I’m a bit through a book called “A Primer on Decision Making” by James March.  The book is very dry but does a good job of presenting the academic version of decision theory and then going through in detail practical aspects of decisions in the real world that make academic models impractical to apply.  It’s also interesting that the book contains some similar themes as the excellent books by Daniel Kahneman’s (“Thinking Fast and Slow”) and Nassim Taleb’s (“Black Swan” ) without being nearly as well sold and preceding their publish date by around 10 years.

In this post, I want to focus on March’s discussion of people’s poor ability to estimate events of extremely low, or high probabilities and what I think this means for planning.  March notes that people are very poor at estimating the probability of extreme events (This is one of the main points that Black Swan explores in detail).  For example,  a melt-down at a nuclear reactor is a very rare event.  Most people who work daily at nuclear power plants will never experience a melt-down.  As a result, people who work in nuclear plants will begin to behave as if the risk of melt-downs are effectively zero, until they learn the hard-way (Three-Mile, Chernobyl, Fukushima) that they are not and adjust their estimates of probabilities.  Similarly, in other complex planning exercises, people may identify a number high impact events that have very low probabilities of occurring.  Like the nuclear engineers estimating melt-down probabilities, the planners will act as if the probabilities of any one of these events occurring is so small as to be zero.   In his book though March points out that while the probability of any one event may be so low as to be negligible the probability of none of these rare events occurring is also extremely small.  One of the rare events will occur, but you can’t predict which one.

It’s this idea - that a rare event is effectively guaranteed to occur during a program - that I want to explore further.   Complex programs must always will have a plan to execute to.  The plan is required to drive a team forward in an organized effort.  But what March and Taleb are telling you is that you’re plan is wrong.  What dooms the execution of a virgin plan from beginning to end is the multitude of highly unlikely, yet highly impactful events that lurk.  Any one of these events is highly unlikely to occur, but one or more is nearly guaranteed to occur.  A plan that accounted for all of these highly unlikely events (Taleb calls them Black Swans) would require more budget than most will have at their disposal.  Worse, not all unlikely events can be identified, even if you could afford to plan against them.  So, there is a paradox.  You need a plan in order to organize your work, but no matter how much effort you put in at the beginning, your original plan will not survive to the completion of your program.  Dwight Eisenhower said it best when he said, “Plans are worthless, but planning is everything”.  Mike Tyson was on to it a well when he was quoted saying,  “Everyone has a plan, until they get punched in the face.”

So practically speaking, how should plans should be made and managed with the paradox in mind.  Pride in your plan is dangerous.  You should not make your plan so complex that you are afraid to change it later.  A plan that schedules down to the hour, or even the day, is wasted effort.  Further, while milestones are important to help communicate progress, their existence should not become an impediment to replanning when the unlikely occurs.  A good master plan identifies what the critical path is and where you should be focusing your effort as a leader.  It helps you define tasks for your team on a monthly or weekly basis, but usually not a daily basis.