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• Jake Wood

# VUCA Decoding Chaos Series: Part 3, Uncertainty

Updated: Nov 28, 2020

In our introduction to Decoding Chaos we learned about the acronym VUCA, developed by the US Army War College in the 1980s. VUCA stands for Volatility, Uncertainty, Complexity, and Ambiguity, and it helps us better understand the chaos we are facing.

To understand how each element of VUCA is distinct from the others we can lay them out in a two by two grid.

Complexity | Volatility

Ambiguity | Uncertainty

With this matrix we can quickly assess our situation. As we move from left to right along the X axis our knowledge of the situation is increasing. As we move from the bottom to the top of the matrix along the Y axis our ability to predict the results of our actions increases - in other words, our ability to control the situation increases. Though don’t get caught sleeping - you can never control chaos.

Last week you read about Volatility. This week we are going to dive into Uncertainty.

Situations that are uncertain lack predictability, which often leads to moments of surprise. You understand basic cause and effect - like how one variable impact another or what leads to certain outcomes. However, you lack sufficient information critical to predicting what will happen. Finally, you have opportunities to influence the situation, but change is not given.

To best understand Uncertainty, let’s use one of my favorite casino games - Blackjack. In Blackjack, each player is playing against the dealer. Each player is dealt two cards, face up, while the dealer is dealt two cards, but one of them faces down. The object of the game is to finish the hand with a higher total card count than the dealer without going over 21 (which is known as a bust). Once all the initial cards are dealt, each players has a choice to take additional cards from the dealer - balancing the need to finish the hand with a higher total than the dealer but not busting. Remember, you don’t know the dealer’s exact total because you can only see one of her cards.

There is a lot more to Blackjack, but on its face it’s a simple game. Here’s the coolest thing about it - there’s a “right” move for every single situation. This is because Blackjack is governed by the rules of probability and statistics.

But here’s the rub - there’s a difference between the “right” move and a “winning” move. Let’s use a classic Blackjack example:

You are dealt a “hard” 16 and the dealer shows a “face card” (a face card is worth 10). A general rule in Blackjack is to always assume the dealer’s down card is also worth 10, so in this scenario our assumption is that the dealer has “20.” Remember, we will need a 21 to beat the dealer’s hand, or a 20 to push (draw/tie). That means that there are only two cards that can help us - a Five or a Four. A Three, Two, or Ace get us close, but close doesn’t count. Anything above a Five (6, 7, 8, 9, 10, J, Q, K) and you bust. In other words, 11 out of the 13 possible cards kill you or do little to help you, and only 2 out of the 13 are winners.

Sound like a bad position to be in? That’s because it is.

You’ll typically hear an audible curse when someone is dealt a Hard 16 at the table against a dealer’s face card. It’s a bad situation to be in. Now imagine for a moment that you knew what the dealer’s down card was - the situation would dramatically change, would it not?

Remember, the Hard 16 you have is bad because you assume the dealer has a 20. But what if she doesn’t? What if her down card is a 5? Suddenly your Hard 16 is facing the dealer’s Hard 15. In this situation, your hand is actually quite strong. By choosing to stay (not take a card) you force the risk onto the dealer, who will be required to “hit” (take a card), which is most likely to result in the dealer “busting.”

Yes, chaotic situations would be a LOT easier if we had perfect, complete information - a lack of uncertainty. But that’s not how this works.

So back to real life - your Hard 16. What do you do?

Well, for starters, you’re going to wish you had paid more attention in your college statistics course. On average, if you stand (don’t take a card), you will win 26% of the time. Put another way, you’ll lose 3 out of 4 hands. If you hit, you’ll win 30% of the time, but that means you’re still losing two out of three hands!

So the answer seems obvious - you hit, right? That’s certainly what the laws of probability, statistics, and common sense would say. But then why do we see so many Blackjack players choose to stay when confronted with this choice?

The first reason is that some players simply don’t know! They sat down at a table without a thorough understanding of the game. That means they didn’t know the rules, didn’t understand the probabilities (there are cheat cards available that tells you the correct decision for every single Blackjack scenario), or, most sadly, they didn’t have the courage to ask the dealer or a fellow player for advice (or even worse, they didn’t take it!).

Therefore, it’s critical for us to understand the game we’re playing - whether Blackjack, a new product launch, the stock market, or a acquisition and merger. If we have a thorough understanding of the rules of the game, historical precedents, likelihoods of certain events, etc, then we can make more informed decisions. But when we don’t know these things, then we have to be the type of leader that is humble enough to acknowledge that, turn to someone else on our team, and ask them for advice. Some people won’t do that at the Blackjack table because they’re afraid they’ll be embarrassed. But what’s more embarrassing: asking for advice and winning? Or making a foolish play and losing a stack of chips?

A second reason would be outcome attribution. Outcome attribution is when someone observes an outcome, either positive or negative, and attributes it to the decision that preceded it. Recall that even in the correct decision scenario - you choose to take a card - you’re going to lose two-thirds of the time. Many people therefore make the right choice but have a bad outcome. They bust on their hand and wrongfully place blame on the decision. Conversely, one-fourth of the time that someone elects to ‘stay’ on a Hard 16 they’ll win - and some will even dangerously look back on their decision and think it was the ‘right’ one. In reality, they made a terrible choice that just happened to result in a good outcome. Make no mistake, leaders at all levels fall victim to incorrect outcome attribution (this happens a ton in poker, another great game for practicing decision making).

