{"id":1109,"date":"2013-07-29T20:12:05","date_gmt":"2013-07-30T03:12:05","guid":{"rendered":"https:\/\/masonmyers.com\/?p=1109"},"modified":"2015-01-28T12:58:40","modified_gmt":"2015-01-28T20:58:40","slug":"business-decision-making-uncertainty-howard-stevenson-gamblers-prediction-map","status":"publish","type":"post","link":"https:\/\/masonmyers.com\/business-decision-making-uncertainty-howard-stevenson-gamblers-prediction-map\/","title":{"rendered":"Great Tool for Business Decision Making in Uncertainty"},"content":{"rendered":"

In business decision making, we never have as much information or certainty as we would like.\u00a0 The best business and investment minds know how to focus on the factors in a decision that are the most relevant and ignore extraneous factors.\u00a0 It is a real skill — one that can be learned over time and can be improved.<\/p>\n

\"\"<\/a><\/p>\n

 <\/p>\n

A tool to help in these circumstances is a tool developed by Harvard Business School professor Howard Stevenson and Eileen Shapiro in their book, “Make Your Own Luck<\/strong><\/a>.”\u00a0 They call it a Gambler’s Prediction Map.\u00a0 They use it to list and organize the potential factors that could have a major impact upon the objective you are trying to achieve with your decision.\u00a0 Once you list the factors, then you organize them in the classic b-school 2X2 matrix with the impact on the vertical axis (low and hi) and the uncertainty on the horizontal axis (low and hi) as shown here.<\/p>\n

Their gambler’s prediction map has four zones: (1) in the “wallpaper zone,” “factors are often ignored, but can be very powerful.”\u00a0 For business owners and investors, this zone may be the most important.\u00a0 (2) Their “wild card zone”\u00a0 has “unpredictable factors that can work massively in your favor — or against it.”\u00a0 The high drama here is often best left to the movies.\u00a0 (3) Their “ant colony zone” \u00a0is where, like ants, “many of these factors put together can create substantial advantages.”\u00a0 (4) Their “strategic rat hole” is a “place you’d rather not be.”<\/p>\n

Focus on Factors with More Certainty to Help with Decision Making<\/h3>\n

The advice of Stevenson and Shapiro is to focus on the left-hand side of the matrix — the low uncertainty side.\u00a0 Because these factors are more likely to impact your objectives, time spent understanding these factors can be more productive.\u00a0 Regarding the right side (high uncertainty), “the job of the smart gambler is to lessen this uncertainty risk — sidestep it, avoid it, lessen it, or hedge it. The one thing you shouldn’t do is accept high risk with the same payoffs you could get with a less risky bet.”<\/p>\n

Their book breaks the common cliche: “We believe that smart bettors reject the notion that higher returns always entail higher risk.” \u00a0For that reason, they’ve structured their maps specifically to highlight opportunities for breaking this cliche to your advantage.<\/p>\n

I believe this same matrix could be used to organize a list of potential growth initiatives, or R&D projects, or other problems that need to be prioritized in a business.\u00a0 A good decision-maker will focus upon the “wallpaper zone” of high impact and low uncertainty projects, Such projects move the organization “to get more of what will help us — with less uncertainty about the outcomes we will achieve.” For more, see the book written by Stevenson and Shapiro.<\/p>\n

I have written about other frameworks and mental models that can be helpful for business owners in these posts below.<\/p>\n