Cobras, Sparrows, and Decision Making For Entrepreneurs During Times of Upheaval

When the British ruled India, they encountered an unexpected problem. Venomous wild cobras were all over the capital city of Delhi. It soon became dangerous to travel anywhere by day or at night. So to eliminate the risk, the British government came up with a reasonable solution: a bounty system. 

It would reward anyone who delivered a cobra head. The plan worked.

Many locals became expert cobra hunters, and the cobra population plummeted. Unfortunately, that left the cobra hunters with a dilemma. How would they make their living now?

So the cobra hunters came up with a 'reasonable' solution of their own. They began to breed cobras in their homes, kill them, and collect the bounty.

When the British government caught on, it realized its mistake. Solution: cancel the bounty.

Except that created a new problem for the cobra hunters: their snakes were now worthless. How did they solve it

They released the cobras into the wild.

In the end, Delhi's cobra problem turned out worse than before. The British government's decision accidentally made the problem worse.

A similar incident happened in China. Shortly before the cultural revolution, Mao Zedong launched the Four Pests Campaign. The idea was to reduce carriers of disease, destruction, and plague. Sparrows were on the kill list because they ate grain.

The campaign was so successful that the Chinese Sparrows nearly went extinct. There was just one problem:

Without sparrows, insect populations grew out of control. Soon swarms of locusts devastated the grain fields. Insects also destroyed farmlands, fields, and forests. In fact, the death of sparrows exacerbated the Great Chinese Famine.

In the end, the Chinese government imported sparrows from other countries. 

By now, you might know I’m talking about the Law of Unintended Consequences.

These stories are examples of what can happen when those in charge make the wrong decision. In both instances, the unintended consequences were worse than the initial problems. But how were the decision-makers to know?

More importantly, how can we know that our decisions for our lives, businesses, and teams are right?

When the future is uncertain and in constant turmoil, entrepreneurs might wonder:

• What can I do next? What should I do next? 
• How will my decision impact my business?
• What if I make the wrong decision? 

These are all valid questions. But sometimes, they are paralyzing questions. 

Despite that, most of us have to make decisions daily. Some of them might be small, some of them might have lasting consequences for our businesses. And some decisions tend to be tough. So we often turn to the experts for advice. 

While there is plenty of excellent research and advice out there, it can be overwhelming. In this article, I want to show you ways to:

• understand how to make the best decisions for you and your organizations
• unmask the hidden psychological dangers lurking behind decision-making
• uncover the fearlessness to move forward.

What Makes Business Decisions so Scary

When I started as an entrepreneur, I often thought about what my mentor, Dan Pena, said:

"I've seen the careers of good men and women end because they made one bad business decision. They beat themselves to death, and they become afraid to make another decision." 

Fear often holds us back. It can keep us from starting, and it can sabotage us from completing what we set out to do. But what exactly scares us?

Well, a lot of things. For example, we might be afraid of success or failure. We might have a fear of change. Or even a fear of making the wrong decision because of lack of time or information. 

The biggest of them all is the fear of the unknown.

Unfortunately, the future is always unknown. Even when we have a degree of certainty, the future can change.

After all, that's what happened during the coronavirus pandemic. Many people - including myself - predicted that an economic downturn was on its way. But no one could have predicted the health crisis that would go with it. And now the future is more uncertain than ever.

Yet, as entrepreneurs, we cannot allow fear to consume our decision making. There's another thing Dan Pena often says:

"Failure is a resource. It helps you find the edge of your capacities. If you don't have any failures, it's going to be very hard to make the first mistake. So don't be afraid of making a mistake."

Accepting that failure is part of decision-making can make the process easier.

Sometimes good decision making just comes with expertise, experience, and practice. But we won't get there without failing a few times. What do you do if you're wrong?

If you can learn from the mistakes - yours and others - you'll be able to keep moving forward steadily.

Take the cobra story from earlier. From that example, we learn that thinking a problem through to the end is critical. For instance, we should ask: 

"What happens when we approach our goal?"

I'll share the three questions I always ask myself before making decisions in a few moments. But first, let's look at how to make decisions when you don't have enough time.

The Simple Time Trade-Off

If you had all the time in the world would you make better decisions?

Most of us would say yes. Time, however, is not a luxury most of us have. Tom Griffits, a computational cognitive scientist, researched how to handle decisions quickly. And he came up with the 'explore-exploit' trade-off.