To avoid outcome attribution we must have enough self-awareness that we can objectively analyze our outcomes and the events that led up to them. We must be open to having other members of our teams critique our decisions, and have introspective discussions about their merit. That will all us to better tell the difference between a good decision that led to a bad result (also known as bad luck), and a poor decision that led to a good outcome (sometimes we call this good luck, but it’s really a failure in the decision making process).

There’s another reason that bad players fail to make the right decision on a Hard 16 - or in any other situation in which there are clearly good and bad choices. That reason is fear.

Fear, left unchecked, drives us to make irrational decisions. First, it has a tendency to activate our brain’s “fight or flight” response while deactivating those parts of our brain responsible for logic. Naturally, when our brain isn’t thinking logically we tend not to make logical decisions (duh).

So what leads to this fear? In my experience, one of the biggest contributors is a player not having come to terms with what’s at stake. Too often, a player will saddle up to a table, plop down a stack of chips, and start a hand without really accepting the (very real) reality that they might lose. They’ve probably watched a few hands be dealt, maybe saw a blackjack or two, and have fallen victim to the fallacy that they’re going to win easy money. But when suddenly faced with a Hard 16, the reality of losing sets in. They become afraid. That \$20 (or \$100 or \$1,000) that they’ve bet was their dinner money, or worse, rent money. Now gripped with fear, they are incapable of thinking logically.

Instead, too afraid to control their own destiny and take a card (like logic would indicate), they choose to absolve themselves of responsibility and let fate dictate what happens. Though they are choosing to stay, they frame this decision as a non-decision, which allows them to blame bad luck if the dealer beats them. If they chose to take a card and lost, they irrationally think to themselves, then it wouldn’t have been bad luck - it would have been a bad choice. But we know this is nonsense.

So how do we avoid being gripped by fear?

First, never bet more than you’re willing to lose, whether at the Blackjack table, the stock market, a new business venture, or any other circumstance. In Afghanistan, when I was walking point for my sniper team in a heavily landmined province during one of the bloodiest years of the war, I faced the very real fear of death or losing a limb. At first, the fear caused by this uncertainty was consuming, but then I reframed my mindset and simply assumed that the unthinkable would happen. It’s a macabre example, but by expecting to lose my legs (thank God I didn’t) I was liberated from the fear of losing them.

Today, when advising other entrepreneurs I’ll often find that they have never reconciled the very real possibility that they may lose all their investor’s money, or have to lay their employees off. That fear lingers in their mind, and in crucial moments it paralyzes them. Their team is looking for leadership, but their fear is causing them to ‘flee’ from the moment.

Second, leaders should rely on the old military adage: “Get comfortable being uncomfortable.” You’ve already failed your team if the first time you’re facing the discomfort of uncertainty and fear is a crucial moment for your organization. Just like hitting a Hard 16 vs a face card is muscle memory for a seasoned player, rising to the occasion amid uncertainty is a skill that can and must be practiced. Seek out ways to make yourself uncomfortable so you have the opportunity to overcome. Sign up for that marathon, travel to a foreign country, commit to learning a new skill - all of these are ways to challenge yourself and build critical muscle memory.

To close, remember that uncertainty is governed by imperfect information. It would be easy to navigate this form of chaos if we had a complete picture - like what the dealer’s down card is. But life is rarely that easy. To conquer this form of chaos we must understand the rules of the game, invest in better information than our competitors, and defeat our own fears.

1. Don’t risk more than you’re willing to lose.

2. Know the rules of the game. Understand how all the different variables interact.

3. Information is king. Remember, if we knew what the dealer’s down card was our odds of winning would increase dramatically. Invest in methods for collecting more and better information. Use big data tools to find the signal in the noise.

4. Get comfortable being uncomfortable. You owe it to yourself and your team to be familiar with uncertainty. Don’t panic in these moments, because panic is contagious (but so is leadership).

5. Be self aware as an individual and an organization. Solicit and reflect on honest feedback through candid after-action reviews. This will help you avoid incorrectly attributing good outcomes to bad decisions.

## Be sure to purchase a copy of Jake's best-selling memoir "Once A Warrior," available here.

Jake Wood is cofounder and CEO of Team Rubicon, a nonprofit organization that utilizes the skills of military veterans to deploy disaster response teams. Under Wood’s leadership, Team Rubicon has responded to over 700 disasters since the 2010 Haiti earthquake and grown from eight to 130,000 members. Team Rubicon has been finished in the top three of the Nonprofit Times’ “Top Nonprofit To Work For in America” lists three years in a row. Wood is a leading veterans’ advocate who has briefed President Obama on veterans’ issues, met with former Presidents Bush and Clinton on disaster response and testified before the Senate. As a Sergeant in the United States Marine Corps, Wood deployed to Iraq and Afghanistan as a Scout Sniper and earned the Navy-Marine Commendation Medal. His best-selling memoir "Once A Warrior" was published in 2020.