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
IncreaseValue
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

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

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