The night when a few friends were to get together before everyone headed off for vacation ended up being the day the six world powers and Iran struck a deal. Obviously the conversation shifted from “Where are you going on your holiday?” to everyone’s opinions about what this agreement means.
The opinions were plentiful and varied, which should be expected as the group included CEOs, diplomats, attorneys, bankers, a few retirees and this CEO coach and author.
The comments ranged from ‘This is the beginning of slow reform’ to grave scepticism about adherence to the terms of the agreement. There were mentions of ‘This will fuel regional instability’ to ‘There have to be conditions that will prevent Iran from participating in or even funding their historical regional proxies’.
The other mentions included ‘Iran is going to be the bastion of economic activity’ to ‘It is going be tough for outsiders to prosper in Iran’. Some used historical references to support their proposition while others used what I will call a ‘hoped for’ outcome-based logic, meaning they held on to arguments even without fact or precedent because they want to see their view become the reality.
There was one point of agreement — everyone was unanimous in their opinion that lifting Iranian sanctions will benefit Dubai ... maybe not neighbouring countries, but certainly Dubai.
Listening to the varied viewpoints left me with one question, “What do you do when you don’t know?”.
It is fair to say that none of us really know what this historical agreement means; after all we don’t even know what the agreement says. So the hypotheses are just conjecturing about what we think, not what we know.
The topic ‘Knowing how to respond to the Iranian agreement’ is a proxy for our discussion on how to make decisions anytime you face uncertainty, which may be on a daily basis given the prevailing market conditions and geopolitical shifts.
When you don’t know all of the information or how something will play out, the conservative advice is to stick with what you do know. The benefit of this approach is that it is conservative and reins in the degree of risk, which also means that it limits the potential gain.
That pesky relationship between risk and gain is what you will have to make a decision about. Are you content doing and receiving what you’ve been getting? If so, the conservative approach may be right for you.
But keep in mind that containing short-term risk — keeping the status quo — may create a creeping long-term disaster.
If you are not content with a conservative outcome, then the advice is to act based upon probabilities. The usage of probabilities is the means for you to determine how likely it is that a particular point of view is going to happen or not.
The higher the probability, the more certainty you have, which almost makes known what you don’t know.
Let’s use the Iranian agreement to illustrate how this plays out.
List out each of the potential scenarios — Iran will adhere to the agreement or they will not. Another possible scenario — it will be easy to do business and succeed in Iran or it will be tough.
Then you rate the probability of your hypothesis. Perhaps, you think it will be very tough to do business there, so you would give that a high probability, say 80 per cent.
Given such a high probability in this example, you should act in accordance with it. So, if you are entering Iran be prepared for it to be very tough.
High probabilities provide enhanced surety while low probabilities mean you’re speculating.
Rating the probability helps to give surety to what you don’t know so that when you act, it is taking a calculated risk rather than Vegas style gambling,
Your ambition may be able to tolerate more risky profiles than others, but it doesn’t mean you should act irresponsibly.
When you don’t know, calculate the probability to give surety to your course of action.
Credit: The writer is a CEO Coach and author, including of the ‘10 Tips for Leading in the Middle East’ and other writings. Contact him at tsw@tommyweir.com