Len Schlesinger
Baker Foundation Professor
Harvard Business School
March 2014
JUST START
TAKE ACTION
EMBRACE UNCERTAINTY
CREATE THE FUTURE
Continuum of “Predictability”
Known
Predictable
2
Unpredictable
The Predictable
3
Google Maps, GPS Universe
You’re never lost
You always know
the optimal thing to do
4
Prediction Logic
1.
Where and
are deductive
you now?logic
and What
 Inductive
result is wanted, needed and best?
 Mathematical and analytic methods
2. What are the various ways of achieving
 Rules of thumb
the result?
 Core logic of virtually all educational
3. settings
What are the required resources
and their costs
 Core logic of large organizations
4. Select the optimal path
 Works great when the future can be
5. extrapolated
Assemble the required resources
6. Execute the plan, and, if required, get
back on track.
What is the best logic in relatively “known” futures
where things can be predicted based on the past?
5
Prediction Logic
What logic works best
when things are very unpredictable?
6
t
t
Discuss with 1 or 2 colleagues:
What principles do you use to get out?
7
But, you
You
either
can’t
thinksit
andway
think
your
into
orunknowable
you act…
an
future
What would rational
thinking and behavior
look like in the face of
unknowability?
Therefore,
the only logical
thing is to ACT.
8
What would rational
How to Act Smartly?
thinking and behavior
lookWhere
like are
in the
you? face of
unknowability?
Do you want
something else?
What do you have at hand?
Anyone who can help/rescue?
Small steps. On firm ground.
Take stock & learn.
Act
9
Therefore,
Build off what you actually find
the only logical
thing is to ACT.
Learn
Build
How well does
Prediction work in the face of unknowability?
Act
What’s current reality - what is
wanted, needed and best?
How can you achieve that result?
Learn
Build

You don’t know
You can’t know
What resources are required?
What’s the best path?
Assemble the resources.
Then, execute the plan and get
back on track if you get off
10
What do you have at hand?
Who can help?
Small steps.
Take stock & learn.
Build off what you actually find
Popular Views of
Entrepreneurs
CloserPopular
to TruthPerception
LOW Appetite for risk
High Appetite for risk
Often start with no sharp goal or vision
Visionary
Distrust predictions of the future
Able to foresee the future
Creates new businesses,
Creative
but not necessarily
original
No more self confident than
others
Self
Confident
Determined, controlling,
Determined, controlling,
decisive, egotistical…
decisive, egotistical…
but not always
11
Behavior or thinking?
Behavior
& Actions
Results
Behavior looks
idiosyncratic and contradictory
12
Saras
Sarasvathy,
University of
Virginia studied
30 “expert”
entrepreneurs
Entrepreneurial Thinking


13
13
Started multiple enterprises ranging
from $200Million to $6.5Billion
How they thought about taking action
Behavior or thinking?
Behavior
& Actions
Thinking
Results
Behavior
& Actions
Strong consistency in thinking that
explains unconventional behavior.
14
Results
Act
Prediction
Learn
Build
 Contrasts with prediction
 Favored by entrepreneurs 89%
 Favors what is real and confirmable
Taken
together
 Smart action trumps
analysis

they form
Entrepreneurial
Use when
the future cannot beThought and Action
predicted from the past
Prediction and Act Learn Build
Two Complementary Logics
15
Uncertainty / Unknowability
the Context and Setting for
Act
16
Learn
Build
DESIRE fuels…

Entrepreneurs are always doing what they
want, or something that will get them what
they want.
Act

17
Learn
Build
In the face of the unknown, it makes no
sense to act unless you want to, whether
you have to or not.
DESIRE fuels…
Smart Steps
DESIRE
Intriguing area,
attractive partners
Sufficient to
get started
Act quickly with means at hand
Act Learn
Buildwith
is based on current reality: who you
Act
quickly
know, what
know and anything else relevant
means
atyou
hand
Fully formed vision,
robust plan
Passion isn’tBuild on what
Pay only what you can afford to
you find
Pay only
can required
and
wantwhat
to – you
Acceptable
Loss
ACTACT
•afford
Moneyto& and
time want to –
•Acceptable
Reputation (professional
& personal)
Loss
• Opportunity cost
Bring others along
Bring
others
• Tangible
salesalong
and other assets
• Other borrowed or bartered resources
• Intangible assets (ambassadors,
reputational capital) through enrollment
18
• Surprises are
often good. Make
them an asset
• Befriend reality
• With each action,
reality changes
Continuum of “Predictability”
Known
Predictable
Unpredictable
More logical to act
Employing the tools of prediction
doesn’t make sense and
wastes time and resources
19
Continuum of “Predictability”
Is it big enough to interest me?
How do I get started with the means at hand?
How do I make progress with a step-by-step
acceptable expenditure of resources?
How do I bring other people along and spread
the risk?
How do I build each next step of the reality I
have created with the previous one?
20
Continuum of “Predictability”
Known
Every ALB includes some Prediction
Predictable
Unpredictable
At some point
As you learn,
can
predictive
toolsyou
require
begin toto
Predict
evidence
work
21
Act
Prediction




