0:00:02.5 Jillian: Welcome back, culture by Design listeners. It's Jillian, one of the producers of the podcast. This week, Tim and Junior sat down to talk about leading through uncertainty. The content from this episode comes from Dr. Clark's most recent Harvard Business Review publication. An article entitled: What Employees Need from Leaders in Uncertain Times. In the episode, they explore the impact of uncertainty on individuals and organizations and share four practical strategies for effectively leading teams through uncertain times. As always, you can find links mentioned in the episode as well as transcripts and show notes @leaderfactor.com/podcast. Thanks for listening and enjoy today's episode on leading through Uncertainty.
0:00:51.9 Junior: Welcome back everyone to Culture by Design. My name's Junior. I'm here with my co-host, Dr. Tim Clark, and today we'll be discussing leading through uncertainty and not just any uncertainty. Uncertainty that's a little acute, might be extreme. We're talking about uncertainty at the 1%. Tim, how you doing?
0:01:11.0 Tim Clark: Doing well. Thank you for inviting me to this conversation. This is gonna be a good one.
0:01:16.8 Junior: It is. Uncertainty is really the only certain thing going on this year, it seems. So, Tim, my first question for you, how does this compare this year? How does this compare to the uncertainty scale of your lifetime and the things that you've experienced? Is it the same? Is it different?
0:01:33.6 Tim Clark: I think there's a net increase. You can talk a little bit more about, some people try to measure this, right? But just my own perception, my own experience is that, it seems to be rising in absolute terms. For example, we have this major inflection with AI, and now we're starting to see that affect our lives in real ways. That's just an example, but I think there's an acceleration of the pace of change, and I think that adds to the uncertainty.
0:02:06.7 Junior: Absolutely. And if you pay attention to the bleeding edge of what's going on in that area, a lot of the industry leaders have no clue what's gonna happen in six months. [laughter], right?
0:02:16.8 Tim Clark: Yes. That was brought home to me in a very poignant way, Junior. When I watched an interview the other day with Sam Altman and Satya Nadella, the CEO of Microsoft, they sat down with the editor in chief of the Economist magazine at Davos, for the World Economic Forum the other day to be interviewed. And someone asked Sam, so what's it going to be like with the fourth or fifth iteration of chat GPT? And he said, I don't know. Basically, he said, I don't know. I can't predict what this is going to be like. Now, this is not something that's way out into the future that we can't see. This is something that will happen in our lifetimes in the relatively near future. And he's saying I can't tell you what that's going to be like. Wow, that's a new level of uncertainty, I think.
0:03:15.8 Junior: It is. And the stakes are really high. So leading through uncertainty, if we do this wrong, what are we going to have? We're gonna have stress and anxiety ourselves and our people, reduced motivation and engagement, decreased collaboration and trust a bunch of regrettable loss. We're gonna have really good people turning over, but if we do it right, there's huge upside. Increased innovation and creativity, enhanced adaptability and resilience, stronger communication, and then a whole bunch of opportunity for individuals personally and professionally and institutionally to become more competitive. So how do we do this? Today, that's the conversation. We want to talk about four practical things that you can do to more effectively lead through uncertainty. So I wanted to take a step back and look at uncertainty in a general sense at a macro level. Is uncertainty actually high relative to history? Because we hear this all the time and we hear, wow, it's a really dynamic environment.
0:04:19.2 Junior: Okay. It's really volatile. Got it. It's uncertain. Yes, we know, but how much? And is it actually more than normal? And one of the relevant questions to me is not how much actual uncertainty or volatility there is, although that's important. The relevant question in my mind is what is people's perception of the uncertainty? Because one's perception of uncertainty is going to influence behavior. And that's what where the rubber meets the road, especially as it relates to institutions. We want to see how people are behaving, whether that's advantageous or disadvantageous, and then what we do about it. And so the answer to that question, what is people's perception of uncertainty, will give us something practical to do. So I started digging into uncertainty indices, if you will. There's a whole bunch of research that happens surrounding uncertainty, not least the World Uncertainty Index. So I'm pretty sure it's worlduncertaintyindex.com, a segment of the economist.
