Fifty Thousand!

 

I was pleased to discover yesterday that my Sidewise Thinking blog has now hit the 50,000 pageview mark. Last month, there were over 4,300 views, or well over 150 per day.

My first post, "What's SideWise Thinking?", appeared on April 11, 2009. It was an excerpt from the book I was currently working on, Creative Project Management (with Ted Leemann). I've generally put a new post up every Tuesday (with a big gap between July and November 2010), with topics ranging from project and risk management to my two big series on cognitive biases and decision-making disorders.

The most popular piece so far has been "You're Not Being Reasonable," on the rules of reasonable arguing. First published on March 2, 2010, it's gotten over 3,400 page views, helped primarily by a plug from the blog "LessWrong" and a StumbleUpon link.

I don't quite understand why the second most popular post is the 23rd part of my Red Herrings series, "Hume's Guillotine." First published January 24, 2012, it's gotten over 2,200 hits, but I can't find any specific factor driving traffic to that article and that one alone. Next comes "Triage for Project Managers (Part Two)" (February 8, 2011, over 1,700 hits), and "Eyewitness to Murder" (April 13, 2010, with over 1,300). Red herrings strike again with "A Cute Angle (Part 19)" (December 27, 2011, over 1,000 hits).

By comparison, my new blog, Dobson's Improbable History, which has only a little more than a month under its belt, is already exceeding 100 hits per day, with over 3,200 pageviews last month — a much better start.

This is the 149th post I've made to the blog. I made 29 entries in 2009, 31 in 2010, 52 in 2011, and 43 so far this year.

Thanks very much for reading, and I hope you continue to enjoy it.

How to Accomplish an Impossible Project

In my upcoming book Project: Impossible, part of Multi-Media's Lessons from History series, I lay out a methodology for dealing with a project that appears to be operationally impossible (that is, it can’t be accomplished within the initial boundaries of time, cost, and performance).

Other questions matter, too:

1. What are the consequences of failure to meet the original requirements?
2. Are there unacceptable negative consequences if we succeed?
3. Could trying make things worse?
4. How much risk should we be willing to take in achieving our goals?
5. What are all the things that have to happen to allow us to call it success?
6. How can we prepare our organization or team to be ready when the impossible project appears?

Except for number 6, the other questions can’t effectively be asked until you have the project (or hot potato as the case may be). And as we’ve seen time and time again on our historical journey, it’s what you do beforehand that often spells the difference between success and failure.

To do the impossible, it helps to be prepared. Preparation starts long before the impossible project swims into your field of view. Whether you and your organization will be able to rise to the challenge often depends on the strength and quality of your preparation.

In the television (and movie) series Mission: Impossible, the Impossible Missions Force (IMF, not to be confused with the International Monetary Fund) takes on challenges far beyond the capability of lesser organizations. How does it do that? First, it selects highly skilled people and provides training in the specifics of espionage. Second, it promotes a high degree of morale and esprit de corps. Members of the IMF see themselves as the best of the best.

Third, and possibly most important, the IMF enjoys a high degree of political support and cover for its operations — at least in the television series. In the case of the movies, it’s more often the case that the problem lies in their own management, and as a result, the movie plots normally involve the IMF team acting without the support of its covering organization. This makes the situation far more perilous, and if it weren’t for the magic of the motion picture experience, those projects more likely would turn out to be actually impossible.

Sometimes a project is impossible for a good reason. In other cases, the project isn’t what it seems. Practice looking at the situation through someone else’s eyes. Play the “what if” game. Look around you. Question the constraints.

And always accept that you don’t know everything.

Unknown Knowns — A Survey of Assumptions, Biases, and Bigotry

“The bigot is not he who knows he is right; every sane man knows he is right. The bigot is he whose emotions and imagination are too weak to feel how it is that other men go wrong.”

- G. K. Chesterton, Alarms and Discursions, 1910

Last week, we explored Donald Rumsfeld’s observation about “unknown unknowns.” Unknown unknowns aren't just about what you don't know, they're about what you don't even know that you don't know. The other categories, of course, are known knowns (things you know and know you know) and known unknowns (things you know that you don't know).

But there is one missing combination: unknown knowns, the things you don't know that you really do know. How could you not know something that you actually do know? The answer involves cognitive biases, the ways in which your mind deceives you. Cognitive biases can blind you to what is in fact right in front of you, and also can make you see things that really aren't there.

