As they say, the word “assume” means, “making an ASS of U and ME”. While this is not very refined, there is some truth in it, I suppose. After all, if one kept on working on one’s solutions based on an unverified assumption, the outcomes may make one an ass! Assumptions, therefore, are very dangerous in business, and we need to assess them.
We like optimistic people; they drive action and point the way when there is nothing but swampland in front of us. Mr Lee Kuan Yew is one such person. A visionary and an optimist, Mr Lee never allowed constraints to stand in his way. However, an over-optimistic person may be framed by assumptions that are unverified. When a new opportunity presents itself, in order for us to seize it, we need to paint a rosy picture, especially if funding is required. I am sure many venture capitalists have heard this pitch before, “If we can get every Chinese citizen to spend just $1 on us, we will earn $2B.” Right…. and how will you get all 2 billion Chinese to spend $1 with you?
The question is, when does optimism flow into over-optimism? When does it hinder rather than help? When is it more destructive than constructive? When is that person being framed by his/her assumptions? Here are 4 ways to identify that:
1. When they refuse to accept disconfirming information
Have you heard of the “Confirmation Bias”? Someone holding on to this bias can find a morsel of data that might validate their idea, all the while being surrounded by a sea of disconfirming information. Or, they may string all the disconfirming data into a convoluted mess that somehow seems to confirm their assumption. Their point of view is really all smoke and mirrors and if you cannot shift that, you will be stuck in a situation that might lead down a very bad ending.
2. When they base their decisions on past successes
“When we were just starting out, we did this, and we made a ton of money. So I cannot see how we cannot do this again, and make that ton of money yet again!” This is called hindsight bias and it is based on past successes. It is difficult to dislodge someone with this bias because, truth be told, you might not have been there; or if you were, you might not have made the decision. You therefore don’t know the full context with which it was successful! Not knowing how the success came in makes it difficult to replicate it. And that is quite telling.
3. When they start “rationalizing” based on costs
This is called the “sunk-cost fallacy”. Because they have already sunk so much into the project, there is no way it CANNOT succeed! This is usually the last-ditch effort of the over-optimist to cling to the ideal that may have gone past its sell-by date. To overcome this, calculate how much MORE it will need to go to market and get the person to face up to it. Of course, if the person has deep pockets and willing to lose it all to prove a point, then, by all means continue. It’s not your money in the end. But just make sure you will not be blamed for losing all that money when the inevitable comes knocking on your door!
4. When they pull rank
The last one is the most obvious signal that the person may be framed by his assumptions. After all, if one cannot justify a course of action through the merits of the idea, and has to use rank and say, “Well, I am saying this is the way to go, so just do it!” shows the smoke-and-mirror-ness of the thinking. Once again, you’d have to tread cautiously because you may have just put it in your boss’s mind that you are not up to task for your job. And if you continued on that track, you might just get railroaded when the outcome is less than expected. You are on a slippery slope.
Assumptions are caustic
Again, there is a fine line between optimism and foolhardiness. We all need optimists, especially when the future seems uncertain. We feed off their positive energy that helps us cross the murky waters. Yet, when this optimism becomes unjustified, or is just blind faith, it may turn dangerous. Especially when the person is betting everything plus the kitchen sink, to make it happen! Take caution! Ensure that you have an escape valve. Otherwise you might be pulled in the undertow. Assumptions are caustic like that.