0:05:20.6 Junior: So, it's an annual survey done by the Economist Intelligence Unit, the EIU, that measures uncertainty across 172 countries based on 14 indicators. And some of these are broken out into separate indices. And then there's an overall. And these include economic, political, social factors. And if you look at the trend line all the way from the first year, they started measuring in 1996 to 2024. What do you think that trend line looks like? The trend line goes up. And it goes up pretty fast. And there are spikes with really big world events. 9 11 STARS in the Gulf War, Eurozone debt crisis, Brexit, US presidential elections, the pandemic, you should see the spike in 2020, right? It's the highest point in the chart. And so this is a fairly objective measure about as objective as it can get, telling us that uncertainty is high. Have you ever looked at that index, Tim?
0:06:23.1 Tim Clark: Yes, Junior. And I was amazed. You're absolutely right. There's an upward trend over time since they began measuring it. Yeah, there's volatility there. It goes up and down. But the trend line is clear, very clear.
0:06:37.4 Junior: Here's another one. I read a Times article a little while back, about 2024 elections. And I didn't know this until I read this article, but here's a quote. Globally, more voters than ever in history will head to the polls as at least 64 countries, plus the European Union representing a combined population of about 49% of the people in the world are meant to hold national elections. The results of which for many will prove consequential for years to come. That's the end of the quote. So how about that half the world voting, that's unprecedented is, to my knowledge, 49% of the people in the world are going to be voting. And a lot of those elections are uncertain by definition, and a lot of them are very consequential. Taiwan was big. We had Bangladesh, prime minister situation. A lot of really interesting things happening in these. Pakistan recently, just last week. We have the United States, which is an interesting one as well. So a lot of these are really big. They're setting really interesting precedent. So, that to me, I thought was worth calling out as an indicator of uncertainty, by definition.
0:07:54.6 Tim Clark: Junior, and I want to come back to what you said. It's so uncertainty is a certainty. It's a given is a constant, but it's going up. And what you said is true. It's a matter of how we perceive it, how we interpret it, and then how we react and respond to it. So it's the psychology that surrounds the uncertainty, which then drives our behavior. An interesting example in my mind, junior would be sometimes you'll see the price of a stock and it will go up double digits or it will go down double digits and nothing happened. There was no new material information that was communicated to the public, nothing. But it dropped precipitously or it climbed to a much higher level. How can we account for that? How can we explain that? It's simply the psychology surrounding it. Isn't that interesting? In the absence of any material information, we get these big swings. [laughter]
0:09:00.9 Junior: Well, and these swings are swings to the tune of billions of dollars, billions of dollars in a single day that will vanish or appear in value, because that value is perceptual. And we'll talk about perception and why that's so important as it relates to this topic. So here are two other points. The Pew Research Center says that people feel like the world is becoming a more dangerous place. So that's one of the questions that they have asked over time. And if you look longitudinally, the answers to that question, it's fascinating. People feel like the world is becoming a more dangerous place. Is it up for debate? But people's perception of the danger certainly increasing. And then we have this next point, which is that there's the pace of actual change, and then there's the pace of knowing about the actual change. Historically, and I think this is worth calling out, historically, there were a bunch of things that used to happen that we didn't know about.
0:10:02.1 Junior: And now we know where celebrities eat lunch. And ignorance for so long was bliss in many cases, don't know, don't care, didn't affect me. But now that didn't affect me or doesn't affect me part is important because much of the information we consume doesn't actually affect us in the day to day, in a real literal proximal sense. But so much of that information is about things we can't control or influence. And a lot of those things that we can't control or influence that we know about every day are not positive things, they're negative things. And so we're constantly being exposed to this information that says, well, you know, it's pretty doom and gloom, but there's nothing you can do about it. And so I guess you should just sit there and quiver, right? And so that is an interesting historical difference. And I look up at my own life, the information that I consume, and we have to be very intentional about that. Because consuming too much of that information can be really dangerous.
0:11:10.3 Junior: And that uncertainty lives not just in one category, but it's economic, it's political, it's social. There's environmental uncertainty. There's an interesting, I mean, several indices that measure trust in traditional institutions. That's worth looking at. Just go Google some of these. So trust in government, trust in media, trust in religion, even trust in science, ironically, all going down, all going down. Some more than others, but going down. So this uncertainty that we experience every day impacts people. The uncertainty impacts you, it impacts me. And because businesses are people, uncertainty impacts business. So why is that important? Because people feel this uncertainty and it means things for their behavior. What do you think about that?