Let's imagine a dilemma most people face every day: what to eat for dinner. You could do lots of things - cook, go out, order-in, and so on. But ultimately, it comes down to 2 choices:

1. Explore by trying something new.
2. Exploit by going with the tried and true options.

Tom Griffiths explains that, at its core, exploration has one purpose. It's an act of gathering new information for future use.

Exploitation, then, is the act of using the knowledge and experience we already have.

What does the explore-exploit trade-off look like during uncertain times like these?

Innovations, social distancing, and technological advancements are changing the way we do business. In some sense, the whole world is the 'explore' phase. 

The old ways of running businesses are likely not going to have the expected result anymore.

Take remote work, for example. It used to be a sought-after privilege to work from home. But these days, working from home is almost required for businesses that aim to be recession-proof. 

Now, if you don't already have an online team, or are still transitioning, you could try and figure it out on your own. Or, you could use the best practices of those who already have successful remote teams in place.

(The members of my Advisory Group, Dragon 100 are laser-focused on building remote teams.)

So, first, gather as much information as you can. And if you are short on time, consider how much, how often, and how long the effect of your decision will last. 

If your decision will affect your business for a long time, try something new and gather data. Then, based on your collected information, tweak and pivot as needed. 

If your decision is for something short term, go with proven methods. 

But what if you don't (or can’t) have all the information?

The 37% Rule

"How do I know that I have enough information to make a decision?"

It's an age-old dilemma. And one that experts have debated so many times that they've given it various names:

• 'the best choice problem'
• 'the marriage problem'
• 'the sultan's dowry problem'

and so on. One of the best-known names for it is 'the receptionist problem.' Here's how it goes.

Let's suppose you are looking for the best receptionist to fill an immediate vacancy. As you interview the candidates, you either hire or reject them. And a rejected candidate can no longer enter the pool.

Now, let's say that you interview these candidates randomly, how will you find the best one?

Statisticians used several complex formulas and algorithms to work out the answer. It turns out that the most optimal choice will be the 37th person you interview out of a 100.

But can you use this formula in your business?

You may need to rely on it in some cases - especially when it comes to an uncertain future. Sometimes, you simply can't get all the information you need. But provided you consider at least a third of it, you can statistically make the best decision.

That said, research shows that many people make the wrong decision because they stop too soon. They make decisions before considering at least 37% of the information. 

So there is a balance. As long as you've done your due diligence research, you'll be able to make better choices. 

The best way is to watch and track the results and consequences of your decisions. 

A Surefire Way to Make Bad Decisions

I see this time and time again - and I've done it myself. In fact, it cost me millions of dollars to learn this lesson:

The road to bad decisions is filled with assumptions.

Now you might say that not all assumptions are wrong. Let's take a look at the definition of an ‘assumption’:

"a thing that is accepted as true or as certain to happen, without proof."

The ‘without proof’ part is the problem. 

I used to make assumptions when I got started. I assumed that my first businesses would be a success. I was sure that I'd have more clients than I could handle. And based on those assumptions, I spent countless hours sitting by the phone, waiting for it to ring.

But that's not how life or business works.

So if you want to avoid bad decisions, avoid making assumptions at all costs.

Don't you have to make at least a few assumptions when you can't predict the future?

Not necessarily. The British government in India assumed that they had a great solution. The Chinese government assumed that killing sparrows would improve their grain yield. 

Neither of them was right. So rather than make assumptions, why not make educated guesses?

Let's consider the task of hiring a receptionist again. Would you assume that the receptionist would do a great job because her resume says so?

Or perhaps, you like his confidence. Does that mean he'll be perfect on the phone?

Chances are, you answered no to both questions. But let's say you noticed that there are no errors in the cover letter and resume. Is it safe to say that the candidate is detail-oriented?

Most likely, yes.

The same applies to any business strategies or tactics you want to use. Here's a question I ask often: 

"What assumptions am I making that I'm not aware I'm making that gives me what I see?" 

In other words, I don't just look for ways to solve the problem. I question how I consider addressing it. That way, I'm able to gather any information I might otherwise have overlooked. 

You should try to do the same before making any decisions too. 

When you have done your due diligence, you can make educated guesses. 

The Decision Maximizers Every Entrepreneur Needs to Know

Twice a year, Bill Gates spends a week in a cabin in the woods and does nothing but reading and thinking. Those weeks usually turn out to be highly lucrative for Mr. Gates.

