Four Ways Probability Theory Can Make You a Better CEO

As a scientist my world was turned upside down when I first learned there was a chance I could walk through walls. It’s infinitesimally small, but it does exist. My subatomic particles could align in such a way that I might pass through a solid object. I certainly could have used that superpower for all the walls I’ve hit in the past few years as a CEO: pandemic shutdowns, supply chain chaos, worker shortages, and a looming recession.

Newton’s Laws of Motion tell us that when it comes to actual walls, almost all of the time we will smack into them. But, that infinitely small probability of wall-walking reminds us that virtually no outcome is certain – in life or business. Uncertainty, and its partner-in-crime probability, are woven into the very DNA of our existence. As a scientist turned CEO, I’ve always used probability theory to help understand and navigate complexity in business. Here are four ways that playing the odds can make you a better leader, particularly in these uncertain times.

Banish the Binary Mindset

Think about when you buy a lotto ticket. You immediately recognize there’s a very small probability of winning and you bake that into your expectations. Then when you lose, you don’t get upset. Funnily enough, we manage lotto tickets that way but not people.

When we ask someone to do something at work, we generally set a high expectation that they will deliver. And then we get frustrated and upset when they don’t. We make it binary. Good/bad. Pass/fail. I remember doing this with a high-performing employee who essentially ran my life at work. I began to expect perfection 100% of the time and found myself getting increasingly irritated if she “failed” to meet that unreasonable bar. Understandably, she got increasingly nervous, and more mistakes ensued. As the downward spiral continued, I took a long, hard look at my actions. I was using the wrong bar. Once I recalibrated to her pre-spiral probability of 95% hits and 5% misses – we got back on track. My expectations were the problem – not her work.

If we take this probabilities approach, it removes the counter-productive emotional response because we’re better prepared for a range of outcomes. In a particularly volatile and variable world, rewiring our expectations this way makes us better at managing ourselves and others.

Manage Your Decisions Like an Investment Portfolio

I saw early on the power of probabilities. When I first started as a management consultant my main job was to find the best data to calculate the probability of getting a desired business outcome from a specific decision. I’ve been using this as a leadership tool ever since. Accepting probabilities as omnipresent is liberating, freeing, and ultimately the key to maintaining confidence as the world throws more than a normal dose of change our way.

Think of your decisions as a portfolio of investments, each with their own risk profile. It doesn’t matter how many spreadsheets you have, how much analysis you’ve done, every time you make a decision you are rolling the dice. The first step is to get comfortable with that.

I certainly got a dose of this early in the pandemic. My organization helped lead the Ohio state effort to make urgently needed protective equipment. We had very little information. Yet, we had to immediately decide which products to make. We killed ventilators and hand sanitizer right away because we saw so many people leaping in. We kept six products in the running. We assigned probabilities for how much impact we could have with each. Then we weighted our effort based on the probability of impact. We played the odds and treated all six as investments with time, money, and resources. Our bets paid off. And Ohio manufacturers ended up making 50 million pieces of PPE in a few short months – including the masks and testing swabs that helped our state safely reopen.

In high stakes situations like this, the goal is to avoid both catastrophic mistakes and decision paralysis, play the odds between those two ends of the spectrum, and manage risk across your decision portfolio.

Embrace Uncertainty While Trying to Reduce It

No leader gets it right all the time. The trick is to embrace uncertainty, while trying to reduce it at the same time. The key is to get just enough good information to manage risk and be decisive.

Get the data you need to inform your risk assessment. Trust your instincts about how much information is enough. Know your blind spots and seek out multiple points of view. Systematically think through how you would manage potential happenings (from virus mutations to a war with China). You’ll likely notice common elements across scenarios. My organization was recently doing scenario planning for post-pandemic manufacturing and every scenario from boosting reshoring to fixing the supply chain has a technology component. So, we’re investing heaviest there.  

Being prepared to execute on the common variables will increase your probability of success, no matter what the future holds.

Accept That Control is an Illusion

If we’ve collectively learned anything these past few years, it’s that control really is an illusion. Believing we have it makes us feel better. Case in point: How many times do you continue to hit the elevator “door close” button, even though you know it’s pointless? It tricks our brains into feeling better, but the illusion of control is dangerous, leading to magical thinking, bad decision-making, and poor planning.

Playing the probabilities isn’t a perfect solution either. But it’s one of the most powerful tools we have to help us manage the chancy realities of our post-COVID world. Probabilities help us better see – and play – the whole spectrum of threats and opportunities. Our bets become more intentional. We make better assumptions. And we have a much deeper understanding of the variables at play when we roll the decision dice.