0:12:04.4 Tim Clark: I think the hard thing Junior, is for people to decide what to pay attention to.
0:12:08.1 Junior: Certainly.
0:12:08.8 Tim Clark: Because they're inundated, right? They're inundated. So I'm gonna share a couple of statements. The first statement, these are two of my favorite statements. The first statement is by the Israeli historian, Yuval Noah Harari. He says that, in a world deluged with irrelevant information, clarity is power. Okay. But we still have a problem because people are struggling to know what to pay attention to. How to allocate attention, which is a scarce resource. And then I can start perceiving and interpreting and making sense of the world. But where do I even go in the first place? Now that leads me to the second statement that I love very much. It's by Herbert Simon, who was an organizational scientist at Carnegie Melanie, won the Nobel Prize. He said, what information consumes is obvious, it consumes the attention of its recipients, hence, an abundance of information creates a poverty of attention.
0:13:13.0 Tim Clark: So Junior, are we not suffering from a poverty of attention, we don't know how to allocate that scarce resource. How do we do that wisely? How do we know what's relevant versus irrelevant? How do we know where the signal is versus the noise? So this is very difficult in the first place because we're inundated. You and I were talking the other day about how things used to be just a few years ago. I remember when I was living in Korea years ago, as a young person, I was 19, I'd send a letter home. It took a month to get home. And then if my family wrote me a letter, it would take a month for me to get their letter. So, we missed everything in between, and then whatever we chose to write was just very limited. But that was a very different reality compared to today's real time abundance of information coming from every source, every angle. It's a very different reality.
0:14:18.2 Junior: Well, two thoughts. One is that you're probably not writing about today's news because you know that by the time it gets there, it's a month old and it's probably irrelevant. So it's not going to be a topic we're going to pay much attention to. We're gonna talk about other things that are still relevant a month later. Like, how are you doing? Right? [laughter] So, the second point is something that's absent from those two quotes that you shared is that, it's not just a deluge of information in a neutral sense. It's a deluge of negative information. And we know that most of the information that's grabbing our attention must be attention worthy. Neutral, vanilla, general information does not get attention. Because businesses have tried to monetize attention, they must use what's attention worthy, which is negative, which is fearful, which is acute, which is sensational. So, that's an important point.
0:15:23.4 Junior: There is tremendous incentive for those producing the information to produce information that is sensational and negative so that we pay attention. So you can see the predicament we're in. Not only is it difficult to figure out what we should pay attention to, but it's difficult to find information that we reinforce the idea that there's hope and opportunity. And so, that part of what's going to affect the way we're going to behave in the four recommendations we're going to make about actually leading through uncertainty. So humans, we don't like uncertainty. Biologically, we're wired to dislike uncertainty. Now, a certain level of novelty is important, in satisfactory life, we need some of that, but biologically we don't like very much of it. So there's another interesting study. This from personal capital shared that 66% of survey respondents reported worry. 54% said that quote, uncertainty has undermined their performance and wellbeing in the workplace. 54%, that's just self-reported.
0:16:36.3 Tim Clark: Self-reported, debilitating effects.
0:16:38.7 Junior: We know if half of the people out there are saying, this is undermining my performance and wellbeing in the workplace, we have an issue. We have something that we need to at least acknowledge and figure out what to do. So here's another interesting point. This came from a Forbes article. I read, I don't know the exact citation, but the article said, I'm assuming they checked, scientists report that living with job uncertainty takes a greater toll on your health and actually losing your job. How about that?
0:17:10.7 Tim Clark: It highlights the negative effects of anticipating something negative. So you live with that anticipation and it just wears you down. It knocks at you. It's taking its toll before anything even happens.
0:17:25.8 Junior: Isn't that interesting that you're let go and then you feel better? I go. Okay?
