All Models Are Wrong, But Yours Is Perfect for You.

Aug 30, 2022

A big part of being a leader is deciding our organization's future. We might have an idea of where we would like our company heading, but how can we ensure specific actions will lead us exactly where we want to be?

In this episode, we look closely at our decision-making processes, the information we rely on to make those decisions, and the models we incorporate and use to fulfill our goals. 

We analyze our assumptions when trusting a method, learn how to test our models properly, and explore the faith component every new project needs to succeed. Plus, we reinforce the idea of avoiding comparisons; after all, everyone's path is unique. 

In This Episode, You Will Learn:

  • The best teachers aren't always the best leaders (2:13)
  • All models are wrong, but some are useful (3:48)
  • How to determine if our model is the one we need to reach our goals (7:51)
  • Why do we need to be specific if we want to think about the future (11:51)
  • About the importance of recognizing our biases to make the best choices possible (15:32)

Resources:

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Transcript 

Clint Hoopes: An unrivaled man is one who isn't in constant comparison or competition with others. As an unrivaled man, you want to win, you want to do your very best, and you want to be a high achiever. But the way that you compare and who you're comparing yourself with makes a difference. So, be the unrivaled man, be the man in your life that makes the best decisions for your situation, for your business, for your family. 

Welcome to the Unrivaled Man podcast. Today, we are talking about your journey and about the information you use to navigate your business. I'm going to share some ideas of how you can be even better at using the information you have available to make great decisions in your business and even your life. Now, let's learn together. But before we start, I just wanted to share that I have a few openings for my private one-on-one executive coaching for you, a key member of your team, or perhaps a friend that you know could use this help. Now, what is this? This is where we get a chance to work together to help you in any part of your business leadership. If you're ready to take things to the next level in your leadership, if you need help with managing growth, if you're feeling stagnant, feeling out of control at work and at home, and just need a different perspective, let's chat. You will get great feedback even in just this first free call. So, message me on social media or email me directly at [email protected] and we will set up a time for a zero-pressure call. 

Navigating information and making decisions are some of the most basic duties of a leader, but that does not make them easy. Any of you that are leaders, you're making decisions constantly based on the information you have, and that really is what you do as a leader; you're just the one that's in place to determine what is the best thing to happen right now. Now, we don't always learn from great examples as leaders, sometimes we learned from someone who was not great in our role or perhaps someone who had never done our role before and they're giving us the best information they know. But often we don't have great examples, so some of the information we're using, or perhaps even some of the models we use to project our decision’s impact aren't always great. So, that's one of the first things to think about is what about the models that we're using? The things that we are using? What are the premises that we're making? What are our assumptions that we are making and why are we making them? 

Now, there's a famous quote that's often attributed to the British statistician, George E. P. Box. This is what he said: “All models are wrong, but some are useful.” I think about different models. I think about whenever I've made pro formas — so, I'm trying to figure out, “Okay, well, this business would be successful.” Or perhaps I'm projecting out revenue, expenses, or something else within my business. Or perhaps it's a little more of an objective decision and I have to qualify the different measures, and I'm using some sort of model or some sort of information that I have based on history or based on something somebody else has given me to make this decision. The interesting thing, based on what George Box says, is that all of these models are wrong, but some are useful. 

Now I think about going back to pro formas. Right now I'm in the middle of looking at a couple of different businesses that I want to invest in, and so we're putting together some pro formas; as I go through them, things look pretty good at times. I'm like, “Alright, this looks great.” You put them into Excel and this pro forma looks great. And I'm using perhaps a model that I've used and that's what I am using is ones I've used in other businesses and they've been very useful. But they have always been quite wrong, but that's the point of it. In a model like that, you'd never expect them to be perfectly accurate; they're just there to provide information. But sometimes we will use the information and assume, even though we know it's wrong, we'll start making assumptions that are incorrect and forgetting that the model is most likely wrong. According to George Box, all of them are wrong. So, how do we find ones that are, in fact useful, and then use the information as best as possible? 

