Tuesday, March 28, 2006

Every day risk aversion and a solution

It is amazing how in every day dealings we find real risk aversion and amazingly low tolerance to ambiguity. I have been selling a car on eBay. I had the usual pile of enquiries about this and that and when the sale ended the winner was a chap who had fired many questions my way. The car is a good car, about three years old, with a full service history and well looked after. Once he had won the car I received a phone call from the winner asking for a series of numbers from the paperwork. When I enquired as to why he wanted to check with the authorities if the car was not stolen, part of a finance deal etc. Fine I gave him the details and he came back within the hour and said that the car had checked out fine but one of the document numbers was wrong. We double checked and I phone the authorities. Indeed the number was wrong. The explanation I got was that there must have been an administration error as everything else checked out. I relayed this on to the winning buyer and he wasn't convinced. So I gave him the details of the person I had spoken to so that they could confirm that this was an error and everything was fine.
He duly rang them and then came back to me. "I'm not sure, I need the paperwork 100%, it's got to be 100% if there is an error it's not 100%."
I asked how this affected the car and the sale.
He replied "I'm not certain what to do now. The number isn't 100%"
I responded (calmly) "As you heard the chap at the licensing agency it appears to have been a computer error on their behalf. Everything else checks out. I will personally vouch for the car and write you a letter that it is fine. I've had it since new."
"I'm not happy, that number isn't right".
Thinking that some form of guarantee might work unstick this situation I suggested, "Look I will sign a letter to you stating that if the car turns out not to be mine I will refund you the full amount"
"Yes but the number, it's just not right".
Eventually the only way to unstick the situation was to remind him that he should have checked this before bidding and that the bid was legally binding. That did the trick. The suggestion of a threat of even more dire consequences resulted in a final "Well I'm sure it will be alright. You sound like a nice guy, someone I could trust really."
It's truly amazing how when faced with real risk aversion (remember risk is perceptual and therefore individual) presenting a greater risk can create movement with the chronically risk averse!

Saturday, March 25, 2006

Wiki certainty

In any research into ambiguity and all things allied to it you necessarily start to consider the notion of certainty. A great online resource these days is often wikipedia (http://en.wikipedia.org) with a great many experts contributing to it's ever increasing knowledge base. Clearly you have to be careful about what is written there as anyone can contribute to it, including the less well informed and the prankster, however it can be interesting to visit as long as you verify it's contributions. Considering that the whole endeavor of any encyclopedia is to define concepts and therefore reduce levels of uncertainty about those constructs, wikipedia has an interesting omission. It was somewhat of a surprise therefore, that when I searched for certainty, to be automatically redirected to the probability pages (http://en.wikipedia.org/wiki/Certainty). The one thing that wiki is trying to provide is missing! I will be fixing this in the next couple of weeks and start the wiki on certainty. At the moment wiki has no certainty, but plenty of probability, uncertainty, ambiguity and chaos.

Monday, March 20, 2006

A consultants dilemma

I am currently consulting with a large financial house in the UK who are, like many other companies, struggling with change in a large and dispersed company. The problems appear to be many and include what the outcomes of the change should be, how to increase the tolerance of ambiguity of those that have to lead and those that have to go through the changes necessary, what the process should be to effect that change, as examples.
What is really interesting about such situations is that senior managers, when faced with the prospect of leading such change will reach out for consultants to help to provide some sense of certainty in what is perceived as an ambiguous and high risk situation. Thus a paradox arises, how to increase the tolerance of the leaders to ambiguity so that they can find the opportunities in such situations whilst at the same time allowing them to move forward into a new world with some confidence without creating dependency. Of course many consultations would argue (in private) that they actually want to create dependency and keep the customer coming back for more - profit over ethics. Asking such consultants at the start what their exit strategy is can be enlightening! Many will create the appearance of certainty and comfort for organisational leaders as this increases dependency on the consultants. A consultant who states that their aim is to increase tolerance to ambiguity must at the same time be increasing independence in their client. Increased independency necessarily means that the client learns to solve their own problems. If they can solve their own problems they don't need a consultant.
Some leaders however are so risk averse that they actively want the comfort of the certainty peddled by the consultants without realising the dangers of dependency inherent in such a situation. Needless to say it is a rare consultant who points this out to a prospective client.