"It wasn’t the best decision we could make but it was the most defensible.”
I'm thinking how much of corporate culture can be summarized in this one single sentence.
In fact, not just corporate culture, now I'm even thinking of how much of bad career decisions finally boil down to how defensible they were to your parents, spouse, or peers.
In large companies, if employees choose to go ahead with a risky decision and something goes wrong, it would be hard to explain because it was outside of normal. On the other hand, if they choose what's safe and everything went right, they'd get virtually very little upside to make all that risk worth it.
If they do something that’s different—and thus hard to defend—and it works out, they’ve risked a lot for very little gain. But if they do something that’s different and it doesn’t work out, they might find themselves unemployed.
And since they don't own the company or any equity in it, they will always want to protect their downside.
This, in large part, explains why big corporates are likely to continue with the status quo rather than change things. People run the risk of ruffling too many feathers and rubbing many people the wrong way.
Likewise, most of our career decisions are made with the view of how easily you could explain them to your parents and friends, and not with any objectivity.
Moroever, I would say that if an idea or a decision is truly a moonshot, it will be pretty hard to fully defend it. Because you don't know all the variables at play, you can't predict second- and third-order effects and you can't foresee emergent consequences.
With any decision that is considered a stroke of genius in hindsight, a lot of luck and uncertainty is at play. If the outcomes of a decision can be predicted with certainty, it is likely to only generate a median result.
And with median results, you get a lot of competition, as the vast majority of players in the market are also taking fully defensible decisions that promise average results.
“If you don’t take extreme risks, even if you’re the most skilled person, you will be outperformed by someone who did. And if you take extreme risks, you will have worse average outcomes than if you didn’t.”
If you're optimizing for defensibility and safety, you're also optimizing for average outcomes.
Now, there's nothing wrong with seeking average outcomes. But don't expect outlier success while taking fully defensible decisions. That sort of a thing, by definition, will never happen. Because with anything truly outlier in nature, luck and the courage to try that luck plays a huge role — even more than skill.
You may risk having worse average outcomes on 9 out of 10 decisions. But on that 1 decision that works in your favour, your degree of success will also be far superior than average.
And you only need to get it right once.
Many times — especially while trying to get unstuck from a place in business or your career — doing the safe thing is not necessarily the same as doing the right thing. There is no innovation or growth in doing safe things, because there is no uncertainty around outcomes, so you likely won't reveal any new information about reality.
And growth only comes with unlocking information about reality that you previously didn't know.
To gain real alpha, dare to work with insufficient data.
