Innovating Leadership:
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Hosted by Maureen Metcalf
Conversations with global thought leaders on leadership, culture, and innovation—designed for executives navigating complexity and building resilient organizations.
Forecast Isn’t Fact: Building Strength from Uncertainty
Episode Description
Uncertainty is presented as a permanent operating condition rather than a temporary disruption, requiring leaders to rethink traditional assumptions about forecasting, planning, and risk management. Drawing on the concept of antifragility, the discussion explores how organizations can become stronger through volatility, setbacks, and intelligent failures rather than merely recovering from them. Leadership effectiveness is tied to designing systems that learn, adapt, and gain resilience from disruption instead of depending on predictability.
Key Takeaways
- Precise forecasts can create false confidence when leaders mistake projections for certainty.
- Excessive optimization and efficiency may increase organizational fragility during periods of disruption.
- Small failures often provide valuable learning that prevents larger systemic breakdowns.
- Adaptive organizations strengthen their capabilities through volatility rather than simply recovering from it.
- Lifelong learning enhances both organizational and individual capacity to navigate uncertainty.
Why This Episode Matters
It challenges leaders to move beyond traditional resilience models and build organizations capable of improving performance amid uncertainty, disruption, and unforeseen change.
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Episode Content:
Your Organization May Be Efficient Enough to Fail
Why the next executive challenge isn’t maximizing efficiency but determining how much efficiency the enterprise can safely afford
Efficiency is good.
That’s what’s been drilled into leaders from the day the MBA was invented. But in business as in life, you can have too much of a good thing.
Being a lean, efficient organization works fantastically well when the world behaves as expected. But, as COVID abundantly proved, when the world refuses to follow your plans, your organization suffers…sometimes fatally.
Why? As our podcast guest, Paul Gibbons, pointed out in this week’s podcast, that zeal to eliminate inefficiency and waste also eliminated wiggle room and options.
That reality challenges one of modern management’s most deeply embedded assumptions: that efficiency and organizational strength are naturally aligned. Sometimes they are. But becoming increasingly efficient under normal conditions makes an organization dangerously vulnerable under abnormal ones. This means the organization is fragile.
Efficiency’s Risk Curve
Efficiency clearly has its place. A company that wastes capital, tolerates obsolete processes, or fails to control costs will eventually lose its capacity to compete. The point here is that efficiency is not an unlimited good.
Beyond a certain point, each continued redundancy reduction creates more risk than value. Every backup supplier removed, every staffing buffer eliminated, every capability centralized, and every timeline compressed reduces the organization’s capacity to respond when events deviate from plan.
For leaders, this requires adjusting the age-old question of “How efficient can we make this place?” to “How much efficiency can we safely afford?”
The question is an easy shift; the answer is tougher. It doesn’t lurk in a single quarterly metric. While the benefits of optimization are immediate and measurable, the costs of fragility usually remain invisible until something goes wrong.
Forecasts Are Predictions, Not Facts
Paradoxically, there’s an inherent inefficiency in how we handle forecasting. So much of organizational planning is based on forecasts: projected revenue, market conditions, consumer confidence, and so much more.
But, as Paul emphasizes, those forecasts are false certainties. We can’t know the future. That’s why mutual fund prospectuses always warn: “Past performance is no guarantee of future results.”
Yet organizations routinely build strategies around a single budget, completion date, sales forecast, or projected return. Objectively, we know the numbers are uncertain; most institutions treat them as fact, nonetheless.
As a result, when reality doesn’t match business prophecy, teams postpone bad news, managers contort operations to meet artificial deadlines, leaders refuse to admit the original assumptions were wrong, and so on.
To be clear, forecasting is not the problem; leaders must make estimates about the future, after all. The problem is designing an organization whose success depends on those estimates being correct.
A stronger approach accounts for a range of probabilities instead:
- What range of outcomes is plausible?
- Which assumptions matter most?
- What evidence would tell us those assumptions are failing?
- What options are we preserving if events unfold differently?
- What losses can we absorb?
- Which decisions are reversible, and which would lock us into one future?
- How quickly can we redirect capital, talent, and attention?
Paul calls this probabilistic leadership: not abandoning judgment, but acknowledging uncertainty honestly enough to make better decisions.
