Exposing the Uncertainty Shadow

In a recent article, I addressed the uncertainty companies face in the current market environment and National fiscal dilemma (see http://connect2action.blogspot.com/2013/01/all-in-navigating-turbulence.html).  Ellsberg’s Paradox is potentially useful in understanding why many are choosing to wait until the fog clears.  The human tendency to avoid ambiguity and uncertainty sometimes defies logic.  When executives succumb to Ellsberg’s Paradox, they close out options and constrain creative thinking in ways that may not be beneficial.

The Ellsberg Paradox is often demonstrated with the following illustration.  Placed before you are two opaque jars.  Jar #1 contains 10 white and 10 black marbles.  Jar #2 contains 20 marbles but the ratio of black and white is not known.  The marbles in each jar are assumed to be well distributed.  You are asked to draw a black marble from either jar and if successful, you will be given $100.  Which jar do you choose to draw from?  Most will choose Jar #1 believing their chances are better even though in actuality they aren’t.  Your odds are essentially the same with either jar.  But there is a tendency to select from the jar where the proportions are known because of what is known as ambiguity aversion.  Let's face it, most of us don't like situations where the alternatives aren't very clear. 

So what does Ellsberg have to do with the uncertainty executives and leaders face today?  The key has to do with discipline and critical thinking.  First, additional research using the Ellsberg Paradox points to higher levels of activity in the amygdala when subjects face ambiguity or uncertainty.  This is important because it is the amygdala which is the base instinct part of the brain – our fight or flight response.  Therefore, when faced with two or more options where you may have more information with one over the others, the natural tendency is to flee to the one you know more about without logically considering the others.  This is where discipline is important.  You have to train and restrain the brain from jumping to a course of action too quickly.  In other words, pause, take a deep breath, and think!

Once you’ve been able interrupt the tendency to flee, it’s important to apply critical thinking skills to carefully evaluate the alternatives.  One of my favorite tools is the Cynefin framework.  This allows you to dissect the situation, classify it then use basic problem solving techniques.  Another popular and useful approach is TRIZ.  In addition to these, brainstorming and other problem solving tools may be equally relevant and useful.  Whatever approach you select, it’s important that you take the time to carefully explore and potentially experiment with the options.  This process actually reduces uncertainty and ambiguity not only pertaining to that option, but the entire situation.  In the end, you will be better equipped to make a decision having explored the alternatives.

For executives and leaders staring into the fog of uncertainty where traditional scenario tools and predictive analysis have failed, a new approach is warranted.  Sitting on the sidelines waiting for the fog to lift is a decision – one most likely born as a victim of Ellsberg’s Paradox.  You can reason that choosing to wait represents a choice where the future may be 50% good or 50% bad.  No one can accurately predict if/when the fog will lift.  Even if it does, it most certainly will be replaced by yet another fogbank of ambiguity. 

While sitting on the shore, you will never know if an opportunity that could dramatically improve your situation lies just beyond.  Those willing to sail ahead may find the way clear and set course in due haste.  Those companies will have beat you to the next great opportunity.  It is possible they could land on the reef and sink and some most likely will.  What is certain is those that choose to wait may never reach their destination choosing instead to grow old and die as castaways protecting an island no one cares for anymore.

Duane Grove is founder of Connect2Action, a strategy execution specialist at the intersection of employee engagement and executive leadership, igniting innovation as a lever to accelerate your growth.  Follow Duane on Twitter @connect2action and connect with him on LinkedIn, Facebook, and Google+.  Learn more by visiting www.connect2action.com.