Now, this can go into all different types of models. He was, obviously, being a statistician, alluding more to statistical models, because they're all just guesses, just like a pro forma. And honestly, there are other models that will come up. Even I have a model. I have a model called the Flowing Momentum Model. It's a framework that I have, and it is there to help leaders make decisions. And it's true, my model is not 100% right, but it has been useful to me and useful to other leaders, and hopefully useful to some of you that have used the model in your life. Those are the things we’ve got to keep in mind when we are making decisions that the model we're using is wrong but what can be useful to us. 

Now, here is another book, this is a book that was recommended to me a while back and I read it recently, it's called The Mom Test. Some of you may have read this, especially people that are in software development or startups. This is a book that's often recommended for people to get user feedback. It basically talks about that your mom will lie to you, because you'll set something up and you'll say, “Hey, is my idea a good idea?” And of course, your mom's going to lie to you and say, “Well, of course it is, honey. That's wonderful.” If my mom's listening, sorry, you're pretty honest with me, I know. But as often we'll set things up in such a way that they will say it's a great idea. So, I love this book, I love the premise of the book because it talks about ways that you can get the truth from anyone that you're asking their opinion, you're trying to get the truth about an idea because you want to make the best decision possible. If you're in a new startup, you're trying to figure out “Will people buy my product?” Or in software, the same thing, “Will people pay for this software?” The same thing is true in all that we're doing and all of our decisions: Is it a good idea? Is the model correct? Are our assumptions correct or close to correct? Because we're never going to get them exactly right. 

So, that’s why I like this book, The Mom Test, by Rob Fitzpatrick. The first little quote from the book is this: “Until he is specific, it always seems like a good idea.” So, what is “it”? Now, they were talking specifically about determining if a startup or software is correct, and you're talking to users and saying, “Hey, is this correct?” But I think this is true in many of the decisions that we are making as leaders. I think often we will think about “Hey, we should do fill-in-the-blank.” “We should do this new thing for our customers, provide this new service.” “We should shift the way that we do this certain part of our business or the way that we interact with employees.” Think about your own situation right now, as a leader, think about a decision that you're making right now and you're gathering information. And I imagine that right now, it seems like a good idea. But have you not found that the more specific you get, it sometimes seems less and less of a good idea, whatever “it” is for you? 

So, if we don't go deeper and get a little more specific, we're not going to find out. If we don't push a little bit on the model, it may seem like a good idea. I'm looking at pro formas right now for businesses I want to create. And guess what? Man, you put that perfectly nice growth curve and it's just up into the right — man, it's wonderful. But it always seems like a good idea at that point. It doesn't take into account all of the different variables. We try to be conservative, but guess what? It almost always looks like a good idea until we can get incredibly specific. So, depending on what you're doing and what's at stake, we’ll determine how deep you go. Now, here's the next quote from this Mom textbook, it’s one of their rules of thumb. They had a whole list of rules of thumb; for this rule of thumb here, he said, “Anything involving the future is an over-optimistic lie. Now, I kind of liked that, it's pretty blunt. 

So, are we lying to ourselves? So, me, back to my pro forma example, am I lying to myself? That's what I'm looking at right now. I'm looking at this deal and I'm thinking, “Okay, oh, this looks great. This is a no-brainer! It seems like a good idea.” But the model I'm using, I know it's wrong because I can't project out with accuracy. I'm involved in the future, so it's an over-optimistic lie, so I have to take into account that I am in fact over-optimistic on those things. Just by nature, I'm going to look at it and likely be over optimistic. So, I have to put things in place to make sure that I don't fall into a trap and make poor decisions. 

Now, at any point in business, or in life, for that matter, everything requires a little bit of faith. We would sit there frozen if never acting, never doing anything, never doing anything creative or creating something worthwhile if we never took that leap of faith. If we never said, “Do you know what? I've went as deep as I can, I've looked at it, I know I'm probably a little over-optimistic but I've accounted for that.” Boom! Let's go. That's where you, as the leader, are the one that gets to make those decisions in your life. You just need to go in with eyes wide open and know that there are errors in your model and in the way that you are thinking and in your thought process. Because all that is is a model; the way you think. The way you've been trained to think has come from either someone teaching you and/or a combination of the books you've read, the things you've listened to, the experiences you've had that have went poorly or went well; they're all coming together to make your unique view. Because the truth is, you are the only one that has ever encountered this exact situation that you're in, no one else has. 

