In our experience, most entrepreneurs and other professionals tend to view various business situations in extremely black-and-white/yes-or-no terms. They might frame a negotiation by asking “Will the deal close or not?” They might view a potential sale by asking “Will the client buy or not?” And they might view a new opportunity by asking “Will I be offered the position or not?”

Guess what? That is not how most of the self-made Super Rich—those with a net worth of $500 million or more—tend to think.

Instead, the Super Rich have a habit of thinking about business dealings in terms of probability—asking “What are the odds?” when assessing a situation. Considering the examples above, the Super Rich might prefer to ask questions like:

• What is the likelihood that the deal closes?

• What is the probability that I will be offered the position?

• How likely is it that the client buys?

It might sound subtle or even simple—but this shift to probabilistic thinking potentially can have a big impact on future success.

Determinants of business success

It’s important to realize that there are two major determinants of most business successes: the quality of the decisions you make, and luck (see Exhibit 3).

Most people love to emphasize the first and discount the second. Seeking control, they resist the idea that events might not unfold as they envision them. The idea that there is a high degree of certainty when it comes to their business lives, or to their lives in general, can be very appealing—but generally inaccurate.

Not the self-made Super Rich, however. They regularly recognize that there are many factors that can make or break a business endeavor and that many of them are beyond their control. Quite often, luck needs to be present for things to go their way.

For the self-made Super Rich, the emphasis is on making quality decisions as consistently as possible—and then they hope to get lucky so the vast world beyond their control will turn in their favor.

Of course, quality decisions are within their control. So their aim is to be as adept as possible at making such decisions—which often entails thinking in terms of probabilities.

Bad lessons learned

Because so many people crave order and certainty even where neither exists, they tend to draw direct lines between outcomes and causes—after the fact. This happens on the positive side and the negative side of the decision-making ledger. Here are some examples.

Positive: 

• We nailed it. There was no way the new product could have not been a tremendous success

.• I’m the best candidate, so how could they not offer me the job?

Negative:

• The signs of the Great Recession were like a big, flashing red light.

• There was no way the other company would have gone for the deal.

This is known as hindsight bias, when everything is so very clear in retrospect. Due to hindsight bias, people often make a tight connection between the decisions they made and the outcomes they achieved (mostly when things worked out favorably).

Think about some of the more important decisions you have made (personal, professional, both) that turned out very well and some that went not so well. Now ask yourself:

• Was the reasoning behind those decisions faulty?

• Was the information I had at the time inaccurate?

• Were my goals at the time unrealistic?

When people go through this kind of exercise, they often find that they made quality decisions. And yet, some situations turned out great and others did not. In short, factors other than the decision-making process greatly impacted the outcome. These factors are typically unknown and outside their control—aka luck.

Embracing uncertainty

It is hard for many people to say, “I’m unsure” or “I don’t know.” That’s often especially true among people who enjoy great success in life and business. Unpredictability commonly runs counter to the idea of business certitude.

Wisdom is said to be learning well from experience. Being able to discriminate between quality decisions and luck when it comes to outcomes can help you become wise. And ultimately, being wise potentially can make you a better decision-maker. As decisions are predictions of the future, the more practice you have—coupled with an honest assessment of how well the decisions produced the outcomes—will only enable you to be more capable going forward.

Simply put, you want to calibrate your confidence (see Exhibit 4). First, you must decide to think in probabilistic terms. Then you specify as many uncontrollable factors as possible (without getting absurd about it). For example, you cannot control the geopolitical environment in the world. But you can take an informed guess about its effect on a business decision. Then you determine a level of confidence in the outcome. 

By thinking this way, you can reframe the earlier situations like this:

There's a 30 percent likelihood of getting the sale.

We have a 50 percent probability of closing the deal.
I have somewhere between a 60 percent and an 80 percent chance of getting the job.

This approach makes you much more realistic. You can use your experience and the insights you have gained along the way to improve your knowledge of the situation—thereby enabling you to make superior choices.

Important: Ignoring uncertainty and related risks can mitigate concerns and anxiety, but doing so is probably going to impair the quality of your decision-making. By recognizing uncertainty and working to address it, you can be better positioned to take actions that can give you a greater chance of achieving your agenda.

What to do if things look bad

Based on your level of uncertainty, you can take actions to increase the probability that you will achieve the outcomes you are looking for. There are two fundamental and related ways of doing this (see Exhibit 5).

One approach is to build more flexibility into your plans. That way, as the situation progresses, you can make adjustments to help keep the endeavor pointed in the right direction.

Another approach is to develop a number of contingency plans. When luck is not on your side, you can shift to alternative versions of the endeavor that you believe have a higher likelihood of getting the results you want. Contingency planning is all about developing alternative scenarios with somewhat different action steps that you believe will help you reach your goals. Each possible future—each contingency—has its own advantages and disadvantages. There are rarely simple answers. So, you always have to be assessing how things are progressing in order to make adjustments when appropriate.

Conclusion

By shifting your decision-making mindset to focus not on whether something will definitely happen but rather on the likelihood of something happening, you give yourself more flexibility and a greater ability to make smart decisions. You also factor in one of the more powerful drivers of results: luck.

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Securities offered through LPL Financial, Member FINRA/ SIPC. Financial Planning offered through M Financial Planning Services, a registered investment advisor and separate entity from LPL Financial. VFO Inner Circle and AES Nation, LLC are not affiliated with LPL Financial.

ACKNOWLEDGMENT: This article was published by the VFO Inner Circle, a global financial concierge group working with affluent individuals and families and is distributed with its permission. Copyright 2020 by AES Nation, LLC.

This report is intended to be used for educational purposes only and does not constitute a solicitation to purchase any security or advisory services. Past performance is no guarantee of future results. An investment in any security involves significant risks and any investment may lose value. Refer to all risk disclosures related to each security product carefully before investing.