Probabilities

If we see things through probabilities & bets, we give ourselves a built-in opportunity to improve. Armed with this perspective, we can develop and then seek to improve our systems.

Systems allow us to better evaluate probabilities, and place better bets.

A revenue forecast, for example, (supported by existing customers, retention rates, new prospects generation, pipeline stages, sales qualification criteria, etc.,) is a quantified representation of a go-to-market system.  When you miss a forecast (on the upside or downside) you gain the opportunity to learn and improve your forecasting system. The aim is to build the best system generating the most accurate forecasts. And that means purposefully not leaning conservative or aggressive when modeling the expected results.  With a deliberately neutral approach, the learning opportunities from a miss make for a better forecasting system.

The nature of a business, or really any investment of resources, is to place bets. Bets on people, bets on technologies, bets on acquisitions, bets on markets to enter or exit; the list goes on and on.  Some bets pay off, others do not.  In every case, the logic leading up to each bet weighs the probabilities of a desired outcome.

Understanding probabilities improves with our ability to think critically and make better decisions.  The better we think, the better we understand the probabilities. Decisions always have the probability of a bad outcome. This is the definition of "risk".

If our system is good, and we're right about the probabilities, then over the long haul, we win.  If our system is flawed and we misjudge the probabilities, we might get lucky in the short run, but eventually we'll lose. Great investors and business leaders know this intuitively and continually try to improve their systems.  They don't get discouraged when a probability goes against them, they instead take the setback as a chance to challenge their logic and improve their system.

I've made my share of decisions over the years that resulted bad outcomes. It doesn't always mean my decision wasn't right, it could mean the outcome was improbable, or, it could in fact mean that my thinking was flawed or incomplete. And thats the trick... Every time a bad outcome happens it's an opportunity to step back, evaluate the system, refine my thinking, learn, and hopefully improve.