Getting Stronger – But for Whom?
Taking these steps reduces fragility. The goal is to become antifragile. Let’s take a look at those terms.
A fragile organization receives damage by disruption; a resilient organization withstands the disruption and returns to its previous condition. An antifragile organization goes further: It learns from the disruption, adapts its systems, and emerges stronger than it was before.
That strength glistens as a total win in theory. In reality, it carries ethical issues. Sometimes, organizations make themselves more robust by transferring fragility to someone else: maintaining flexibility by relying on temp workers (who therefore have unpredictable incomes); reducing inventory by requiring suppliers to hold more (increasing their up-front costs); protecting margins by passing volatility to customers (hello, inflation); and preserving corporate stability by making individual careers less secure (goodbye, career path).
From the enterprise perspective, risk appears to decline. From the employee’s or supplier’s perspective, it simply moved.
That means every resilience strategy should include a human-centered question: Who is being asked to absorb the instability we are removing from the organization?
Evaluating an antifragile operating model means examining how risk distributes across the entire ecosystem, not just the organization in isolation. That’s practical as well as ethical: The organization that survives every shock by exhausting its people is not antifragile. It is consuming the human capacity on which its future depends.
Face Your Personal Fragility, Too
These same principles apply to executive careers. Your experience can create adaptability, judgment, and pattern recognition…or you can let it harden into dangerous certainty, instead.
A leader becomes professionally fragile when their value depends too heavily on one specialization, one industry model, one technology, or one set of assumptions about how organizations work. The antidote is sustained intellectual mobility: the ability to revise a worldview, acquire unfamiliar capabilities, and recognize when the knowledge that produced past success no longer fits.
For senior leaders, lifelong learning is less an enrichment activity and more bona fide risk management.
Your Strength in Change
In the old industrial era, leaders could create advantage by making organizations increasingly efficient, predictable, and controlled.
Those capabilities still matter in the modern era. But in a world of overlapping technological, economic, environmental, and geopolitical disruptions, they are not enough. The strongest organizations realize they can’t predict every disruption. Instead, they preserve enough redundancy to absorb surprise, create enough flexibility to change direction, allow enough failure to keep learning, and maintain enough humility to revise their assumptions.
Efficiency asks, “How little can we operate with?” Antifragility dives into “What will help us adapt when the future refuses to follow the plan?”
Senior leaders need to ask both because the organization that looks perfectly optimized today may already be too fragile for tomorrow.
Thank you for reading our newsletter, where we bring you thought leaders and innovative ideas on leadership topics each week.
We strive to elevate the quality of leadership worldwide. Are you ready? If you are looking for help developing your leaders, explore our services.
Resources:
Paul’s book, The Science of Organizational Change, is available in paperback at https://amzn.to/4wMwlNY.
The book that coined “antifragility,” which Paul references, is Antifragile by Nassim Nicholas Taleb, and is in paperback at https://amzn.to/4x3VmDM. That author’s first book is The Black Swan; it’s available at https://amzn.to/4iEAQG4.
Our host Maureen Metcalf posts a newsletter every week on LinkedIn. You can subscribe here.
Maureen’s latest book is Innovative Leadership & Followership in the Age of AI. You’ll find details about it at https://bit.ly/LeaderInAI, or check out the Kindle version at https://amzn.to/44buVz8. The audiobook version is now available at https://amzn.to/4dTCleZ.
Her other 10 books are available on Amazon here.
Other episodes you may enjoy:
- Making a Stronger Organization through Change with Paul Gibbons (the prelude to this episode)
- Why Smart Companies Make Bad Decisions with Mats Alvesson
- The 5% Problem: Rampant Change (and How to Survive It) with Greg Moran
Guest(s):
Guest(s) Bio:
Paul Gibbons is an AI-adoption strategist, leadership thinker, author, and keynote speaker working at the intersection of artificial intelligence, organizational change, and human behavior. During more than three decades in strategy, leadership, and transformation, he has held roles with IBM Consulting, Deloitte, and PwC and advised organizations including Google, Microsoft, HSBC, Barclays, Comcast, and KPMG. He founded Future Considerations, a prominent European leadership-development firm, and wrote The Science of Organizational Change, which introduced behavioral science more fully into change-management practice. His current work focuses on people-first AI adoption, leadership capability, behavioral governance, and helping organizations adapt continuously as technology evolves. His latest book is Adopting AI: The People-First Approach.
