Your Perception of Likelihood Is, Most Likely, False
We can't weigh strategic risks correctly
An old joke says: what's the probability that you will walk out the door tomorrow and meet a dinosaur? It is precisely 50%. You will either bump into a dinosaur or not.
That's not true, of course. When I was a student in the Applied Mathematics Department at the university, probability theory was one of the most complex and boring subjects. But it's almost inapplicable for business purposes.
When we think strategically, we don't have to focus only on opportunities, and we also need to weigh the risks. Even if you don't belong to a secret society of risk managers, you may have heard about risk matrix. It helps divide all the risks you see into groups depending on their impact on our business and the probability of their occurrence.
And it is more difficult than it may seem.
Endowment effect
The grass is always greener on the other side. We tend to see the other options as more attractive than what we have. But we do it only in theory – as soon as we hav…