Dealing With Uncertainty While Running A Business

In March 2023, the sudden collapse of Silicon Valley Bank pushed the startup world into a crisis. Running a business is always fraught with uncertainty, but that event was even more terrifying than business as usual. Many founders didn’t know if they would have the funds needed for payroll the following week.

Fortunately, like many things in life that look bad, the funding situation was resolved in just a few days. The government intervened and ensured that most startups would have access to their cash.

While it may be tempting to dismiss the SVB collapse as an extreme event, the truth is, running a business is always fraught with uncertainty. You have to expect that extreme events are going to happen, even when you least expect them.

Dealing with uncertainty, then, is mostly psychological. It takes the right mindset to succeed in a world where anything can happen. Some good strategies include:

• Taking smart risks
• Focusing on mental health
• Relying on others
• Changing your perspective
• Knowing what you don’t know

Taking Smart Risks

Everything you do in life is a risk, whether that be walking down the street or pitching a new client. Since we don’t have a choice over whether or not we take risks, we have to focus instead on which risks to take.

The answer is simple: prefer risks that have a known, limited downside, and an unknown, potentially unlimited upside. In this way, you shut the door on the negative, while leaving the door open for unexpected positive results. Ideally, we should use crises as a potential source of growth.

This is the position taken by Nassim Taleb, author of The Black Swan. Often misinterpreted as saying that we should try to avoid black swan events, his real insight is that they are unavoidable. Instead, we should try to maximize our exposure to positive black swan events, while minimizing our exposure to negative black swan events.

Focusing on Mental Health

Running a business is more like running a marathon than a sprint. It’s a multi-year or decade endeavor, and it takes endurance to succeed.

That’s why taking breaks is so important. Your body and mind simply cannot handle the stress and uncertainty of running a business 24/7.

We can also help manage our mental health through mindfulness, exercise, hobbies, and engaging with other people.

Relying on others

Business is always a social activity. Even if you are at the top of your own organizational hierarchy, your position there rests on everyone else around you.

Since no one can manage an entire organization on their own, one important strategy for dealing with uncertainty is to rely on others. Even when the path forward may be unclear to you, someone else in your circle might have a good idea.

Establishing a council of advisors is a good way to source ideas from others, as is simply listening to what your employees say.?

Changing your perspective

It’s almost a cliche now to point out that the Chinese word for “crisis” is made of the character for “danger” and the character for “opportunity”. While it turns out that that is somewhat of a mistranslation, the idea is sound. Every crisis is a potential opportunity, if it can only be seen as such.

The English word “crisis”, by the way, comes from the Ancient Greek krisis, which meant “decision” or “choice”. A crisis is essentially a moment in which we have to make a choice, and then stick with it. Often, this means changing your perspective to see which direction you need to move in next.

Changing perspective could mean a shift in goals, beliefs or values:

A shift in goals comes about when you realize that the goal you’ve been working towards is not what you really want or need. Then you can come up with new goals based on your existing values.

A shift in values comes about when you realize that the way in which you’ve been pursuing your goals are no longer applicable. Then you can come up with new values based on what you believe will work.

A shift in beliefs comes about when real-world information arrives that upsets your models. In this case, you might have to update your goals and your values to adjust.

In any case, most crises can be solved with a simple shift in perspective. While this may be painful, it is usually the simplest solution.

Knowing What You Don’t Know

Uncertainty comes from the unknown. But there are two kinds of the unknown: the unknown you know about, and the unknown you don’t.

The known unknowns include everything from why your code stopped working to what the weather will be like tomorrow. In these cases, you can make progress in reducing uncertainty. You can run a debugging protocol or take meteorological measurements.

The unknown unknowns are the things we aren’t even aware of. This is the sudden collapse of an apparently safe bank, or a chance meeting with an old colleague that turns into a new business opportunity. These are events that you wouldn’t even think to try to predict.

Humans tend to spend way too much time worrying about the known unknowns, because those are the only ones we can worry about. Frustratingly, this means that the unknown unknowns wind up being the ones that affect us much more, since we can’t prepare for them. But at the same time, it’s often the unknown unknowns that really change our lives for the better.

Conclusion: Uncertainty is the path forward

Unfortunately, as business owners and as human beings, there is no path that leads away from uncertainty. Instead, uncertainty is the path we must walk along in order to get where we want to be and live the lives we want to live.

But there is much that we can do to make this process easier. We can take smart risks, focus on mental health, rely on others, and change our perspective.

As business owners and operators, much of this burden falls on our shoulders, but we are never alone. Uncertainty is something that everyone must deal with when running a business.