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Our Podcast Team:

Maureen Metcalf
Podcast Host

Dan Mushalko
Editor & Producer

Jenna Reik
Podcast Manager
Transcript
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Maureen: [00:00:00] My name is Maureen Metcalf, and we’re joined by Paul Gibbons. Paul’s book is called “The Science of Successful Organizational Change.” And today we’re gonna be talking about the idea of anti-fragile. What is it and why do we care?
Paul: I wish I’d coined it myself, but I did not.
It comes from a guy called Nassim Taleb, who was a statistician and a derivatives trader. Actually, he and I were at the same firm on opposite sides of the ocean in the 1980s.
And he is a burr in the side of almost anybody who does prediction for a living. He’s very disdainful of economists and economic predictions particularly. In one of his books, “The Black Swan,” he talks about we are singularly bad as a world of predicting the events which matter most.
So the things that make the biggest impact, from the fall of the Berlin Wall to the meltdown of 2008 to the Fukushima disaster, all of the things that matter most, we are very, very bad at predicting them. Yet what we try and do is design systems that will protect [00:01:00] us from the worst things that happen.
So after writing “The Black Swan,” he wrote another called Antifragility (Full title: “Antifragile: Things That Gain from Disorder”). And so, yeah, it’s a strange word and it’s a neologism, so he coined it himself.
So he opens the book with a very beautiful metaphor. He says that fire is strengthened by the wind- Hmm … and a candle is blown out. We wanna be like the fire. And that’s how he begins his discussion of antifragility. There are certain things, particularly in nature, that are strengthened by stressors.
And so that’s the key concept of antifragility. You know, it’s often compared with resilience, and he doesn’t mean that. He means much more. So resilience means you bounce back, right? If I have a mishap or my business has a mishap, if I’m resilient, a few days later , I’ll be back to where I was.
Antifragility is I’ll be back, and I’ll be back much better than I ever was. So that’s the concept in a nutshell.
Maureen: I appreciate the distinction because I’m the one who said resilience.
Paul: Your resilience, [00:02:00] your ability to bounce back is strengthened by life’s mishaps.
Maureen: So what are some real world examples of antifragility in the business arena that our listeners can relate to?
Paul: Let’s contrast it with fragile. So we can see fragile as a startup business with no capital. There’s a slight market downturn, and they’re wiped out. So that’s a fragile business.
So the next step, and Taleb refers to this as the triad, is robust. So robust is better. What we try and do is protect our fragile systems from the world. We try and control, we try and manage, we try and ensure. And one strategy we use in banks, for example, is we diversify. So if you diversify your assets widely enough in a bank, then when the storm hits, only a few of your assets will be hit, and you’ll be robust.
And we all have a sense of resilience and, and robustness, and that’s what we try and do through most of societies. We try to manage- Mm-hmm … plan, control, and [00:03:00] predict. So from Taleb’s point of view, that’s a mug’s game because we leave ourselves, when we try and do that, more vulnerable to the things that really matter, which are the black swans.
So what’s antifragile? What are some examples of that? If you put people in spacecrafts and take them where there’s no gravity, their bones deteriorate. So the gravity, the pounding from running, from walking, from lifting strengthens bone. Also, weightlifters strengthen muscles, but when they lift more weight than they can easily manage, they break muscle tissue down.
But which results in an increased muscle mass and increased strength. And we all have a sense of how, many of us anyway, our emotional mishaps, we’ve become stronger, more compassionate, more resilient, and a better human being, if you want, through those mishaps. So it’s easy to see at the kinda human level what antifragility looks like.
I had a little business, Future Considerations, in London. At the peak we had 25 people and 25 associates. So, uh, it was big for a leadership [00:04:00] consultancy, and we nearly went under. I mean, we went under twice. And one time we nearly went under, the accountants told me to shut the door, open up across the street and go bankrupt, and, uh, uh, we didn’t do that.