In looking at cognitive bias, the essential first step is to realize that no one is immune. It's easier to see the mote of self-deception in someone else's eye than it is to see the big heavy curtains that are draped over our own perceptions. None of us can completely escape the trap, but we can (and must) stay aware that what we think isn't necessarily the whole or complete picture. As once was famously said of Vietnam, "Anybody who knows what's going on clearly doesn't understand the situation."

Project managers are taught how important it is to document the range of assumptions on a project, but the PMBOK® Guide doesn't go into much detail about how to discover them or what to do about them. And it's wrong to assume (*ahem*) that all assumptions are bad for your project. They don't always make an "ass + u + me."

Some assumptions are, of course, clearly bad. Common project assumptions include the idea that everybody's on board; that people will always play nice; and that the proposed project will actually solve the underlying problem. "Bad" in this context doesn't mean these assumptions are necessarily or always wrong; it means it's dangerous to take for granted that they're right.

Other assumptions are more useful: if you see a gun, it's wise to assume it's loaded and act accordingly, even if you have good reason to believe it probably isn't. The consequences of an error in one direction don't have the same impact as the consequences of an error in the other. Still other assumptions may change over time. Assume the gun is loaded unless you need to use it; in the latter case, it might be safer to assume it isn't loaded and check to make sure there's a round in the chamber.

The big problem in assumptions comes from assumptions that are held so deeply in the subconscious mind that we (or other stakeholders) aren't even aware they exist -- the “unknown knowns" of our title.

Prejudices and biases are a normal part of the makeup of human beings. They have a certain utility; they permit us to filter and organize and simplify the complex flood of data we get from everyday existence. The danger comes when prejudices are confused with facts. A good general assumption turns into an iron-clad rule; “some” is equated with “all,” and it’s one short step to the idea that if someone sees it differently, they must be either stupid or venal. That, as G. K. Chesterton points out, is the essence of bigotry.

It is both humbling and fascinating to read the extensive and exhaustive lists of biases and cognitive distortions that have been identified over the years. There are far too many for a single blog post, so we'll have fun with these for the next few weeks. If you'd like to jump into discussion, please feel free. SideWise thinkers know they have to battle their own biases as well as those of others, and understanding the list is the essential first step.

Let’s start with five common biases.

Decision-Making and Behavioral Biases

Bias Blind Spot — "Bias blind spot" is a recursive bias, the bias of failing to compensate for one's own cognitive biases. Some 80% of drivers think they are substantially better than the average driver. That's called the "better than average effect." Here, the vast majority of people think they are less subject to bias than the average person.

Confirmation Bias — Evidence is seldom completely clean and clear. If a mass of facts argue against our position and one fact supports it, guess which fact we focus on? When confronted by a mass of data, we tend to be selective in the evidence we collect; we tend to interpret the evidence in a biased way; and when we recall evidence, we often do so selectively. This is why a search for facts isn't as persuasive as logic might suggest.

Déformation professionnelle — Your training as a professional carries with it an intrinsic bias that's often expressed by the phrase "When the only tool you have is a hammer, all problems look like nails." We probably know IT professionals who think every problem can be best solved with software, HR professionals who think every problem yields to training and human capital development, and project managers who think all problems lie inside the confines of the triple constraints. Each profession, of course, provides enormous value, but no single profession has all the answers.

Denomination Effect — One way to limit your daily spending is to carry only large denomination bills. Research shows that people are less likely to spend larger bills than their equivalent value in smaller ones. (This could also be called the Starbucks Effect.)

Moral Credential Effect — If you develop a track record as a moral and ethical person, you can actually increase your likelihood of making less ethical decisions in the future, as if you have given yourself a "Get out of jail free" card. For example, in a 2001 study, individuals who have had the opportunity to recruit a woman or an African-American in one setting were more likely to say later that a different particular job would be better suited for a man or a Caucasian.

More next week...

[Illustration © 2009 Mark Hill, used with permission.]

Unknown Unknowns

“There are known knowns, known unknowns, and unknown unknowns,” Donald Rumsfeld famously observed. He was talking about an issue close to the heart of every serious project manager: managing risks and making decisions when you don’t always have data to back them up.

