What To Do When You Don’t Know…
Author Paul Brown recently put a piece together for Forbes Magazine entitled “What to Do When you Don’t Know What to Do: A Case Study.” The article focusing on the importance of action and provides a guideline to how to act when you initially do not know what to do or how to do it. We felt the piece was relevant to our readers and want to encourage you to read the article. Below is an excerpt of it:
The uncertainty we all face every day—everything from wondering if we will we have a job tomorrow to whether the weather (hurricanes; massive storms) will up-end our lives—is like being on a confusing road trip. You know where you want to go, but the incomprehensible road signs, congestion, construction delays and the like make it extremely difficult to get from here to there.
As we try to move from where we are to where we would like to be in our lives, it sure would be nice to have a reliable GPS.
We have created one. Although we will admit we did it accidentally. Let us explain how it came about so you can see:
a) it works, and
b) it can help you.
It started with us trying to answer a fundamental question: What do you do when you don’t know what to do?
That was the question we began wrestling with and almost immediately we asked who are the best people at dealing with uncertainty? The answer? Serial entrepreneurs, people who have started two or more organizations successfully. There is nothing more uncertain than starting a company, and these people have mastered it more than once.
So we looked at how they handle things. And when it came to moving into the unknown, they used a different logic. Instead of focusing on expected returns—or how much they could possibly make—their attention is on “Acceptable Loss”—how much they might lose, should things not turn out in the way they hope. Employing the concept of “acceptable loss” keeps any failures small. By definition, you never lose more than you are willing to.
Let’s see how acceptable loss plays out in practice.
Consider the case of a man in his mid-40s who is thinking about quitting his high-paying job to start his own company.
If our potential entrepreneur were to follow the typical reasoning governing risk, he would do in-depth research to estimate not only the size of the market, but also all the risks he might face (competitors, changing market conditions, etc.). The more potential risks/challenges he believed he was up against, the more money he would raise, to help offset the uncertainty.
Given all this, he might say, “I’d better do a business plan. (Months, maybe years, pass while he does research and prepares the document.) At the end of all that time he says, “it looks like I need $1 million to start my idea of creating a service that matches recent MBAs who have a scientific background with high tech employers. My projections show I’ll break even in two years. I can put in $100,000 funded by family and friends and my savings. So, I need to raise another $900,000 before I can start. That’s assuming I can live without a salary for two years. Let me start raising money.”
In contrast, for someone using affordable loss reasoning, the idea of getting underway is far more important than having a fixed goal, because they understand they have no idea of knowing ahead of time whether their idea will truly work as imagined. So, their interior monologue sounds like this:
“I am 46 and I just don’t know how long I am going to have a job. I’ve always wanted to be my own boss. By drawing on my own resources, and borrowing from family and friends, I have $100,000 I can commit to finally going off on my own. I need $50,000 for expenses and $50,000 to live on for the next 6 months until I get some revenue. In the worst happens and I fail, I will go back to my old job—if it is still there—or I get a different job and figure out a way to pay back everyone. It wouldn’t be the end of the world.
Courtesy of Forbes Magazine