But the fact that we nearly went bust made us completely reinvent our business model. And so at my little small-scale business in London, the fact that we had this stressor, we responded in such a way is that we emerged from it much stronger.
So the question is do organizations learn like that? The question I’m gonna leave it for listeners to ponder is, have we done enough with the banks and the banking system? Or perhaps even more fragile still?
So those are some things that we need to think of. Really, neither Taleb nor me can think of a business that is emblematic of antifragility. I think there are some people who get close, and I’ll talk about a few of those later. But one super, super, super good business example is Silicon Valley.
If you consider [00:05:00] the ecosystem at all, Silicon Valley’s been subjected to more disruptive change in its history than any other industry, right? You think about technology. They started with radio when radio was a new thing in the early part of the 20th century. That’s the earliest.
And things like typewriters and cash registers. So those were the high tech, first Silicon Valley companies were in those areas, which seem fairly quaint to us now. And it’s been disruption, wave of disruption, of wave of disruption, of wave of disruption, of wave of disruption since then. And you could say, and I do say, Silicon Valley now is in better shape than it’s ever, ever been as a business ecosystem.
It functions extremely well, and some enormous percentage of US venture capital finds its way to Silicon Valley. I think it’s a great example of antifragility in action.
Maureen: So what is it that Silicon Valley has done as an ecosystem? Is it that they have a mindset [00:06:00] toward innovation?
Paul: Well, certainly, but it’s one of the things that you see in Silicon Valley, is we see the unicorns, the successes. There’s a massive amount of destruction and failure. Massive amount. Mm-hmm. So i- in Silicon Valley, it’s almost like a badge of honor that you have a s- failed startup early in your career.
I mean, that’s not always the case, something like that. But they don’t try and, if you will, preserve companies that have poor business models. They kind of let the market do its work and sift and winnow. And then all of the people who are in these partially functioning companies are redistributed towards highly functioning companies, and all of the capital that was at risk in the small companies is redeployed of that which is left, so they have a natural robustness. And also the Silicon Valley model is interesting because now the Silicon Valley model is hailed as one of the things that makes Tesla so successful, the Silicon Valley model and mindset. They’re doing things that no other car company does, and they’re doing them [00:07:00] better.
And that’s the same with SpaceX also. I mean, SpaceX are arguably the leading space exploration, space travel company in the world. They are, again, using a Silicon Valley model. And so I think Silicon Valley has a lot to teach the business world.
Now, what makes Silicon Valley as a system so robust is the fragility of the individual companies- they let them fail.
Maureen: So what I hear, and I find this fascinating is that in the spirit of making the whole system successful, I have to let the weaker in the litter perish and in the case of capital and machinery and other resources, including people, those resources that are used suboptimally are reallocated, and the overall system then becomes more effective.
Paul: You got it.
Maureen: Why should this be of interest to business leaders?
Paul: Businesses are very fragile things. Now, if you think of a fact of species and ecosystems on this planet living for 500 [00:08:00] million or a billion years, companies are very fragile things. And so I think every business leader, uh, wants to believe that they can build a legacy which will last far beyond their lifetime.
There you have one interest we should have as business shareholders and stakeholders, building a business which is not just robust, not can just defend itself against shocks, but is able to surf the waves rather than get swept over by them.
That’s the, I think the high ground for businesses is that they’re anti-fragile in that respect. And so I think most business leaders would nod their head at that as a concept, as something that’s a desirable attribute for a business. And as I said before, I, I don’t think many are there.
Maureen: One of the things that it sounds like is a bit of a mindset shift. We fall in love with our own ideas. So if I think of the ecosystem of my company rather than the ecosystem of Silicon Valley, I have a number of service lines and different product offerings. I need to be willing to [00:09:00] kill the ones that are a drag on the business, whether they’ve exceeded their useful life or whether they just failed to launch- Mm-hmm -in service of investing my time, energy, resources in something that is gonna be mediocre at best.
Paul: That’s right. Yep. That’s a reasonable summary of what we’re talking about. Yep.
Maureen: Business organizations … I think you said we don’t know many that really are anti-fragile.