Classical risk management is based on the law of large numbers. A creation of famous mathematicians of the 18th century, classical risk is based on statistics. We don’t know if your house will burn down, but in a pool of 100,000 houses, we can make a pretty good prediction about how many houses will. In many ways, classical risk management is at the heart of modern economic civilization. From insurance to interest rates, the ability to analyze and measure risk is essential. At the root of our current economic crisis is the unfortunate fact that risk analysts sometimes get it wrong.

The classic risk formula R=PxI (risk equals probability times impact) measures the severity of risk and provides a guideline for determining how much you should spend in dealing with the risk. If there is a 10% chance, for example, of an event that will cost you $10,000 if it happens, the risk score is $1000. That means if you can get rid of the risk for under $1000, you are better off.

But in project management, you often have no idea what the probability is. “We’ve never done this before! What’s the chance of Event A happening?” Clearly, we have no idea. What do we do now?

Rumsfeld’s answer, basically, was to do nothing. Known knowns and known unknowns fall into the universe of planning, but the set of unknown unknowns was too far outside the box. Unfortunately, that doesn’t work out in practice. If you go to your boss and say, “Sorry that project failed, but it was because of an unknown unknown,” that doesn’t work very well as an excuse. Someone else, after the fact, with the benefit of 20/20 hindsight, gets to decide whether it was reasonable for you to have missed it. You are a hostage to fate.

Fortunately, there are a great many things project managers and planners can do even in the face of unknown unknowns.

1. Establish a reserve. Military planners know this well. As the elder von Moltke famously observed, no battle plan survives first contact with the enemy. No project plan survives first contact with reality. The total reserve should be proportional to the estimated risk, but the real secret is that reserve can be created in three dimensions: extra resources, extra time, and optional scope.
2. Think backwards. The triple constraints – the interplay of time, cost, and performance – form a powerful tool for insight. Any negative event can only do three things to your project: it can make you late, it can drive up your cost, or it can degrade your performance. If it does none of those things, it’s not an issue. If you have generic strategies for recovering lost time, recouping lost resources, or patching up problems in scope, you don’t need to know every possible direction from which trouble can appear. You already know what to do.
3. Define the range of outcomes. There are six possible outcomes for any given project. The baseline outcome is “fully satisfactory.” That’s the level of meaningful good enough. Another outcome is “barely adequate.” That’s the worst you can do and not have to call the outcome of failure. Above “fully satisfactory” is “exceeds expectations,” a traditional operational definition of quality. At the top is “outstanding,” and below “barely adequate” are the levels of “failure” and “catastrophe.” (Failure just takes down your project; catastrophe takes other stuff down along with it.) The reason you want to define failure and catastrophe is for risk management. The reason to define the higher grades is to improve quality. While it’s easy to provide quality as long as you don’t care how much you spend, that’s not so good for business. Find the elements of outstanding that cost very little, and you’ll deliver high quality performance even on a shoestring budget.
4. Work harder and dig deeper. At the beginning of the project just about everything is an unknown unknown, but it doesn’t have to stay that way. Have you really analyzed your project risk environment? In a number of organizations, thinking about failure causes people to be branded as “not a team player.” Unfortunately, the failure to think about failure increases the likelihood of failure. The more you obsess about the reasons for failure, the more powerful you’ll be at preventing it.

SideWise thinkers don't fall to pieces in the face of uncertainty. Uncertainty and the unknown is quite real, and denying its reality doesn't make your life better. Unknown unknowns are part of projects and of life in general. You can prepare even if you can't know.

Next week, Unknown Knowns — What you don't know that you really do know.

When Conflict Breaks the Box

In my previous blog entry, “The Rules of Conflict,” I identified the conflict resolution styles that are inside the box: smoothing, withdrawal, compromise, forcing, and negotiation. Sometimes, sadly, conflict breaks the bounds, and turns into war.

Not all war is violent. If you’ve ever been in a bad work situation, there’s war all around you, even if nobody’s getting killed. (Fired, maybe.)

But if you extend the “concern for my needs” line high enough, forcing can turn violent, and eventually becomes a war. War is an extreme form of conflict resolution, but it’s still part of the grid.