0:17:30.0 Tim Clark: Junior. Hey, case in point. I was talking to someone the other day that was just let go. Said, how you doing? Doing great. I feel great relief. So to this very point, I wanted to also add a point, you mentioned that the news media, other information outlets, they need to continually up the ante to get our attention. Well, it's true. If you're desensitized, then you're like an addict that you need a bigger dose. So you need something that's more sensationalized. We've gotta put a little more sizzle into it. We've gotta hype it up, look what's happening. And then what happens to objectivity, accuracy, what happens to dispassionate, impartial analysis?
0:18:21.0 Junior: Oh yeah, that's gone.
0:18:23.7 Tim Clark: To the quality of journalism, for example.
0:18:27.0 Junior: Yeah. We shouldn't even open that kind of worms.
0:18:29.7 Tim Clark: No.
0:18:30.2 Junior: I have things to say.
0:18:31.8 Tim Clark: But it's related.
0:18:33.4 Junior: It is. It is related. And I want to acknowledge the fact that there are many people and perhaps most people who would not respond the same way to that person you mentioned that was let go. It is a difficult thing and in many cases, especially if it is a surprise, you are not going to feel that way. And we acknowledge that it's a difficult thing. Okay. So, the stakes are high, as we said in the beginning, uncertainty can result in negative or positive impact. We've been talking a lot about negativity, but there is some upside which we want to get to. Whether we get the negative outcomes or the positive outcomes, largely depends on the behavior of our leaders, what we as leaders do in a practical way every single day. So how do you do it, right? Four suggestions. Number one, create thick trust. I imagine you wrote this way on purpose. Why did you say create thick trust and not just create trust?
0:19:36.4 Tim Clark: Thick trust is a different kind of trust. It's a deeper trust. It has more stain power. And thick trust is built up over time. It's something that you invest in over time. You create predictability in your behavior. So, you're making a really a series of deposits and you build what philosopher Russell Harden called a street level epistemology of trust. What that means is that on the ground, if I'm working with you, interacting with you day after day, I can observe you, watch you, I can see your response patterns. I can see your values expressed in the way that you interact. And so I gain predictive understanding of you that that becomes thick and I can forecast what you're going to do in a given situation. So I would say that's extremely important to dealing with uncertainty. But this is not something that you can prepare at the last minute. You can't cram, you cannot microwave thick trust. It's something that you build in advance. And there's no shortcut to it.
0:21:00.8 Junior: So you're countering the uncertainty of the environment with the predictability of your own behavior. So the last thing, probably the very last thing that we want in an uncertain environment is an unpredictable leader. So let's say that we have those two things, uncertain environment, unpredictable leader. How do we think that people are gonna feel?
0:21:22.4 Tim Clark: That's the worst of all combinations, right? Because what we're saying is, there is the possibility that you could harness uncertainty. And Junior, I have seen situations, counterintuitive situations where in the midst of great uncertainty, engagement, productivity, performance all go up. And you think, how can that possibly be? Well, a big part of the reason is that, that leader is trading the uncertainty of the environment for the predictability of their behavior. That is a form of reassurance that able to give to the employees even though the greater environment is volatile and unforgiving and unpredictable.
0:22:15.4 Junior: There's an angle that's a little depressing if you look at trust as prerequisite. If you don't have that trust and we're saying that it is prerequisite, then you're up a creek. There's not much that you can do. And we're not going to tell you that, oh, all of a sudden there is something that you can do to turn the ship around immediately. No. There is no shortcut for this. So the point is, that if that trust is not there, start today, best time to plant a tree. But hopefully you do have a track record. This becomes fascinating to me because it's kind of a double-edged sword in that I guess at a macro level, not a micro level. If you have trust, thick trust, if you have that trust of your people, when the environment becomes more volatile, that becomes a competitive advantage because trust is a prerequisite.
0:23:10.3 Junior: So if it is not something that you can turn on at the snap of a finger, what does that mean? It means that other people who are experiencing the same volatility as you can't snap their fingers and turn on the trust. So if you have paid the price over however long to create trust with your people, you now have an actual competitive advantage that will help you win in the marketplace. If you don't have that, if you're an unpredictable leader, your people won't know which ways up. How are you supposed to align an organization, move forward through uncertainty and all the fog if they don't have something durable to hang onto? Not that you're the end all be all, and not that there aren't other things that they can lean on, but it certainly doesn't make their job easier If you are unpredictable. And now it's not binary, but with how much certainty and confidence could they predict your next move? Is it 50%? I don't know it's coin toss. Could do this, could do this. I'm not sure. Is it 90%? Is it 99? You wanna get as close to 100% where they know your values, they know your track record and they can say, okay, when met with this type of a situation, I'm almost 100% confident that this is what that person's going to do. And that's where we need to get. If we can do that, then we'll create advantage.
