Nassim Taleb is purportedly not a big fan of strategy, because of the implications of uncertainty on long term plans.
Yet, organizations that are in businesses where significant capital and infrastructure like investments are necessary need to do long term planning. In Canada, it can take up to 20 years to build a new mine, major generation facility, pipeline, etc. Also, major investments will only proceed if there is some expectation that there will be a return on investment, hence these investments often have multi-decade life expectancies. Yet, even a casual review of the literature on leaders in these fields acknowledge the implications of uncertainty in their businesses and investment strategies.
One thing that has “created” such long term planning horizons is uncertainty arising out of “social oriented sources”. These include governments, environmental, stakeholder, etc., etc. sources of demands. Some of these are relatively well understood and known, hence these are risk like circumstances. Others, we have some sense of yet the positions of these stakeholders can change rapidly and significantly. In Nassim’s parlance we might think of these as “grey swans”. Still others seem to come out of the blue, and are truly examples of “black swan like” uncertainty.
Yet, we (e.g.,Canadian society) need at least some of these investments to proceed. One only need to have a cursory understanding on how our social supports are funded (e.g., through sustained and often growing taxes) to realize as our population grows older, fewer and fewer taxpayers (at least as a ratio of those being beneficiaries) are paying the bills.
This is not meant to be a political commentary, rather it is about how we can hopefully find, examine, approve, build, and take advantage of good to great investment projects.
So on a modest level I am interested in this post in examining how we can intentionally take advantage of “wisdom” in dealing with uncertainty.
Wisdom is simply knowing how (and doing so) to take advantage of what you know and have had experience with. If we adopt Taleb’s notion of uncertainty, we are exposed in the future to events that we don’t know anything (or at least in a limited way) about and we have not had any experience with. We all have limited/finite knowledge and experiences. The trick here is to recognize in your longer term planning efforts how to take advantage of what others know that you don’t, and have had experiences that you haven’t. Their risk management wisdom cover some of your uncertainty like needs.
So when we plan and we are asking such questions as:
- What do we need to learn so we can determine how feasible this project could be? Who might help us here?
- Who needs to be involved (because of what they know and can contribute) if we are going to be able get approvals for the most feasible project identified?
- What do we need to know if we are going to be “more likely” successful in implementing this project?
Wisdom when tapped into is especially valuable when:
- The future is often going to similar in important aspects to the past experiences of others and their knowledge.
- We have reasonable cause and effect theories of why implicating elements behave they way they can.
- We understand how variances can arise and how to control them.
- We understand and appreciate the limits of what we know and what our experiences have taught us.
The dark side of wisdom is if the future behaves differently than the past. A fixation on wisdom will lead us into failure, even disaster. Yet where the future has patterns that are familiar with the past, we are making black swans grey and grey swans white. If we tap into the wisdom of others we can exponentially expand our awareness of grey swans and our skill sets at dealing with white ones.
I propose that the skill of tapping into the wisdoms of others (where we don’t possess comparable wisdom) is a powerful tactic in becoming more successful at doing long term horizon type projects.