So, let’s define war. Why go to war? The first reason why people sometimes choose war (the violent or nonviolent kind) is that their perceived need is so overwhelmingly important that they must achieve it, no matter what the cost. Conflict avoidance isn’t an option, and withdrawal or surrender is morally repugnant.

What can possibly be that important? Well, perhaps the other side is committing genocide against my people, or invading my nation. Perhaps the other side is threatening my religion or my fundamental values or poses a long-term threat to the security and welfare of my nation. Here’s a list of common reasons offered by those who support any given war. Which reasons (or cases) do you think justifies war?

Traditional Reasons for Going to War

1. We have been attacked militarily (Pearl Harbor).
2. We have been violently attacked through a proxy force (9-11, the assassination of Archduke Ferdinand).
3. We believe we are in imminent danger of being attacked (the Cuban Missile Crisis).
4. We believe there is a long-term military threat that will be substantially easier to eliminate at the present time (the suspected Iraqi WMDs, the Iranian nuclear program).
5. We believe our national security interests are threatened (Vietnam).
6. We believe our national economic interests are threatened (“gunboat diplomacy” in Central America).
7. We believe our national economic or security interests can be advanced through military action (the creation of Panama, annexation of the Phillippines).
8. We believe our moral, political, or religious ideals are at stake (supporting anticommunist forces in Nicaragua, stopping potential genocide in Kosovo, or any of the Crusades).
9. We believe we are being subjected to intolerable pressures, laws, or demands. (Revolutions and revolts against existing power structures.)

No one agrees in all cases. Some people find no justification for war under any circumstances; others allow limited circumstances, opposing most but not all wars; still others set a threshold for military action at a much lower level.

Others agree on principles, but disagree on cases. The United States was born out of a Reason #9 scenario, but four score and seven years later opposed the Confederate states when they tried the same thing. Individual cases matter far more than general principles.

The reason for going to war matters, but it's not enough. Going to the extreme on the "forcing" axis doesn't make sense if other options remain. While smoothing/conflict avoidance and withdrawal/surrender are out, two other strategies remain: compromise and negotiation.

Is compromise possible? If we’re disputing ownership of territory, perhaps we can split the difference and both walk away with part of what we want. If the issue is genocide, compromising is much less of an option.

That leaves negotiation, the search for a win/win answer.

“Win/win” is an idea that sounds impractical, no matter how desirable it might be. How can both sides win? Harvard negotiation experts Roger Fisher and William Ury in their seminal work Getting to Yes tell the story of the two sisters fighting over the last orange. They decide to settle the argument by compromise, cutting the orange down the middle and each taking half. One sister is hungry. She peels her half, eats the fruit, and throws the peel away. The other sister, however, is baking. She takes her half, peels it, throws the fruit away and carries the peel into the kitchen to grate for her recipe.

Interests are different from positions. The position is what we’re asking for. (“I want the orange,” or “I want to eat Thai food.”) The interest, on the other hand, is why you want it. (“I need some grated orange peel,” or “I can’t eat fish.”)

You can’t negotiate positions. You get the orange, you don’t get the orange, or you cut it up and each take a piece. Interests, on the other hand, aren’t necessarily reciprocal. If you want the fruit and I want the peel, we can split the orange and each get 100 percent of what we want. If you want to buy something from me, you want my stuff more than you want to keep your money. I want your money more than I want to keep all my stuff. We both win. That's SideWise thinking.

Unfortunately, negotiation is more difficult when the parties don’t trust each other. In American politics, one side proposes something that sounds reasonable on the surface (a restriction on handgun ownership by felons, or providing vouchers that enable poor children to attend better schools), but the other side angrily rejects it as being a stalking horse for a hidden agenda (gun confiscation, the destruction of the public school system). Neither side believes the other is being honest about the goal, and negotiations that might possibly have produced good outcomes instead fail miserably.

“Keep your friends close, and your enemies closer,” Michael Corleone said (quoting his father) in The Godfather II. Most people interpret that as making sure you keep an eye on them. That’s not a bad reason, but it begs the question of why they should let you get close in the first place.

The real reason to keep your enemies close is to build the relationship. It may be unrealistic to think all war can be avoided, but certainly some wars can be. Settling issues short of extreme means is challenging, but it has been done before. Let's keep trying.