22
Learn
Build
You need both
You employ them reflexively, like a second language
Consider using ALB even in predictable situations
•
Derails the habit of prediction
•
Action might be equally reliable, cheaper and faster
•
Action changes reality, predicting doesn’t
Use both simultaneously
Where Serial Entrepreneurs Like to Play
23
Existing Market
Existing
Product
Manage
(incremental)
Everywhere
New Market
Opportunities
Adapt
are largely found
(evolutionary)
88%
Why?
Act
Learn Build is required.
New
Product
• No competition
Opportunities
•
Expensive
Prediction
In
this
quadrant
Extend
Create are largely made
Suicide
tools are
not required
Action
Trumps
Everything
(evolutionary)
(revolutionary)
12%
Quadrant
• They like to create
opportunities
unusual in their comfort and
preference for this quadrant
23
Optimize Your Actions
DESIRE
Predictable
Unpredictable
You must Satisfice
Optimization
is impossible
Optimization
is possible
Nobel Laureate Herbert Simon
Satisfy (desire) + Suffice (good enough,
not necessarily optimal or “the best.”)
DESIRE fuels…
Smart Steps
DESIRE
Intriguing area,
attractive partners
Act quickly with means at hand
Sufficient to
get started
Act Learn Build is based on current reality:
who you know, what you know
and anything else relevant
Pay only what you can
afford to and want to –
Acceptable Loss
25
Passion isn’t
required
Fully formed vision,
robust plan
Is it big
How
big is
enough to
the
“prize”?
interest
me?
Expected Return
Acceptable
Loss
Pay to Play
• What can I afford to lose?
• What am I willing to lose?
Currency:
o Time , money and other
tangible resources
o Reputation and social capital
o Opportunity cost
These are all knowable
in the present moment
Acceptable Loss
26
26
Acceptable Loss removes
all of the psychological
and most of the actual risk
Smart Steps
Intriguing area,
attractive partners
Act quickly with means at hand
Act Learn Build is based on current reality:
who you know, what you know
and anything else relevant
Pay only what you can afford to
and want to – Acceptable Loss
• Money & time
• Reputation (professional & personal)
• Opportunity cost
Bring others along
27
DESIRE
Sufficient to
get started
Fully formed vision,
robust plan
Thanks
for joining
me…
Reduced load on
entrepreneur’s assets
Bring Others Along
Spreads the cost and
therefore the risk
for any one player
Confirms your judgment
28
28
Smart Steps
DESIRE
Intriguing area,
attractive partners
Sufficient to
get started
Act quickly with means at hand
Act Learn Build is based on current reality:
Fully formed vision,
robust plan
Act
quickly
who you
know, with
what you know
means
at hand
and anything
else relevant
Pay only what you can afford to
Pay only
can
and
wantwhat
to – you
Acceptable
Loss
•afford
Moneyto& and
time want to –
ACT
•Acceptable
Reputation (professional
&
personal)
Loss
ACT
• Opportunity cost
Bring others along
Bring
others
• Tangible
salesalong
and other assets
• Other borrowed or bartered resources
• Intangible assets (ambassadors,
reputational capital) through enrollment
29
Build on
what you find
Build on What you Find
30
30
Smart Steps
DESIRE
Intriguing area,
attractive partners
Sufficient to
get started
Fully formed vision,
robust plan
Act quickly with
means at hand
Pay only what you can
afford to and want to –
Acceptable Loss
ACT
Build on what
you find
• Surprises are
often good. Make
them an asset
• Befriend reality
Bring others along
31
• With each action,
reality changes