Starting a Business – Planning – Part 1

Apologies for not posting in over a week, this post took multiple re-writes before I was happy in the way I was articulating my thoughts. It is a 3 part series, here is Part 1;

Part 1.1

No one can predict the future with any certainty. Why?

Part 1.2

France won the World Cup. Mbappe’s speed and Pogba’s midfield prowess were crucial. Their team spirit was essential and being managed by a World Cup champion gave them belief they could win. It seems obvious in hindsight. But knowing this now does that mean it was a predictable outcome? How do we know that this explanation is actually true?

Let me ask you this, will France win the next World Cup? Will France make the final? Scratch that – will France even win their next game?

We cannot predict with certainty whether 11 players on a field will beat another 11. And soccer is a relatively controlled environment; consider how variable the world is.

Part 1.3

Imagine thousands of pins in a cork board, with strings connecting them. When one pin moves, a vibration moves along the string, affecting those connected. Some of those pins are connected to only one other, some to multiple. What if those pins could move and the connections change. There are thousands of cause and effect relationships in this system creating larger outcomes. Now imagine instead of a thousand pins, you have millions.

Throwing one stone into a pond causes waves to ripple out, you can picture it. But throw a handful of stones- some large, some small, some with one hand, some with another… you end up with ripples upon ripples. Could you predict the pattern? And sometimes a duck just lands on the pond, changing everything.

These pins and stones (and ducks) reflect the components that may affect your business; only it is worse than that, we can’t see which pins are connected. The modern world has globalisation and technology – more people, more connections. More pins, more ripples. More complexity.

Part 1.4

Predicting outcomes in chaotic systems is difficult, particularly with lots of connections and longer timeframes.

Predicting the World Cup winner is harder than just picking the winner of the next game.

The more time that passes the more games, the more likely other factors impact the matches. Injuries, a heat wave, a meteor strike. Even the lowest probability events will happen given enough time.

Trends and patterns can be found in the world, they play out over time, but exact outcomes are just hard.

Part 1.5

Our narratives explaining the past trick us into thinking we can predict the future with accuracy. What does this all mean? That luck plays more of a role in outcomes than we want to admit.

So have goals, have plans and have strategies. I am not saying you can’t impact the future, we are not hopeless.

I’m saying make your plans more general the further into the future you look, more of a vision, more high level. Don’t rely on predicting the iron ore price in 4 years time as part of your strategy.

Have plans but focus on the detail of those plans in the short term, shorter than your instincts tell you. We didn’t have a formal business plan until 2 years into our business, even now we only look seriously at the coming year. But we know why we exist and where we want to get to.

It also means get ready to change along the way – a lot of things are out of our control.

In Part 2 – more on why to beware of hindsight and narratives and some discussion about skill vs luck.

Part 1.6

In summary;

• Predicting the future is hard, harder than we realise.

Outcomes are more random and more subject to wild variations than we realise

• Because of a huge amount of interconnectivity in the world, it is impossible to predict with accuracy
• Longer timeframes and greater complexity decrease our ability to predict the future
• So when planning your business, the longer ahead you are looking, the more general your plans should be.
• Focus on the short term and the cause and effect relationships you can predict – the near future.
• Get ready to change when things change along the way – don’t beat yourself up for not predicting the future correctly, no one does!

Where did I get these ideas? This blog is a combination of things I have read, heard, pondered, and in the end weaved together. At the end of each post I will do my best to provide some rough references, please let me know if I have made mistakes, as I most likely will;

• The Black Swan – Nassim Nicholas Taleb (this post leans heavily on his work)
• Thinking, Fast and Slow – Daniel Kahneman
• The Everything Store: Jeff Bezos and the Age of Amazon – Brad Stone
• Alibaba: The House That Jack Ma Built – Duncan Clark
• Principles – Ray Dalio

Thank you for taking the time to read this post, I hope you enjoyed it.

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