Brand New, Completely Original, and Just Like Everything Else

At the American International Toy Fair in New York City one year – the year the Cabbage Patch Kids were the hot new toy – my boss (a former Hasbro executive) and I were standing in a knockoff importer showroom looking at (no kidding) Broccoli Patch Kids.

I made a predictably sarcastic remark, but in return my boss grinned.

“You’re missing the point,” Jack said. “Intellectual property theft is what the toy business is all about. Yes, this is a stupid knock off, but there’s a brilliant Cabbage Patch knockoff at the show. See if you can find it.”

Armed with the challenge, I peered at every doll and piece of plush in the show. I found plenty of other knockoffs, but none I would call “brilliant.” I gave up eventually.

“You’ve got to understand what the retailer wants,” Jack said, “He wants a brand-new and completely original product that’s just like everything else.”

"Huh?" I said. It still didn't make much sense to me.

“It’s got to be brand-new and completely original, or the retailer can’t sell it,” he continued. “But if it’s not like everything else, he doesn’t know where to merchandise it.”

“Okay,” I said slowly, “so how exactly do you do that?”

“What’s the essential Cabbage Patch gimmick?” he asked.

“You adopt them,” I said.

“What else do you adopt?”

And with that, the lightbulb finally went off. “Pound Puppies!”

He nodded. “They’re just like Cabbage Patch, only completely different. That’s the essence of business creativity.”

Apparent paradoxes exist many places. Because they appear unresolvable, people naturally ignore them. But at least some of these paradoxes can be resolved, and the way to do that is by facing them.

What, for example, would a perfect test look like? Well, a perfect test provides an honest, complete evaluation – and never fails anything. An apparent paradox, but look again.

We don’t want to cheat on the quality of testing because we need to know that the product or service is of good quality. However, we don't really want things to fail testing, because it's costly to do the rework.

Can these apparently contradictory aims be resolved?

Asking this question can lead one to a powerful insight that’s at the core of the modern quality movement: moving incremental testing far further up in the chain so that errors are caught and corrected long before the final test is performed.

We are frustrated because our business environment forces us to do more and more with less and less. “Paradox!” screams our common sense, and morale plummets. But what if we faced the question head on? Try thinking “both-and” rather than “either-or.”

That’s SideWise thinking.

The Three Americas

Abdul Aziz Al Saud, first monarch of Saudi Arabia, wanted his nation’s borders based not on geography, but on the migration of tribes. The British High Commissioner, Sir Percy Cox, lost his temper and started yelling, but Ibn Saud had a good point: a nation is not necessarily the same thing as a state. A nation exists in the hearts of the people who belong to it by some combination of heredity and choice. A state, on the other hand, exists in physical space. The two can be as one (a nation-state), but they don’t have to be.

In many parts of the world, nations overlap in the same geography: Israel and Palestine; Turkey, Kurdistan and Iraq; and Tibet, China and Taiwan. Nations can overlap states, be contained within states, or be distributed in communities worldwide like the Chinese and Jewish Diasporas. Such relations tend to be uneasy, and sometimes (Yugoslavia, Rwanda) turn tragic.

What makes a group of people into a “nation”? Culture, common geographic or ethnic origin, religion, history, numbers, and political clout all combine. Nations can self-declare, but others eventually have to recognize them as a distinct population. The Kurds and Tibetans are generally recognized as nations even if not as states. Some nations (Native American tribes) get some limited privileges of statehood. Other self-proclaimed nations (Nation of Islam, Aryan Nation) get little recognition except from their immediate circle.

“Nation” can exist on a metaphorical plane as well. We can be members of more than one nation (if not more than one state) at a time. We might recognize our national, ethnic, or racial origins, or embrace the community of our religion or political movement. Regional differences form nations. In his 1981 book The Nine Nations of North America, the Washington Post writer Joel Garreau identified nine culturally distinct nations sharing our North American continent.

I’d like to propose three nations of my own. Three distinct motives drove Europeans to conquer and settle the New World.