So, these models are all guesses because they were based off of someone else's experience. So you have to take that into account, whatever it is you're looking at. We’ve got to be careful whenever we make comparisons, whenever we're comparing others. So, comparisons can be incredibly useful because it can help us now, “Okay, well, this company made this decision and this was the impact.” Now, if we make the same decision, what are the odds that the same thing will happen? Well, depends, a lot of things depend. And that's where, once again, you as the leader get to determine those decisions, especially if they're financial decisions. Now, other decisions are a little less quantitative, so you have to use other things to determine what to do. 

Now, another thing that's dangerous is when we start making comparisons with other leaders and the decisions they make, trying to make the decision as if you were them. That can be useful in certain circumstances, but really, they're not in our situation. The decisions they make are based on their exact situation. And often we look at the results that certain people attain and we compare ourselves. Now, it comes back to why this show is even called Unrivaled Man. An unrivaled man is one who isn't in constant comparison or competition with others. As an unrivaled man, you want to win, you want to do your very best, and you want to be a high achiever. But the way that you compare and who you're comparing yourself with makes a difference. So, be the unrivaled man, be the man in your life that makes the best decisions for your situation, for your business, for your family. 

I love books by Brandon Sanderson. If you've never read anything by Brandon Sanderson and you're looking for a good fiction book, fantasy fiction, that type of thing; kind of fun. It's a good little reprieve from the normal, nonfiction reading I often find myself in. So, the book from him is called Dawnshard. So, any of you Brandon Sanderson fans out there are probably cheering right now saying, “Oh, yeah, this is the best!” So, there's a part of the book right here. I'm not going to give all the backstory of why this is, just know it's a book where there's a hero on a journey. And that's a traditional book plot that you can imagine; there's a hero on a journey, and she said this: “If no one had traveled this path before, then she didn't have to compare herself to anyone, did she?” So, this is basically talking about this hero saying, “If no one had ever traveled this path before, did she have to compare herself to anyone?” The reality is, she didn't. She didn't have to compare herself to anyone because no one else had traveled the path. And you are in the exact same spot in your leadership. No one has ever traveled your path before. I mean, people have traveled similar paths, people can understand to an extent and you want to gain knowledge and experience from those people. And you never want to use this as an excuse to be a victim to say, “Well, nobody else understands. I'm the only one.” 

Now, pity thinking and being someone like that, you don't want to tolerate that in your own mind. Don't tolerate that kind of thinking, because it's not true to say that no one's done anything as hard as you or been in a situation that's similar — now, that's foolishness. But your exact situation, now that's different. You are in a situation where you are the one with the most knowledge, the most expertise. You may be explaining to someone, “Hey, this is what my situation is.” And they may say, “Oh, man, in that situation, I would do X, Y, or Z.” But they don't have all of the information; you are the one with the information. So, you need to know where your biases are so that you can make the best decisions possible. 

So, here are three things to remember;  these are some of the things that we learned today. First off, all models are wrong, but some are useful. So figure out which ones are useful, throw out the ones that aren't, and make the best decision possible knowing that it's wrong but you have taken that into account as a leader. Number two: get specific, especially when the future is involved. The future is already uncertain enough, don't add more problems with what you're trying to do and making decisions by having a bad model and not having specific information — get the information you can and go as detailed as you need for the importance of the item. If the decision is a small decision, then don't put all the extra effort into it. There's no reason for that, and you know this. You wouldn't be to this point as a leader if you didn't understand that. But sometimes we go back into bad habits, and sometimes we'll start doing knee-jerk decisions on decisions that are in fact quite big. So, get specific, especially when the future is involved. Number three: don't compare, because no one has traveled your path before. So, don't get too caught up in comparing yourself to the outcomes of other leaders. Look at what makes sense for you and for your situation, and make that decision. Make it from your perspective, using your unique experiences and unique abilities. 

You can do this, you got this. Imagine yourself right now, think about it. You have this big decision that you're facing, and this difficult decision in your business is right in front of you. And you are thinking through the process, you're gathering information, and you're doing your very best — use these things to know where your biases are; to know when you need to get more information; to know when your model is not complete enough. And beware of over-comparison, and don't be afraid to make the decision as a leader because you can always, of course, correct and learn from where you're at. So, don't be afraid to move and to do great things in your business and your life. Go and be the Unrivaled Man in your life.