Executive Decisions In Radical Uncertainty
Entrepreneurs: Masters of the Unknown
“Uncertainty and expectation are the joys of life. Security is an insipid thing.” William Congreve, 1670–1729, playwright.
A Rational Trap
For two centuries the underlying assumptions behind much decision-making theory have been enshrined in the idea of rational economic wo/man’s ability to control and manage profitable future markets by choosing preferences from a given environmental spectrum of risk-weighted expectations. Executive training and learning programs have followed these assumptions blindly and reinforced the portrayal of business decision-makers’ behaviour as rational and a practice that can be disseminated in simulated, normative workshop experiences.
In recent times and immediately after the demise of that most rational Master of the Universe i the financial capital marketplace- we have begun to search for alternative explanans of executive decision-making. Explanans that diverge and challenge the partly failed and classic economic view of business decision-makers as rational. Heuristic and behavioural economists have begun to find acceptance and develop valuable insights into the financial marketplace for example, by offering valuable ideas and accounts of the stochastic character of capital market agency ii.
The Uncertain Turn
Central to a number of these new ideas is the notion that future markets are uncertain, unknown, at times unknowable, and that business decision-makers needn’t be rational in order to succeed. They go one step further to suggest that uncertainty itself is a pre-condition for economic opportunity and growth. The economic notion of uncertainty dates back to ideas contained in Knightian Uncertainty iii that make a distinction between risky and uncertain futures. Current manifestations of this argument are found in the Black Swan Hypothesis iv.
Neuroscientists have also begun to decipher this distinction and are recognizing the fundamental role played by uncertainty in human learning and value-based decision making. The distinction made in neurology is between unexpected uncertainty (unknown and unknowable futures), estimation uncertainty (knowable futures) and expected uncertainty (risk) v.
Despite these contemporary developments and increasing support for an uncertain view of the world, one that is unpredictable, random, bounded-rational and unexpected vi , the vast majority of executive-level development designs continue to be locked in a deterministic and rational explanandum of business decision-making.
We have argued previously vii that Business Schools reinforce this view with programs and MBA offerings which assume that tomorrow’s leaders and executives need to enhance their capacities either in the risk calculus of unknown futures or in assimilating future scenarios based on recent samples of data and experience. Our argument is that too little attention in executive development design is given to decision-making for uncertainty.
Entrepreneurs Have It
We believe that entrepreneurial decision-makers offer a paradigmatic route out of this malaise. Entrepreneurs re-construct uncertainty as a force for opportunity and value, and therefore, their orientations are a must-have in any executive-level, decision maker’s toolkit.
The Effectual Method of Entrepreneurship viii and the Cooplexity Model for High-Performing teams ix adopt uncertainty as a central premise in arguing for a reform of executive and leadership decision-making development programs.
Both these approaches conceive successful entrepreneurs as Masters of the Unknown.
Effectuation evokes reasoning at the individual level through which entrepreneurs control their immediate resources and capabilities and thrive in uncertainty because they have no innate desire to predict futures. Instead, they create/make future markets in the unknown. Effectuation provides an immediate contrast to the dominant causal reasoning prevalent in most executive learning designs.
Cooplexity evokes communicative rationality x at the team-level, to demonstrate how, using experiential play designs xi we might simulate entrepreneurial activity where leaders in high performing teams create and generate future markets from immeasurable and subjective heuristics in “unknown” unknown situations.
It is the spirit and substance of entrepreneurial play that we present in a future post as offering a significant and timely opportunity to design alternative decision-making programs for the early 21st Century’s Corporate Executive to whom unknown and uncertain, rather than risky or known markets, offer the most exciting business opportunities.
Author’s Note: To learn more about our playful approaches to Executive decision-making in Uncertainty & Ambiguity you may want to Sign-Up to the Cooplexity Institute’s Open Program in Barcelona this September
i Jones, Daniel Stedman. Masters of the Universe: Hayek, Friedman, and the Birth of Neoliberal Politics. Princeton University Press, (2014).
ii Dachel, Jaroslav, Eva Duchácková, and Jarmila Radová. “A Criticism of the Paradigm of Rational Choice in Uncertain Conditions through the Lens of Behavioral Economics.” (2016).
iii Saes, Maria Sylvia Macchione, André Cavalcanti Rocha Martins, and Paula Sarita Bigio Schnaider. “Entrepreneurial Decision-Making Using the Knightian Uncertainty Approach.” Revista de Administração (São Paulo) 48, no. 4 (2013): 716–26.
iv Taleb, Nassim Nicholas. The Black Swan: The Impact of the Highly Improbable. Random House, New York, (1998).
v Payzan-LeNestour, Elise, Simon Dunne, Peter Bossaerts, and John P. O’Doherty. “The Neural Representation of Unexpected Uncertainty during Value-Based Decision Making.” Neuron 79, no. 1 (2013): 191–201.
vi Pushkarskaya, Helen, Xun Liu, Michael Smithson, and Jane E. Joseph. “Beyond Risk and Ambiguity: Deciding under Ignorance.” Cognitive, Affective, & Behavioral Neuroscience 10, no. 3 (2010): 382–91.
vii Gonsalves, Edward, and Ricardo Zamora. “Cooplexity: Entrepreneurial & Executive Play for Complex Environments.” Redmond, 3rd Serious Play Conference, Washington, (2013).
viii Sarasvathy, Saras D., and Sankaran Venkataraman. “Entrepreneurship as Method: Open Questions for an Entrepreneurial Future.” Entrepreneurship Theory and Practice 35, no. 1 (January 2011): 113–35.
ix Zamora, Ricardo. Cooplexity: A Model Of Collaboration In Complexity For Management In Times Of Uncertainty And Change. S.l.: lulu.com, (2012).
x Habermas, Jurgen, D. E, and others. The Theory of Communicative Action, Vol. 1: Reason and the Rationalization of Society. Beacon Press, (1984).
xi Mainemelis, Charalampos, Yochanan Altman, Alice Y. Kolb, and David A. Kolb. “Learning to Play, Playing to Learn: A Case Study of a Ludic Learning Space.” Journal of Organizational Change Management 23, no. 1 (2010): 26–50.