0:24:32.9 Tim Clark: Junior, you in strategy, you often talk about the dimension or the principle of in immutability. Meaning that you cannot imitate. And I think this is what this represents. If you are... If you've developed thick trust, but others haven't, then you become imitable and they can't catch up quickly. So you have this distinctiveness. Is that fair?
0:25:03.9 Junior: Yeah. And and there's this nice marriage with path dependence with that principle that I really like thinking about. So let's say you wanna go and compete with McDonald's in retail locations. Are you gonna do that? No, you're not. Because of what McDonald's has done in real estate for the last 50 years. So you can't just turn that on and say, wow, I'm gonna go do this now. It takes time to do certain activities. Trust is one of those things that takes a lot of time. Now there are things you can do to accelerate that trust. One of those things is transparency. One of those things is communication. There are things that we can do to bolster the trust and maybe to accelerate it, but you cannot fake it. And so is trust inimitable? Yes. In a pinch across a certain timeline. It absolutely is. So I appreciate that you brought that up.
0:25:54.6 Junior: Okay. That's thick trust number one. Number two, inoculate with vision. Now there's a paragraph that you wrote that I liked so much, I wanna read it. Inherent in a leader's role is the commission to give others sight, paint a portrait of the future, plant a seedling of reality, and inspire others to move toward it. In times of extreme uncertainty, a vision generates lasting motivation beyond the survival instinct for people to perform, work and absorb stress. If you can package the organization's ambition in a well-crafted vision, you can help others see extreme uncertainty as a necessary part of the journey toward the ultimate destination. So tell me a little bit more about a couple pieces of this. I would like to hear more about necessary part of the journey. Tell me about that. Why did you frame it that way?
0:26:42.3 Tim Clark: Well, if we're talking about a long-term journey toward a vision, then junior, we need to anticipate that the road will be an arduous road. There will be obstacles, there will be adversity along the way, and we need to prepare for their arrival. It's not a matter of if? It is a matter of when? And so the vision gives us motivation to take that journey, but hopefully we're also communicating the reality along the way. So it's a journey. The vision is the ultimate destination. The vision creates momentum and energy, both intellectual and emotional that we can take advantage of. For me, I wrote it this way because it's still the way that I can understand it. It provides motivation beyond the survival instinct for people to perform, work and absorb stress. So if you think of Maslow's hierarchy of needs, we have basic needs at the bottom to survive. And that's the survival instinct. And we're driven to survive. But we need more than that. And a vision is a source of motivation that goes beyond the survival instinct and persuades them to perform additional work and absorb additional stress. And those are the two things that you're going to need on the journey toward the vision and doubtless you will be doing that in an environment of uncertainty. So I think what the vision does, is it can inoculate against discouragement and against the uncertainty. It provides the impetus to take that journey.
0:28:36.4 Junior: A couple things that stand out to me here. One, survival instinct governs behavior across how long a timeline, not long, like now, right? The next 10 seconds, the next five minutes. That's survival instinct where we will get a rush of adrenaline to govern our behavior over the next few seconds so that we don't die. So how much vision does the survival instinct have? Almost none. I've been reading a book called Dopamine Nation by Anna Lembke, and there's an interesting part of this book where she cites a study asking opioid addicts, how long the future is, right? This study is interesting to me and I can't remember exactly, but on average it was like nine days, right?
0:29:30.9 Tim Clark: That's the future?
0:29:32.8 Junior: Yeah. The future is nine days. And the control group said something like five years or 10 years or something like that. And what I have seen with the most successful people personally and professionally is that their answer to that question would probably be something like a hundred years or a thousand years or a million years. The timeline across which we operate and see will dictate our behavior today. So if we are operating out of survival instinct, what are we doing? We're making decisions that are gonna affect the next five minutes. If we have vision that is 10 years out, that's just noise. Now, it doesn't mean that there won't be acute moments where we need to make a decision now and we need to gear into that survival instinct, but it will inform that behavior because we know there's a future waiting for us that we wanna be prepared for, a destination at which we want to arrive.
