic Edge LLC



Four-step process:

1. Review what the current line of analysis on this issue appears to be;

write it down on paper for “peer review”.

2. Articulate all the premises, both stated and unstated in a finished

product, which are accepted as true for this line of analysis to be valid.

3. Challenge each assumption, asking why it “must” be true and whether it

remains valid under all conditions.

4. Refine the list of key assumptions to contain only those that “must be

true” to sustain your reasoning; consider under what conditions or in the

face of what information these assumptions might not hold. Credit: Analytic Edge LLC



Explicitly identifying working assumptions during a decision analysis helps:

• Explain the logic of the argument and expose faulty logic.

• Understand the key factors that shape an issue.

• Stimulate thinking about an issue.

• Uncover hidden relationships and links between key factors.

• Identify developments that would cause you to abandon an assumption.

• Prepare for changes in circumstances that could surprise you.

Credit: Analytic Edge LLC


Decision-Driven Scenarios

Scenarios: Useful as a planning in order to understand potential outcomes

Decision-Driven Scenarios are:

• Focused on specific uncertainties that drive decisions.

• Focused on short-term decisions and immediate outcomes.

• Data-driven and analytical when possible.

• Heavily reliant on your own knowledge or knowledge of close advisers.

• Designed to test options for a specific decision against the range of

potential outcomes and develop implications for which option to choose

Credit: 20/20 Foresight


Decision-Driven Scenarios



Scenario Development

N/A

Develop mutually exclusive, collectively exhaustive set of

scenarios that describes each potential outcome

Representative set of 3-5 scenarios the largely covers the

range of potential outcomes

Integrated sets of assumptions that one would have to believe

about the future to support different proposed strategic options



Influence

Political skill – How good are you at influencing others?

• Agent: the person who is trying to influence someone else

• Target: the person who the agent is trying to influence

• Tactics: what an agent says or does to accomplish their aims

• Context: surrounding circumstances that shape their actions

Always have a socially beneficial motive and ethical approach that

provides accurate information. Take the Ethical Persuader perspective.

Ethical persuaders take the long view, setting the stage for later influence.

• Don’t believe someone who offers something that’s too good to be true.

• Have some skepticism and expect other to as well.

• Trust but verify Credit: Influence: Mastering Life’s Most Powerful Skill


Game Theory

• Game Theory is the study of strategic decision making. Specifically, it is

"the study of mathematical models of conflict and cooperation between

intelligent rational decision-makers.“

• What are a person’s:

• Choices in a situation?

• Chances of influencing a decision?

• Values?

• Beliefs?

• Prediction vs. Engineering: Most things that can be predicted can also

be engineered to get a better result.

Credit: The Predictioneer’s Game


Game Theory

• Self Interest – someone’s personal goals, objectives, and aspirations.

• People rarely take actions that harm their own self-interest.

• If you can discover or observe a person’s self interest, you can align

yourself with it and with them.

• If you oppose someone’s self interest, even if there is a logical reason

to do so, you will be met with resistance.

• If you align with someone’s self interest, even if the reason is illogical,

you may have a much easier time dealing with that person.

Credit: The Predictioneer’s Game


Influence

Credit: Influence: The Psychology of Persuasion

6 Influence Principles – Robert Cialdini

• Reciprocity – Returning favors so not to feed indebted

• Commitment and Consistency – Desire to be consistent

• Social Proof – More likely to do what others are doing

• Liking – More likely to be influenced by people you like

• Authority – A sense of duty or obligation to authority figures

• Scarcity – Things are more attractive when their availability is limited


Cognitive Bias

Credit: About Education – What is Cognitive Bias?

• When we are making judgments and decisions about the world around

us, we like to think that we are objective, logical, and capable of taking

in and evaluating all the information that is available to us.

• The reality is, however, that our judgments and decisions are often

riddled with errors and influenced by a wide variety of biases. The

human brain is both remarkable and powerful, but subject to limitations.

• One type of fundamental limitation on human thinking is known as a

cognitive bias.


Cognitive Bias

http://rationalwiki.org/wiki/List_of_cognitive_biases

• A cognitive bias is a type of error in thinking that occurs when people

are processing and interpreting information in the world around them.

Cognitive biases are often a result of our attempt to simplify information

processing.

• They are rules of thumb that help us make sense of the world and

reach decisions with relative speed. Unfortunately, these biases

sometimes trip us up, leading to poor decisions and bad judgments.

• Cognitive biases can be caused by a number of different things.

Heuristics, or mental shortcuts, can often lead to such errors. Social

pressures, individual motivations, emotions, and limits on the mind's

ability to process information can also contribute to these biases.



Logical Fallacy

http://changingminds.org/disciplines/argument/fallacies/fallacies_alpha.htm

• Cognitive Bias vs. Logical Fallacy

• People sometimes confuse cognitive biases with logical fallacies, but

the two are not the same.

• A logical fallacy stems from and error in a logical argument, while a

cognitive bias is rooted in thought processing errors often arising from

problems with memory, attention, attribution, and other mental

mistakes.



Crowdsourcing

• If you have a critical decision to make, ask others that are more

experienced than you what they think.

• Ask people with different perspectives the same question.

• Find the overlap and commonalities between their answers.

• When their answers start to all sound the same, you have found clues

from the “wisdom of crowds”.

• Ultimately, the decision is yours to make, but use the wise advice of

others to your advantage.


The Win-Lose Decision

Pros:

A, B, C

Pros:

D, E, F

Cons:

D, E, F

Cons:

A, B, C

• Faced with 2 alternatives

whose pros and cons

mirror each other in exact

opposites

• Either choice you make on

its own is a mistake

• The problem is twofold:

• A skill you don’t have

• A belief you don’t hold

Choice #1 Choice #2


The Win-Lose Decision

Neutral Option

A, B, C

D, E, F

Worst Option

A, B, C

D, E, F

Best Option

A, B, C

D, E, F

Neutral Option

A, B, C

D, E, F

Belief System:

What is a belief or belief

system that you don’t have

about this current situation?

Adapt your thinking pattern

Skill:

What is the skill or action step

that you don’t know how to do

and is holding you back?

Take steps to learn the skill


The Keystone

Belief

Skill

Johns hopkins innovation factory entrepreneur development program #5

Small Business & Entrepreneurship

Transcript of Johns hopkins innovation factory entrepreneur development program #5