1. Business. New Romans came to conquer and build. The frontier was dangerous, but the potential rewards were great. “The business of America is business,” New Romans tell us, and pragmatically measure success in terms of wealth. It’s not an accident that Washington classical architecture is Roman in style, or that we have a Senate and do not have a king. Above all, it's no accident we maintain the world's largest military.
2. Faith. New Israelites, from the Puritans of New England to the Baptists of Dixie to the Mormons of Utah, came here to settle a new Promised Land, to build anew the institutions and society of God.
3. Society. New Athenians came from the explosive development of liberalism in Europe, which sparked a revolt against aristocracy and the divine right of kinds. Embodied by the intellectual elite that clustered around the hotbeds of political thought in great American cities like Williamsburg, Philadelphia, and Boston, they sought to build a pure Athenian democracy.

Each of the three nations has equal roots that stretch back before the founding of the United States of America. We share, but none of us owns outright, the state, even if from time to time we all wish we could.

We are fortunate that no group is powerful enough to dominate alone. In practice, the country is governed by a shifting and inherently unstable alliance of two out of the three nations. Traditionally, New Romans, pragmatic in orientation, find it easiest to unify in a common cause with either of the other two nations, although occasionally New Athenians and New Israelites have found common cause. And there's not a simple Athenian=liberal, Israelite=conservative pattern either: libertarians are New Athenian conservatives; utopian religious communities are New Israelite liberals. New Romans occupy the whole spectrum as well.

Viewed through this lens, here’s our recent pattern: New Athenians and New Romans united to conquer the Great Depression and World War II. Their alliance could not withstand the philosophical discord and disintegrated over Vietnam and civil rights. Inertia sustained the cause for a while, but by the ascendancy of Ronald Reagan, the foundation had clearly crumbled beyond repair, and a new alliance of Israelite and Roman led the country into a new era, which now too appears to be at an end.

(Some will argue that the Reagan Israelite/Roman alliance is merely suffering a temporary setback, but that’s not the way to bet. The fracturing and realignment is natural, and even if it can be staved off for a while, it can’t be stopped.)

Regardless of your national identification, there’s a lot to like about the well-known 30-year political cycle. Ideas, like fields, need to lie fallow from time to time to maintain healthy crops. A strategy that worked on one set of problems turns into a one-size-fits-all solution, working on the well-known theory that when the only tool you have is a hammer, all problems start to look like nails.

The success and the stability of the system require the three nation tribes to live with one another. The relationship among the three Americas too often resembles something in between a food fight and the Hatfield-McCoy feud.

When we share geography with people whose values we dislike or distrust, we have to accept that they are here, that they are not going anywhere, and that they have a right to be part of the public discourse. Nations that have not been able to recognize and accept their overlapping distant cousins as neighbors inevitably turn to the only logical alternative: get rid of them. While the United States has robust cultural and legal institutions that make such an outcome unlikely, it’s never impossible.

When I was young, my father made a point of paying attention to news sources and ideas he found stupid, repugnant, or just plain wrong. He wanted to make sure he understood them. I know he paid attention; I’ve even known him to change his mind. That's SideWise Thinking.

People who disagree with you can be opponents or enemies. Opponents are people with whom you have opposing interests, but a good relationship (trust, mutual respect.) Opponents keep you on your toes, make you think harder, and often stimulate your best work. Good opponents make your ideas better and your life richer. They can

When respect and trust are absent, opponents turn into enemies, and with enemies, it’s personal and negative. "Keep your friends close; keep your enemies closer" doesn't mean what most people think. Contact provides opportunity, either to find common ground, or to build a better relationship. While success isn't always possible, it's usually worthwhile to make a reasonable effort.

The Fine Art of Making Bad Decisions

Butch Cassidy and the Sundance Kid are trapped on the edge of the cliff. “What I look at it, we can either fight or give. If we give, we go to jail. If we fight, they can go for position and shoot us, wait and starve us out, maybe start a rock slide and get us that way. What else can they do?”

“They could surrender to us, but I wouldn’t count on it,” replied the Kid.

Butch thinks for a minute. “Wait! We’ll jump!” It’s 300 feet down into rock-filled, treacherous waters. And after some argument ("I can't swim!"), both men eventually jump.

What kind of idiot makes a blind jump into uncharted waters? Answer: the one who’s otherwise dead anyway.

Making good decisions is easy. A good decision implies the existence of a good alternative, and anybody can do that. If there is a good choice, problem solved. But what if all your alternatives are rotten? Well, in most organizations, that gets kicked up the ladder. The higher you are, the nastier the choices that end up on your plate.