0:30:38.3 Junior: And so, that's what I think so powerful about inoculate with vision is if we say, okay, just for a second, climb up this 20 foot ladder and just look out a ways, okay? Just see, look that way, you can see further. That helps and it helps settle down. It helps you feel like, you know what? This email is actually not the end of the world. There's more life to live, there's more going on. It's not just me. So zooming out and looking at yourself from top down I think is a really helpful thing to do. Look at yourself from a thousand feet, get outta yourself, move out of that survival instinct. You'll make better decisions. And a leader's ability to do this for other people is hugely, hugely impactful on the success of the team.
0:31:28.0 Tim Clark: So junior, then the practical advantage, the practical benefit of vision then, is that people convert that knowledge, that understanding, that momentum, they convert that into a willingness to engage in delayed gratification and plan deprivation.
0:31:52.3 Junior: Exactly.
0:31:52.9 Tim Clark: Because we're on a journey, it's gonna take a while. We need people to behave that way. That's part of the requirement to be successful. We need planned deprivation, we need delayed gratification. And if we don't get that, we can't get there. So we have to understand that the uncertainty that characterizes the journey, it's not a surprise. There's no surprise here. We anticipated this, but we have that portrait of the future in front of us and it's guiding us as we go.
0:32:30.0 Junior: Yeah. Well if you just look... I think personally and professionally, how many problems have I experienced in life? And I'm probably representative of most people, right? There are problems. We've had problems. How many of them have you overcome? Okay, well then when the next one comes, it's just another one of those and you know, okay, here's another one to work through. And there will be more. And some of them will be big and some of them will be small. But I have this vision of the future that I'm moving towards. And I think it helps settle you down and give you some perspective. So that's number two, inoculate with vision. Next, number three, increase honesty and transparency. There is nothing worse, as you have said, than a leader attempting to create false certainty with rhetoric that doesn't match reality. So have you seen this? Tell me about this.
0:33:21.6 Tim Clark: I have Junior too many times. Leaders in an attempt to assuage people's fears, they say things that they should not say during times of great uncertainty. For example, well, they even make promises that they can't keep. They'll say things like, the market will recover in the next six months. Don't worry. Oh really? Do you know that the best macro economists in the world can't predict that. [laughter] But we hear leaders that say things like this. Here's another one, no one will lose their jobs. These priorities are set in stone and won't change. This new product will far exceed our conservative revenue forecast. Or your team will not be affected by this. I've heard all of these and many, many more coming from leaders who I guess meant well but didn't understand that they were really hurting their credibility and the team's ability to be successful. Because this is not honest and it's not transparent and it's not helping. Even though there's the thought that, oh, let me give you some assurances, right? So to give... So here's the distinction that I would make Junior, to express confidence in the future is important, it's something that leaders need to do. But to give assurances for the future is a different thing. And that's disingenuous. Do the first thing, not the second thing.
0:35:07.1 Junior: So there are four phrases we want you to keep top of mind, especially in times of uncertainty. One, I don't have all the facts. Two, I can't remove all risk. Three, I can't promise zero loss, and four, I can't eliminate all the pain. Those are things that should be obvious to us, and they're probably obvious to most people. We just disregard them and lie about it and try to convey the idea that we do have all the facts. We're going to remove the risk. There won't be any loss and it's not gonna be painful. [laughter] We know you're blowing smoke. If you tell us any of those things.
0:35:43.7 Tim Clark: Don't say that.
0:35:46.1 Junior: We don't, yeah, just don't do that. Don't do that. We know it's not true, so just don't. Right? The market will recover in the next six months. I have heard things like that. I'm like, are you outta your mind? Like what? I'm not stupid. You know? Come on. So those are four important things to keep in mind. And then the last thing I'll say, in increase honesty and transparency, there's an element of accessibility to this. So don't just deliver reality. Don't just deliver the news and then run away and hide. Stay there for the follow-up conversation. Stick around for the Q&A. If you just send the communication and then turn off the inbox, that's not gonna help anyone. And you may cause a bigger problem. So when you're being honest, when you're being transparent, stick around to talk. Be accessible and make sure that you can have a conversation. Tim, anything else on this point?