Paul: Well, on the timescales that we’re talking about really from the Industrial Revolution, you know, I think someone asked Chairman Mao what he thought of democracy, he said, “It’s far too early to tell,” in 1973 or whenever. I’m gonna point to a company in a minute- Mm-hmm
which is, uh, a whole 100 years old. From the point of view from which I look at things, that’s not terribly old. But IBM is one company that began by making scales for weighing produce in the late part of the 19th century, and in the early part of the 20th century it was making meat [00:10:00] slicers.
And, then it made punch clocks and coffee grinders and typewriters, and now I’m only up to the 1930s. And then it was right there at the computer revolution that birthed the digital age in 19- approximately ’37. And then there’s been probably nothing that’s been more disruptive than the computer and the information technology revolution since the first computer went into operation.
So they have been able to, despite their size, dance with all those different technologies. And I think another company that was number one in the mobile phone industry for a number of years, was Nokia. And they were in rubber and forestry and lots of heavy industries.
Those are two companies that I like to point at. They’ve been able to ride the waves of disruption extremely successfully. Unfortunately, when it comes to corporations, we don’t have that many examples.
Maureen: So you just said something that strikes me as really important: ride the wave of [00:11:00] disruption.
What is it about an organization that allows me to ride that wave?
Paul: Oh, well, that, that’s a fabulous question. I mean, I think one of the things that you see in nature is you see great redundancy of the subunits. So you see smaller subunits which are interdependent, yet independent. And in, in nature particularly, lots of destruction and recreation during these smaller subunits.
One example of that is the process of evolution, which is, you know, a very harsh process: ” Nature is red in tooth and claw.” So that internal disruption, destruction, to say, within companies of small subunits and redundancy is certainly one feature.
I think one thing also, if I may add, we try to in the world make decision-making based on predictions. So you’ve been in consulting a long time, Maureen. Mm-hmm. We make predictions of how long a project will take. We’ll make a prediction of how big the market will be [00:12:00] and how many units we’ll sell- Mm-hmm
and what market share we’ll have. In fact, the whole business world is really based on, to some extent, even when you start any business, you’re making a prediction about how it will prosper. Taleb says, there are limits we have as human beings to be able to predict the future.
Well, that sounds like a trivial thing to say. Of course we are. But his aim with antifragility is to have a science of non-predictive decision-making. How does that sound? Decision making that’s not super-duper sensitive to our predictions. Doesn’t that sound interesting?
Maureen: It does, and the term sensitive, I wanna talk about that for just a second. So as I’m thinking of redundancy of subunits, specifically I also think of organizations that have become incredibly lean. So if I run a restaurant in Ohio, and we’re subject to snowstorms in the winter, if I have just enough [00:13:00] stock, if the interstates are closed for two days, what does that do to my business?
So I’m incredibly lean, and that seems good for cash flow-
Paul: Yeah …
Maureen: but I’m not resilient- Or you’re fragile … or I’m not able… Yeah, you’re fragile.
Paul: You’re, you are fragile, yeah. So lean can mean fragile. Yes, absolutely. Yep, that’s a great example.
Maureen: So these constructs are at odds.
Paul: They are somewhat at odds, yes.
But now, obviously if a company’s hemorrhaging money because it’s inefficient, let’s call that the opposite of lean for the sake of argument- … then obviously it’s vulnerable also. This is an example from Taleb’s book. I wish I thought of this one myself also.
Um, as we try and protect forests from fires of any kind. But actually, a little bit of fire is good for a forest, because it cleans out all the dry tinder and all of the stuff that’s combustible material. So these little, small fires prevent the big fires. And so when you’re interested in forest maintenance, and this is an example from his book, is we try and make the forest robust [00:14:00] by preventing any fires whatsoever.
But what we do is we make it vulnerable to a huge fire, which is some of what we see sometimes in the west where I live in the Rocky Mountains, and certainly in California.
Those natural cycles are what makes it antifragile. In the short term, we make things robust, but in the longer term, we make things much more fragile. And I guess that’s the trade-off that Taleb says, is you can make things robust in the short term, but you’re making them much more fragile in the long term.
This sort of steers a little bit into the political. So if you have a company which has a very flexible labor model you know, very flexible labor laws, able to shed workers- Mm-hmm
very quickly- Mm-hmm … lots of contractors, project-based workers. So take a company like that. It will be very resilient to shocks, right? When the market downturn, you get rid of a ton of people, and when the market’s better, you hire them back. So that’s an example of a company which to some extent is, uh, robust, right?