Actually, Butch and Sundance had a pretty easy choice: the certainty of death if they stayed, the probability of death if they jumped. Not a pleasant decision, but not a hard one. Real leaders have it worse. They have to choose among strategies each of which makes sense given a specific future. But the future is like Schrödinger’s Cat: depending on the actions of unknown random variables, the cat is both alive and dead until the moment the box is opened. The future become real only when it becomes the present.

Risk managers distinguish between the concepts of “pure risk” and “business risk.” Pure risk only contains a downside. If you didn’t get into a car accident yesterday, you’re not better off. You just failed to become worse off. If pure risk is avoided, it’s status quo. Business risk, on the other hand, combines threat and opportunity in the same decision. If you launch a new product, you might make a lot of money. If it doesn’t succeed, you’ll lose a bundle.

There are four parts of the business risk equation: the probability of the downside, the effect of the downside if it should happen, the probability of the upside, and the effect of the upside if it happens. In classical risk, you know the probability and the impact, so calculating the expected value of the decision is fairly straightforward.

What do you do when you don’t have the numbers? Try asking these four questions when evaluating potential bad choices:

1. What’s the best that can happen? (Can I make it better?)

2. What’s the worst that can happen? (Can I mitigate the impact?)

3. Is #1 worth risking #2? (Is the probability of one higher than the other? Is the impact of one higher than the other? Am I looking at an absence of good options?)

4. Can I live with #2 if it happens? (If not, do I have a less bad option available?)

The buck has to stop somewhere, and the available options may not be what anyone would prefer. Making bad choices is one of the unavoidable burdens of leadership. Do it as well as you can. That's what SideWise thinkers do.

What's SideWise Thinking?

At the end of World War II, Montgomery Ward chairman Sewell Avery made a fateful decision. The United States, he was sure, would experience major difficulties moving from a wartime to a peacetime economy. Millions of troops would return, all seeking jobs. At the same time, factories geared for the production of tanks, bombers, and fighting ships would grind to a halt with no further need for their production.

Avery was not alone in his belief. Many leading economists also predicted that the United States would fall back into the Great Depression. The massive financial stimulus provided by World War II would wear off, and the nation would return to status quo ante.

Let Sears and JCPenney expand; Montgomery Ward would stand pat on its massive cash reserves (one Ward vice president famously said, “Wards is one of the finest banks with a storefront in the US today.”) and when the inevitable collapse came, Montgomery Ward would swallow its rivals at pennies on the dollar.

As we know, it didn’t turn out that way. Instead of falling back into depression, the United States in the postwar years saw unprecedented economic growth.

Sewell Avery was wrong. But was he stupid?

The outcome of the decision doesn’t by itself prove whether the decision was good or bad. Lottery tickets aren’t a good investment strategy. The net return is expected to be negative. On the other hand, occasionally someone wins. That doesn’t make them a genius. Wearing your seatbelt is a good idea. There are, alas, certain rare accidents in which a seatbelt could hamper your escape.

In 1945, no one knew for sure what the postwar world would be like. To understand the future, the only resource we have is the past. It was certainly not unreasonable to conclude that a nation traumatized by depression might well fall back into one.

But it was far from certain.

Year after year the economy grew, but Avery stuck to his guns and refused to permit expansion, expecting the Depression to start any minute now. Sears and JCPenney grew in size and in profits, and by 1954 Montgomery Ward was a lagging also-ran in the department store business. In 2000, the company declared bankruptcy.

Sewell Avery thought ahead, but he failed to think sideways. From our time bound perspective, the future is a wave front consisting of numerous possibilities. We often have only a vague idea of the relative probability of each outcome. But that does not excuse us from the necessity to make decisions.

Foresight is not enough. We must think laterally as well. What if we’re right? What if we’re wrong? What could come out of left field and upset all our precious calculations? What are the signposts that hint at the shape of things to come?

The art of lateral thinking melds classical decision-making with outside the box ideas and a search for clues and models that help us unravel and manage the complexities of organizational life. Whether you are setting strategy for a Fortune 500 corporation or figuring out how your small business plans to cope with economic uncertainty, one answer – whatever it is – simply isn’t good enough.

The art of SideWise thinking – learning to think “what if” – applies numerous models and insights tools to help you avoid the mental blindness and linear thinking that trapped Sewell Avery.