0:36:41.3 Tim Clark: I just think that doing that goes back to creating thick trust. That's why you don't run away and hide, you stay there, you talk through things with people. You commiserate when necessary. You connect and you're there. You're accessible. That's what you do.
0:37:00.0 Junior: And number four, see uncertainty as opportunity. This is my favorite one. The author, Ecartol said, if uncertainty is unacceptable to you, it turns into fear, if it is perfectly acceptable, it turns into increased aliveness, alertness and creativity. So who decides whether or not uncertainty is acceptable? You do.
0:37:28.1 Tim Clark: You do.
0:37:28.8 Junior: You do. You get to make that choice.
0:37:31.1 Tim Clark: You're the boss.
0:37:32.8 Junior: If you look at uncertainty and say, this is unacceptable, what happens, it turns into fear. And what does that fear do to your behavior? It kicks you into the survival instinct and you start operating on a 30-second, five-minute, five-day time horizon. That's what happens. You lose vision. Fear is not conducive to vision for you or your people. And so if they see that in you, they will probably feel that too, and it will start affecting their behavior that way. And they'll act over the next few days just to not get fired. They won't act in the best interest of the organization. And what's interesting is acting in the best interest of the organization means that the organization's probably best suited as stick around longer. Which in turn will keep the job. There will be things for you to do, but if everyone is operating without alignment, without vision and just out of fear, it just descends into chaos. And then are we going to stay competitive, of course, we're not going to stay competitive. And so this presents a real opportunity for individuals, personally and professionally. Think about learning. We learn in situations where we are unsure. By definition, if we're sure of course, we're not learning.
0:38:53.7 Junior: If things are predictable, what do our brains do? They turn to auto-pilot. They just switch. They switch into autopilot. Are we absorbing new information? Are we assimilating that information and learning? No, we're not. So unfamiliar environments, uncertain environments tell our brain, Hey, you need to absorb more information, figure out what's going on here and figure out what to do.
0:39:14.7 Tim Clark: So that state Junior of disequilibrium is a good thing. [laughter]
0:39:19.6 Junior: It's necessary to learn, and if you like learning, then it's good. Yeah.
0:39:24.1 Tim Clark: I heard a scholar say the other day that, the biggest mistake and the biggest liability over the last century in education has been rote learning. Because with rote learning, you're not developing your critical thinking skills. You're not reading and interpreting the environment and then adapting to it. So you're not building those critical thinking skills.
0:39:51.0 Junior: So, that's true personally. Let's talk about competitively. How do we see uncertainty as opportunity and how does that translate into competition. Uncertainty for us probably means uncertainty for other people. If you think about your industry, there's some macro-level change that affects your industry while everyone else in your industry is probably affected the same way. So instead of reacting to that with fear, while everyone else is hold up in a cave and they're scared, you can be out there taking action. You can confront the uncertainty squarely with confidence. That you can build the skills necessary to succeed in the times that will come. So Tim talked about AI. What are you doing relative to AI? Are you ignoring it? Are you turning a blind eye and hoping that it doesn't disrupt you? 'Cause it's going to. Are you out there looking at how this might affect you and how you can use that to your advantage? We're trying to do that every day and look at how can we sharpen the saw? How can we become better? How can we become more efficient? How can we disrupt?
0:40:56.6 Junior: And looking at that uncertainty and saying, Okay, it's game time. It's time for us to really get going. Because why? Because there are a whole bunch of people who are not gonna do that. And in some cases, understandably things get scary. If you look at that peak in 2020 on the uncertainty index, that tells you that humanity responds with fear to these types of things. And sometimes deservedly so, but latent behind some of this uncertainty is opportunity almost every time. And we've seen people time and time again take advantage of that, and people who get hurt by that. Tim you've used the word hibernate. Would you tell us just a little bit about that too? That's relevant here?
