How to keep your head in the fog of business war

One of the most common anecdotes used in business strategy to illustrate the concept of leadership is that of the Swiss police captain who used the wrong map to guide his unit to safety. We’ll never know if the captain knew this, and therefore exhibited his leadership by keeping the secret and instilling confidence in the others; or if, on the contrary, he did not realize until it was pointed out to him, in which case we can only wonder at his luck and in general acknowledge the role of chance in critical situations.

One of the lessons of the anecdote, especially relevant for business strategy, is that in situations of radical uncertainty, when it is impossible to predict an outcome, any map serves as a reference to formulate a narrative that convinces the most relevant stakeholders, as long as the story is convincing and the leaders have the appropriate authority and prestige. During the recent pandemic, many companies and organizations experienced such a scenario. The most common measures companies implemented were to reduce costs, manage cash flow prudently, emphasize communication and convey trust and confidence. The idea is to create a map of measures intended to convey calm in times of extreme turbulence.?

Uncertainty is a characteristic of strategic environments such as business or politics, where circumstances change and forecasts are indeterminate, sometimes volatile or completely unpredictable. Unlike a paradigmatic environment, in which evolution can be programmed - e.g. a mathematical game - or there is no substantial change, in strategic scenarios multiple variables are all interacting simultaneously. One of the functions of management has been precisely to try to sort out this complexity in order to help managers understand the context of their companies and be able to make justified decisions.

Thirty years ago, when I studied for my MBA, one of the introductory courses in the program was?Decision Theory. I remember the sessions devoted to learning how to meticulously construct decision trees, following the approaches of Bayes, the father of statistics. The fundamental assumption behind the course was that the risk of a given decision could be moderated by assigning probabilities to the various options in a business dilemma. For example, whether or not to launch a new product. Logically, after the two initial options, subsequent alternatives could be opened, which in turn were weighed up using our intuition, knowledge and previous analyses.

For example, if the product were to be launched, it may have been accepted quickly and our sales and market share may grow; or development may be slow and we may encounter successful competing products. These options generated different effects, which in turn were weighted to calculate the respective potential returns. Although the analysis had to include qualitative elements - for example, estimating the entry of competitors - the emphasis of the model was quantitative, and I remember that the impression I got from this exercise was of a certain artificiality, even though the professor was brilliant.????

Today, we have access to previously unimaginable amounts of information. Access to this abundant library of facts, ideas, opinions and figures is, moreover, simple and universal and relatively affordable. Nevertheless, the existence of so much data, well as the possibility of managing it, does not seem to resolve the problem of uncertainty so often highlighted by economic and business analysts. Perhaps the informative overload provided not only by digital media, but also by social networks, together with a tendency toward the hyperbolic, in search of larger audiences, contributes to spread a feeling of greater uncertainty, regardless of the facts.?

At the same time, the digitization of all types of content, together with the standardization and centralization of search engines on the web, which is how we now look for information, has contributed to create increasingly homogeneous knowledge and opinion. In an encounter with thinker and writer Niall Ferguson during a conference before the pandemic, we commented on how nowadays most academic researchers browse Google to find sources for their intellectual output. Before this practice became widespread, for example when I was preparing my PhD, it was normal to dive into library files, spend time "cherry picking", jumping from one topic to another -related or not-, checking bibliographies cited in books, as well as asking professors and colleagues for suggestions. I have personally enjoyed such research in good libraries, and I have happy memories of hours spent at the shelves of the Bodleian Library in Oxford, consulting volumes of various journals, leafing through books, and inhaling the fragrance emanating from that formidable concentration of printed paper.

Another facet of automated research occurs when professors give assignments to their students, in different classes and independently of their experiences. Normally, they use the same sources, which are easy to digest due to the simplicity and speed with which they handle references in Google and other search engines. This process, however, greatly limits innovation and out-of-the-box thinking, and instead encourages a one-size-fits-all approach. The algorithm becomes the ultimate authoritative source of knowledge, or oracle, in establishing the order of links provided to the question posed by the user.

Paradoxically, although the feeling of uncertainty may be ingrained in the majority, search engines provide quick, almost instantaneous, and also consistent answers to their users' requests. These solutions are often very similar, and similarity or uniformity is a priority for users relying on the highest number of searches, for example, when choosing a certain expression or combination of words. This homogeneity and coincidence becomes redundant by the action of the algorithms themselves, in a circle that can be interpreted as virtuous, assuming that the questions we ask have only one correct answer.?

But it can also be conceived as a perverse circle, if we value originality and uniqueness as attributes of good research, and even convenient to stimulate creativity in the work prepared by students. Education and research should not be conceived only as tasks of standardization, of studying what has already been proposed and shared, but fundamentally of presenting new ideas, questioning what has been learned and suggesting new avenues for progress.

Therefore, although there is a great deal of confidence -almost certainty- about what exists in the digital world, boosted by search engines, and to the extent that the management of big data and algorithms order research, determine navigation or prioritize certain options and preferences, uncertainty will nevertheless continue to exist outside the digital world. Interestingly, perhaps the digital world has the potential risk of being more finite and permanent than the physical world. To this drawback, the visionaries among us may reply that machine learning will produce the renewal of this digital space, that the intelligence that will be developed in the digital space has much more potential than human talent. But that’s a topic for another discussion.?

An important lesson, and perhaps the conclusion of this reflection on uncertainty, is that the enormous advantages offered by the digital environment should not diminish one's ability to develop a critical capacity, to seek information through alternative means, to adopt - at least methodologically - outlier or even contrarian positions when weighing important decisions, whether in business or one’s personal life.???

One of the classic works on military strategy, which has also had an influence on business strategic thinking, is "On War" by the Prussian military theorist Carl Von Clausewitz. In one of its passages, he refers to the "fog of war" to describe the ambiguity of the battlefield. At such moments, as we see in Akira Kurosawa's monumental films, the confrontation between armies produces dust, death, and unimaginable terror. In such circumstances, as in situations of radical uncertainty, temperance and leadership are necessary qualities.?

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