Categorized | management

Fat Decisions Part One

Big decisionIf there is a science to business, it is the science of making the right decisions. From the lone entrepreneur bootstrapping a startup from a one-room apartment to world-bashing mega-corporations with hundred million dollar CEO’s and thousands of employees, success always boils down making far more right decision than wrong ones.

Proving once again that for all its elusiveness, business and financial success always boils down to just a few simple truths that are, as in everything else in life, far easier said than done.

“So business is about making the right decisions?” you answer. “Glad for the news, Brokaw, I’ll start right now. From now on, I’ll do nothing but make right decisions. My first ‘right decision’ is to pop you one right on the kisser.”

That, I hazard to guess, would be a wrong decision, because there’s actually a little bit more you should know.

The problem with the unassuming but unavoidable truth that business success is about making the right decisions is that most of the decisions we make in business are plagued by uncertainty, doubt, misinformation, and ignorance. Being imperfect creations in an imperfect creation, even the stoutest and brightest amongst us can only reduce that uncertainty and doubt and misinformation and ignorance, never eliminate it. Hell, if decision-making were easy, we’d still have Enron and CalPine and Lehman Brothers, no?

And that, folks, is the bumper sticker definition of risk.

Risk is the unknown, the imperfectly known, the instinctual, the false belief, the lie . . . all the “not-knowns” that make the outcome of a decision hard to predict.

We’re now well on our way to figuring out how to make right decisions – in fact, it’s right at your fingertips.

You know the phrase, “If I had known x, I would not have done y”?

Sure you do. Everyone says it, from Presidents to plumbers (some Presidents and plumbers more than others). Our lives are paved from start to finish with this phrase. Well, every time you say this harmless phrase or some version of it, you are revealing to the whole world the universal secret of how to make a right decision in a world of uncertainty and incomplete information.

You should know x before you do y.

And the more x’s you know before doing y, the more likely doing y is going to turn out well for you.

That’s why the biggest power hitters in the business world, the Wall Street investment banks, back up their trading teams with the smartest, savviest, summa-cum-loudest Harvard and Yale alum researchers. They’re out to know as many x’s as possible before doing any kind of y, which usually entails putting millions of dollars of the bank’s money on the line. And, boy-howdy, they make a lot of dough doing y.

Knowing all the x’s before doing y is all fine and dandy when you’re talking about mega-basher-corporations, particularly the investment banks and their swimming pools full of cash. Big companies solve the right decision problem through the sheer size and diversity of their workforce. They hire specialists with narrow training and a narrow but deep knowledge base and then slot them into narrow jobs with a narrow set of decisions to make. With the right organization chart and the right employees, you’re pretty much covered in the right decision department. As President of World Domination Corporation, you can always count on finding someone, buried deep in the catacombs of accounting, with the information and skills you need to make the right decision about FASB Rule 140 even though you’ve never heard of it and probably never will.

But what about the start-up entrepreneur or small businessperson? What if your organization is five people and a part-time bookkeeper? Or just you?

Well, the simple answer is, “you’re screwed.”

Just how screwed you are will have to wait until part two

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