That company is robust. Mm-hmm. But it’s robust at the expense of the subunits. Now, those subunits, I have a special name for them, they’re called human [00:15:00] beings and human beings have lives and livelihoods. So then we run into something that’s not talked about enough, is the ethics of the situation. So when people talk about, for example, the US car industry shouldn’t be allowed to fail, from an antifragility point of view, they’re absolutely right.
There’s no question that it was very inefficient in the way it used resources, and it’d been really inefficient for 30 or 40 years. It had been outpaced by European and Japanese car makers, and it was maybe time for it to shut down and regrown from the embers but the subunits in the United States car industry were somewhere between one million and two million workers.
What we did was we made the livelihoods of those workers more robust by keeping them fully employed. But of course, that makes the industry itself, because its cash flow economic model, more vulnerable. And so this is one thing when you look at the levels in a system, from the subunits to the higher units to the ecosystem level, the business level, then the business parts of the business level, you talked about different lines of [00:16:00] business, and then the lowest level, which you could say is the, the individual livelihoods of the people in it, there can be trade-offs.
You can make one part of the system robust, which makes another part of the system more fragile, or you make in the instance of business, if you protect people’s livelihoods, then you make the entire business more fragile. So these trade-offs at every level, and this poses a great and interesting moral dilemma, an economic dilemma.
So I think you hit the nail right on the head there.
Maureen: Which is a fascinating subject for me as an economist, but as a business leader, if I look at the systems and subunits as my enterprise, how does this play out? How do I create stability for my workers?
Paul: Indeed, indeed.
Maureen: This sounds like we have just hit the crux of the issue: understanding kind of a balance between lean and efficient, ’cause certainly I don’t wanna be inefficient, but how efficient is too efficient to be… That throws me into fragile.
Paul: You’re gonna [00:17:00] love this. It may be from an ecosystem point of view to cull certain predators or certain species in an ecosystem, but when those species are human beings, I think we ought to be morally sensitive to that.
Maureen: Yeah, I’m a, a bit of a fan of humans, uh, since most of my work- … involves them . And so inflicting suffering-
Paul: Right …
Maureen: in a, a million people so that a industry can be more profitable, it does have its ethical questions. I realize as a business our responsibility in a corporation is to maximize return to shareholders, but it, it does seem that we have some moral obligation to the million employees to also consider them as a reasonable stakeholder a- at the same time.
Paul: Yeah. If stakeholders have a moral claim on the business, then it surely should be true that moral claim on the business should be codified in our laws.
It’s not possible for them to have a moral claim without that claim being somehow codified in [00:18:00] law. And, and European company law now reflects some of those moral claims.
Maureen: And that again, uh, impacts the fragility of the organization by long-term commitment to employees when you’ve said the most effective from a business perspective, is people are more transient, and yet that then requires an entire infrastructure around human transition that we have kind of this independent worker idea that is maybe not a whole lot unlike itinerant workers in farms. And now we- Yes … call ourselves all consultants.
Paul: Well, indeed, indeed. And for a worker today, if you get down to the perspective of a worker, is how do I have a career that’s not fragile? So one of the ways to have a fragile career is have a very narrow specialism in something that might, for example, be time boxed or something that’s disrupted by technology, and then also not learn, because if you were a computer programmer, [00:19:00] for example, unless a computer programmer is reinventing themselves almost every several years, you become a dinosaur. And so that’s one example of how a career may be made fragile.
Maureen: It sounds like there are some specific prescriptions for what will allow me to remain effective.
Paul: Well, certainly. I know you spend a lot of time developing senior leaders, and one of the things I sometimes see is that leaders will spend entirely too little time on their own development. There’s a sort of culture in many organizations that by the time someone reaches 45, they’ve learned formally all they need to learn, and the rest of it they’ll pick up by osmosis.
That’s not the case with people who are the very best, who are always educating themselves, always developing themselves in some sense or another. But it’s absolutely vital, if you’re going to have any sense of agility or antifragility in your career to be a lifelong learner.
