Dealing With Uncertain Times

A recent article in The Economist discussed uncertainty about the future. It noted that uncertainty is different from risk: as economist Frank Knight first pointed out in 1921, a poker player can figure out the odds of success when holding a pair of kings. But when it comes to buying a house or forecasting business, there are so many variables—so many jokers in the deck—that any decision must be a guess.

Most of us usually accept this constraint and make the best guess we can. “But when uncertainty increases substantially,” The Economist says, “the temptation is to freeze—to do nothing until the situation becomes clearer. Consumers delay their spending plans; companies halt their capital expenditure.”

This has certainly been my experience over the past year. Companies have frozen in place, reluctant to make any investments in their organization until things become clearer. And although things may in fact become clearer, there will always be uncertainty.

On the other hand, I recently read an article in the StarTribune about a local retailer who—despite the recession—is choosing to spend seven-figure sums to expand and open new stores. When asked why, the owner said, “”We’re being opportunistic. No one else is adding stores, and we’ll be in a much better position to take advantage when the economy turns around. Besides, with retailers closing stores nationwide, landlords and developers are offering ‘very attractive’ leases and build-out allowances.”

What’s the difference between freezing and expanding? In my opinion, it’s a different mindset. The former is a mindset of fear and pessimism. The latter is one of courage and optimism.

The problem with the mindset of fear and pessimism is that, in the words of Larry Wilson, it’s Playing Not to Lose: staying safe, avoiding all risks, focusing on survival. Now, that might seem like a good strategy, one based in “being realistic.” The problem is that, as The Economist article clearly states, we can’t be certain of anything…including future dangers.

When a company decides to Play Not to Lose, it can often be a self-fulfilling prophecy. You can’t save your way out of an economic downturn; you have to sell your way out of it. And that requires investment in people, in product/service development, in new ways of doing things. It requires creativity, which is difficult if not impossible in a climate of fear. As a colleague of mine once put it, “Fear doesn’t play well with others.”

Ever watched your favorite football team try to protect a lead in the 4th quarter? They stop doing the things that got them the lead, and start playing it “safe”; they start Playing Not to Lose. Suddenly, the opponents—who haven’t been able to move the ball all day—are able to march down the field.

In business, uncertainty about the future can cause companies to stop doing what was successful and start trying to avoid risks. I don’t mean the riskiest of risks; they start avoiding all risks.

The mindset of courage and optimism is what Larry called Playing to Win: going as far as you can using everything you’ve got, exploring new possibilities, taking risks, focusing on thriving. When a company Plays to Win, they don’t wait for the future to play out; they create it. They invest in people and ideas, they encourage creativity and innovation, and they look for ways to change the “reality” of the situation.

I believe that companies (and individuals) who choose to Play to Win will ultimately be best placed to take advantage of better economic times. I can’t predict the future, but I know this: it will be different than the present. And economically speaking, it will be better. It always turns around. Always.

So, how do you move from fear to courage, from pessimism to optimism? The answer is simple…but not easy.

Choose it.

Choose to acknowledge uncertainty, but not be frozen by it. Choose to see possibilities, not roadblocks. Choose  to really thrive, not merely survive. Choose to ask “What if we…?”, not “What if it…?” Choose to Play to Win.

As I said, it’s simple but not easy. What’s easy is to find reasons to play it safe. What’s more challenging—but not impossible—is to find reasons to play big.

One final reason to choose optimism over pessimism. When you choose pessimism, there is no joy in being right. When we choose optimism, we unleash our creativity and courage.

And since we’re making it all up anyway, why not make up something good?

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