0:41:43.2 Tim Clark: Yeah. It's just a distinction that I see again and again, when the uncertainty rises to a very high level. Some leaders and some organizations, they take it as an opportunity to accelerate. Others withdraw, retreat, hunker down and hibernate. That's a really interesting distinction. And two different response patterns to the same stimulus, accelerate or hibernate. And it makes me think of the distinction, there's a theorist, he since died, his name was James March. And he taught at Stanford for a while, and he made the distinction between two modes of operation in an organization. One is exploiting and the other is exploring. And he said, you really can only do just those two things.
0:42:43.6 Tim Clark: You're either exploiting or you're exploring. Well, here's the interesting thing, you can only exploit certainties, isn't that interesting? Certainties meaning the things that you have your current strategy, your current capability, your current resources. So we exploit certainties, we explore uncertainties. So when the uncertainty comes, that is a cue and an opportunity to go exploring. And it's during those times of exploration that we figure out new opportunities that we can exploit in the future. Well, that's the difference between these organizations that go out and accelerate versus those that hibernate under conditions of extreme uncertainty. I just find that so unbelievable. Because if you think about it, when an opportunity becomes clear to everyone, when it passes the test of obviousness, then that opportunity either fades away or the forces of commoditization erase the distinctiveness.
0:44:05.0 Tim Clark: And therefore, the competitive advantage. So the opportunities are always in the uncertainty. If the uncertainty fades away, it's not an opportunity anymore, 'cause we can all see it. So by definition, uncertainty is synonymous with opportunity. The very fact that something is uncertain means that it cannot be exploited for gain today, but probably in the future. So we can't miss the opportunity to explore. That's where we really get ahead.
0:44:44.4 Junior: Well, if we think historically about any innovation, especially in the last 100 years, how much certainty surrounded the innovation? Were almost none, right?
0:44:52.3 Tim Clark: Yeah.
0:44:53.4 Junior: These things happen in uncertainty during exploration. So that's our conversation for today, let's summarize. Uncertainty is a term and condition of life itself on a personal level, a professional level, an institutional level that's a given. So don't waste your time fighting that, it will always be the case. Confront uncertainty and create a healthy environment for your people by doing those four things we talked about, one, create thick trust, two, inoculate with vision, three, increase honesty and transparency and four, see uncertainty as opportunity. Tim any final thoughts.
0:45:32.4 Tim Clark: I wanna give a little case study if I could if we got just another minute. So we've had the opportunity, and I'm gonna go back to number four frame uncertainty is opportunity. We've had the opportunity to work with a CEO, and I wanna just tell you a little bit about him as we close this episode. He relishes every downturn in the business cycle. Why? Because when this thick fog of uncertainty sets in over his industry, he sees that as his greatest opportunity to explore new markets, new products, new acquisitions. Does that make sense? So in the context of decreasing demand, people are starting to panic, he waits for his competitors to re-trench and they do, they go into cost cutting, they go into austerity, and then what does he do? He leverages his fortress balance sheet, which he has prepared to scoop up undervalued assets and plan for those rewards, the rewards of exploitation that will come ultimately when the market recovers. So what is he doing? He's framing uncertainty as opportunity and as he has done that over time, he's transformed the culture of his organization and the perception of employees. So he has decoupled fear from uncertainty and he's replaced it with confidence and curiosity and anticipation. That's what we want to do. So just a little plug for number four, frame uncertainty is opportunity. So important.
0:47:17.8 Junior: It is. If there's one thought that I would leave everyone with it's, don't turn away from uncertainty, turn towards it. I think your orientation towards the uncertainty is perhaps what's most important. So thank you everybody for listening today, we appreciate your time very much. We know you could spend it other places. We are very grateful for the work that all of you do. And we are here to help. If you liked today's episode, please leave us a review. Share it with a friend. You can always reach out to us at leaderfactor.com. Take care everyone, we will see you next episode bye bye.
0:48:02.2 S4: Hey Culture by Design listeners, this is the end of today's episode. You can find all the important links from today's episode at leaderfactor.com/podcast. And if you found today's episode helpful and useful in anyway, please share it with a friend and leave a review. If you'd like to learn more about LeaderFactor and what we do, then please visit us at leaderfactor.com. Lastly if you'd like to give any feedback to the Culture by Design podcast or even request a topic from Tim and Junior, then reach out to us at info at leaderfactor.com or find and tag us on LinkedIn. Thanks again for listening and making culture something you do by design, not by default.