It’s acute in industries like engineering and computer programming. It’s acute in the sciences. But in business, you know, the culture and the demands on businesspeople don’t really require them. There’s no [00:20:00] really accountability for businesspeople being up to date with the most recent ideas.
Their feet aren’t really held to the fire, I don’t think, sufficiently.
Maureen: And yet with the volume of change we’re now facing, it seems incumbent upon leaders to accelerate that pace of learning.
Paul: But they sure don’t, right?
By and large.
Maureen: So let me go back to something you mentioned earlier that was fascinating to me, and to me there’s a connect here. You talked about black swans and non-predictive decision-making.
Paul: Yeah.
Maureen: I’m thinking about, again, not learning. Tell me a little bit about non-predictive decision-making.
Paul: It’s a fascinating subject. So I think it’s a new area. So one of the things that you know as a consultant is that when you put together a project plan, you put together a single-figure budget, and you put together a plan that’s got a single delivery date. Anybody who’s ever been in project world know that those numbers are more often than not fantasies.
It’s documented- Yeah … in something called the planning fallacy. So what we need [00:21:00] to do is model our businesses on the appropriate statistical distribution of outcomes. And I never see this, you see, I’ve been in consulting a very long time. When I see a consulting proposal, it’s got a single number for the price and a single budget.
So it’s based on a prediction of how quickly they’ll be able to do things, and organizations contort themselves to meet the time and budget. But we’re living in a fantasy world because in the real world of projects, everybody know there’s a distribution of outcomes, and sometimes that distribution is a very long tail.
I mean, sometimes projects take twice as long as predicted. So that’s just a one single example of how a leader can much more live in the real world of non-predictive decision-making and not base the success of their business on being able to predict the future with a, a level of certainty that’s a fantasy.
Maureen: I’m thinking of most of my clients, if I said it might cost between 100 and 200,000, they would be, um-
Paul: They’d show you the [00:22:00] door.
Maureen: Yeah. Yeah, pretty much.
Paul: Yeah, they would. Imagine a, a guy who’s a ambitious vice president going up and making a project proposal and saying exactly what you just said.
The project delivery date is nine months. But it could take- Plus or minus a year … it could take, it could take, yeah, it could take as long as 15 months. Our expected ROI is that it’ll make us $50 million, but some of the time we’ll lose 20. You know, I mean, he’d be out of a job. But that’s because he’s talking about the real world- Mm-hmm
and the distribution of outcomes. The corporate culture doesn’t talk about a distribution of outcomes. They talk about point estimates, and those estimates are fantasies.
Maureen: And so what do you do about that? Having grown up in finance, I know they’re fantasies, and we were forced to pick a number and then manage the heck out of it, even if it was not necessarily the best- Right
final outcome because we wanted to hit our numbers.
Paul: And you contort yourself. You do all kinds of unintended consequences and all kinds of workarounds, and [00:23:00] I’ll call them cheats. I don’t mean fraud, but do all kinds of short-cutting to try and hit a number. Whereas in fact, the real world operates in probability distributions and not in point estimates.
Mm-hmm. It’s a change in corporate culture. It’s a change in the way we think about things.
Maureen: It also means how we report our earnings to the street, it seems. If I’m being held to a quarter of a cent in earnings, I don’t have the freedom to miss my numbers.
Paul: No, you don’t. So the culture, yes, of course, goes all the way up to the very, very top. To the whole ecosystem. So the wor- the whole- Mm-hmm … capitalist ecosystem, the expectations of investors to the, uh, restrictions put on chief executives to the requirements chief executives make of their chief financial officers to the requirements the chief financial officers make of the people who propose budgets to them and manage business units.
It’s all the way down. Yes, for sure
Maureen: If I’m running a publicly traded company, I’m in an ecosystem that gives me very little opportunity to deal with this other than to continue doing what I’m doing.
Paul: And that’s a shame. And then, [00:24:00] and Taleb and, and other authors I admire today, they talk about this fantasy that we live in that the world is a certain way and we’re able to make predictions with great certainty, and the fact that we contort ourselves to try and work to those predictions and the costs to us.
