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Develop a "Probabilistic" Approach to Managing Uncertainty
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Data and how it frames your thinking
What’s more important than how much data you have is how it frames the way you think.
Some leader when they're under pressure to appear decisive, approach complex situations with simple rules or analogies, selectively using data to justify poor judgment calls.
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Thomas Bayes'd thought experiment
He wondered how he could predict the probability of a future event if he only knew how many times it had occurred, or not, in the past. Bayes figured out that even when it comes to uncertain outcomes, we can update our knowledge by incorporating new, relevant information as it becomes available.
His theorem describes the probability of an event, based on prior knowledge of conditions that might be related to the event.
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Importance of using probabilistic thinking
Data can be imperfect, incomplete, or uncertain. Most of the time, there is more than one explanation for why things happened the way they did; by examining those alternative explanations using probability, you can gain a better understanding of causality and what is really going on.
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The human mind is naturally deterministic
So thinking probabilistically takes some getting used to. We generally believe that something is true or false.
Our instinct for determinism may well have been an evolutionary innovation. To survive, we had to make snap judgments about the world and our response to it. However, the deterministic approach won’t help us make good decisions in complex, unpredictable environments.
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SIMILAR ARTICLES & IDEAS:
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How leaders cope with uncertainty
Uncertainty is always there. The degree of uncertainty can rise and fall.
Leaders, being human, also have difficulty coping with uncertainty. When they receive confusing information, they te...
Heuristics during periods of uncertainty
During periods of heightened uncertainty, leaders reflexively reduce investment, stop hiring, slash marketing, refrain from entering new markets, or stop making decisions.
Although understandable, acting in a pro-cyclical manner can be counterproductive. It can leave companies poorly positioned to benefit from the next stage of the cycle.
Attributes to succeed in uncertainty
Organizations should be inclined toward action. As a baseline, companies must strive to be fit for growth. This can be done by aligning costs with priorities and strategy, investing in varied capabilities, and using traditional and digital levers to execute.
They must regularly engage in scenario planning with an array of options. They must build the capacity to be agile. They must learn to become more resilient to withstand strong external forces and quickly recover from setbacks.
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Mindsets in leaders
Mindsets drive what leaders do and why they do it.
Two different leaders might face the same situation but respond to it very differently. One leader might see the case as threatenin...
Growth and Fixed Mindsets
A growth mindset is a belief that anyone can change their talents, abilities, and intelligence. Those with a growth mindset:
- take on challenges
- take advantage of feedback
- use the most effective problem-solving strategies
- provide developmental feedback
- is persistent in accomplishing goals
Conversely, those with a fixed mindset believe that talents, abilities and intelligence can't be improved.
Learning and Performance Mindsets
Leaders with a learning mindset are motivated to increase their competence and master something new.
A performance mindset desires to gain favorable judgments about competence and avoid negative judgements.
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Homo Narrativus
We, humans, seek stories.
We are essentially ‘story finders’ looking for meaning, narrative and shape in everything around us. We tend to not believe in improbable...
Bias Towards The Individual
Stories built around individuals provide relatability and a sense of being in the shoes of the people involved, living in the narrative.
Our tendency to give a ‘face’ and a story to a group or collection of people made us invent a dominant leader of the group, like the President, or the Team Captain, or the Monarch.
How Fame Alters Our Perceptions
- The popularity or fame of an individual or a piece of art (like a painting, song or a movie) alters how we perceive it.
- The characteristics and behaviour of the people among whom fame spreads matters more than the actual merit or quality.
- A study showed that more people liked the songs that were topping the charts, copying the behaviour of other listeners, and if the same songs were arranged randomly, they were not chosen or liked that much.