But you shouldn't take time to think just because Bill Gates does. 

You should do it because it can be your productivity, profitability, and decision maximizer. Henry Ford once said:

"Thinking is the hardest work there is, which is probably the reason why so few engage in it."

I find that thinking time is the best way to do due diligence as well. That's why I don't make any business decisions without setting aside time to think.

Many people make the mistake of confusing thinking time with meditation. Some don't do it because they believe it involves emptying the mind. But that's not how I do it.

When I start my thinking time, I get a notebook and write a question at the top of the page. Then I answer that question in every way that comes to mind. My three go-to questions are:

1. What could go wrong?
2. What don't I know?
3. What don't I see?

I'll ask many other questions too. But these three help me focus and make decisions with confidence.

Now, you might say that these questions are overly negative. But I don't see it that way.

You shouldn’t be making your business decisions with optimism in the first place. In fact, try to be more pessimistic about your business model, tactics, and strategies. Why?

That way, you'll be better prepared for anything that happens down the line. I call this strategy 'negative preparation.' It gives you options to handle any eventuality and scenario.

It can also remind you to consult a mentor or advisor if you need it. Or study a new skill or pursue the answers to anything you don't understand. 

So use thinking time before investing, hiring, or making other business decisions. You don't have to spend a lot of time, but take at least 5 minutes to think first. 

What to do When Everything Goes Wrong

Incidentally, when things go wrong, I go back to thinking time too.

Warren Buffett once said:

"If you can't read the scoreboard, you can't read the score. If you don't know the score, you can't tell the winners from the losers."

As I mentioned earlier in this article, failures are inevitable. Chances are, you'll make some bad business decisions. But you don't stop being an entrepreneur unless you stop making more decisions.

Whether it's losing money, people, time, or effort, it hurts. But business is an intellectual sport. And it's a very competitive one at that.

So it's critical to take time to analyze what went wrong. And look at it play by play.

During your thinking time, write down everything that comes to mind. Everything that went right, everything that went bad, and everything between. Then look for patterns, lessons, and takeaways. Why?

It will help you learn from the experience, but you might also realize that the problem isn't as big as it seemed. Maybe all you need to do is make slight adjustments and pivot.

Or maybe you need to scrap the whole thing and start over. Here are a few tips that might help:

• Untangle your self-worth and identity from your business. Your business is something you do, not something you are.
• Understand that when you take care of your business, your business will take care of you and your team.
• You now have more information (and experience) than you had before and are, therefore, one step closer to your goals.

Picking yourself up and dusting yourself off after a wrong decision can be rough. But I believe that you have what it takes to keep going. Remember, the more decisions you make - even if they’re failures - the better you’ll be next time. 

How to Decide Whether Your Next Business Idea is Any Good

Have you heard the saying, "prevention is better than cure"? While that's true, most people don't use prevention. They prefer to buy a cure.

And that applies to the way you approach your business ideas and decisions as well. I used to be one of those entrepreneurs.

Back when I first got started, I didn't know what I was doing. But rather than taking the time to stop and consider what I was trying to do, I kept working harder. That's the primary reason I failed at 13 businesses and ended up in so much debt.

Perhaps you've made some mistakes and have to re-do your business model too. 

Or maybe you're just getting started. 

Or perhaps you're looking to optimize your existing business.

Whatever your situation may be, before you start doing anything, do more thinking. And you should ask a lot of questions as well.

The most important questions should be about the market you want to serve:

• Is there pain? A sense of urgency? Or an irrational passion (like golf)?
• Is your audience actively looking for solutions?
• Is there too much (or not enough) competition?

Take time to do thorough research and know the answers to these questions inside out. Other questions you can then ask yourself are:

• What qualifies me to execute this business idea?
• What do I bring to the marketplace that's different from everyone else?
• What am I offering the market that's not available right now?

Also, ask yourself questions about your ideal client, your competitors, and your industry.

Good decision making comes down to asking the right questions. So as long as you're curious, decision making doesn't have to be painful. 

After all, the more questions you ask, the better information you'll gather. And the more information you collect, the better you'll fill in the gaps in your knowledge. 

And the more complete your knowledge is, the more confident you can be when making decisions. Even when the future seems uncertain and turbulent.

If you'd like to know more about productivity, growth, decision making, or leadership, connect with me on LinkedIn.