And one of the costs, of course, is fragility. It’s a human mindset. There’s a German author called Gigerenzer who talks about being educated in probabilities and in risk, and he’s not talking about turning everybody who’s in 11th grade into statisticians, but understanding when someone says, “The risk of cancer is doubled if you do this,” what that means in the real world.
Mm-hmm. Or even trivial things like, “There’s a 50% chance of rain tomorrow.” The even statistics that we throw around with one another are grotesquely misunderstood. And I think it’s, there are great public health and personal consequences to that.
Maureen: So what do you do about it?
Paul: We need to begin to think about the world in the way the world really is, which is in terms of probabilities.
Now, that sounds very [00:25:00] abstract, but it’s not really something that we are taught very young. Statistics and probabilities are abstract, high-level stuff, and most of us don’t have to get to grips with it. That’s one thing, but if you look in the public health world and you look at the statistics that human beings are supposed to take advantage of to manage their own lives and their own, health outcome and their own diets, even that, we’re confronted daily with information that we misunderstand.
So that’s part of it. The other part that we touched on, Maureen, is people being lifelong learners. I mean, one of the most destructive- things, one of the most important fragilizers is a really fixed mindset. That is to say, a mindset that’s not porous or that’s closed to information from the outset.
The business example of that perhaps is Blackberry, which were absolutely sure that this idea of a, a keyboard on the screen was just a fad, and that what people really would always want is a keyboard attached to their phone. And absolutely wrong, but they absolutely firmly refused to acknowledge that.
So that fixedness of mindset is one thing. [00:26:00] And so the other thing I think, Maureen, that we need to do about it th- is information-sharing. And there’s a very interesting contrast in the world. When an airline crashes, it’s a great disaster. But the information on how that happens is shared so widely in the industry that airlines have become incredibly safe, and they continue to become safer all the time because of the sharing of information.
However compare the banking system, where there’s a fraud or a significant loss, and those are frequently treated as private affairs, and there’s not the same culture of collaboration and sharing information to make the risks in the whole system lower.
Maureen: So a few things I’m hearing and interestingly, some of these are not new. The idea of probability, so we say our ROI is gonna be 20%, but what’s the probability that we actually hit that, would be a question I would ask anyone making a proposal to me as one. This idea of fixed mindsets is interesting because as we look at leadership development [00:27:00] and leadership maturity specifically, the underlying construct that we talk about is worldview.
So it is foundationally changing my operating system for how I see the world. So do I look through the lens of making a mistake makes me bad, or do I look through the lens of if I’m learning, of course I’m making mistakes? Uh, and those foundationally change everything I see and how I see it.
Paul: Yes, indeed.
Yep, absolutely right.
Maureen: As we’ve talked about the idea of antifragility, a few things I heard. A redundancy of subunits and being willing to destroy in service of redistributing resources.
So not destroying resources, not killing jobs, but using the Silicon Valley example, that as ineffectively used resources are reallocated to more productive outcomes, then the entire ecosystem [00:28:00] benefits.
Paul: Absolutely right, Maureen. Absolutely right.
Maureen: We also talked about the science of non-predictive decision-making and the idea that in corporations, given the ecosystem that we all inhabit, there’s an expectation that is faulty that I can predict something in advance, in some cases years in advance, and then deliver it down to the week or the day, to the dollar, to the level of quality, without significant adjustment, is also an unreasonable expectation if I want to optimize my outcomes and create a system that is robust rather than fragile.
Paul: Yep. Also very good. Yeah very, very nice summary.
Maureen: Thank you. And then the third I would say is if we take away natural rhythms, and we use the example of the forest, again, I become more fragile. So with that, Paul, why don’t you share the name of your book, and then we’ll wrap.
Paul: What I’ve tried to do in “The Science of Successful Organizational [00:29:00] Change” is really take all of what I think the best thinking from intellectuals and researchers around the world in areas that business people don’t read.
So there’s, uh, insights on that, particularly from a statistician. There’s public health and medicine and, uh, economics. So rather than a book which is a lot about business leadership being based on the soft sciences of psychology and so forth, really tried to bring the latest in the behavioral sciences to the practice of organizational change, and update the world of change with 21st century thinking.
So that’s the ambition of the book. I, I hope some people might agree that I’ve realized it, and with that, thank you very much, Maureen.
