The Product Pragmatist

How often have you spent time in multi-day planning sessions, created a huge set of goals for the upcoming year, only to circle back a year later to find that many of the goals were not achieved?

Don’t worry, you aren’t alone. Recent studies have shown that reaching goals is a common problem:

• 75% of venture-backed startups fail — These are companies with the best-of-the-best ideas, but fail due to lack of focus.
• 90% of companies fail to reach their strategic goals — The majority of senior executives admit it comes down to poor delivery of ideas.
• We’re even bad at home, with science recently stating that 92% of people do not reach their New Year’s goals.

However, what these studies also show is that there is a common theme among the businesses and individuals who are successful in reaching goals. The traits they exhibit, and the principles they follow, are highly pragmatic.

prag·mat·ic /praɡˈmadik/: dealing with things sensibly and realistically in a way that is based on practical rather than theoretical considerations

Big goals are complex, and are required to be broken down into smaller pieces, which in turn forms a plan. When carrying out the plan, there are many decisions that are made, and risks that are taken. Pragmatism focuses on making good decisions and calculated risks, which in turn improves the chances of keeping the plan on track.

Being pragmatic is easier said than done. It involves taking a step back, and proceeding with a high level of rationality, discipline, and focus — which at times can go against our basic human nature.

Is Anyone Truly Rational?

Pragmatism is heavily rooted in rationality, as rationality allows us to determine the amount of risk involved with ideas or decisions. However, behavioral psychology has shown that humans are not very rational by nature. In fact, the majority of our decisions are driven by emotion.

Daniel Kahneman and Amos Tversky determined that the emotional self is controlled by heuristics, a series of shortcuts that allow humans to make snap judgment calls. However, heuristics create cognitive biases that we are often unaware of. In turn, these biases lead us to believe we are acting in a rational way, when in fact our intuition is in the driver’s seat.

By understanding heuristics and biases, we can better recognize when they are coming into play with decisions. The more we recognize our own biases, the more we can limit their impact.

Decision making

With the future being uncertain, many scenarios that were unplanned for will be encountered. Every day we are faced with making multiple decisions. Each decision has a level of risk, which in turn has varying levels of impact and consequences. The end goal is to stay the course of reaching our long term goals.

No plan survives contact with the enemy — Helmuth von Moltke

When it comes to important decisions, relying on intuition can be a recipe for disaster. Making important decisions under stress is common, as often the decision itself brings stress. When people are stressed, they heavily favor the upside of the decision and ignore the downside. We fixate on best-case-scenarios, even if the best-case-scenario has a low chance of occurring.

Our emotional state also impacts our decisions. When emotions are running high, rationality decreases, and people are more likely to make poor decisions. This applies to both positive and negative emotions, as both influence the thought process.

It may seem simple, but a good question to ask yourself before making a big decision is “Are my emotions currently influencing me?”. This will allow you to take a step back from the situation and give you a chance to frame it in a more rational manner.

If you’re in a highly emotional state, delay a decision until you’re able to approach it with a clear mind.

Smarter Does Not Always Mean Wiser

Believe it or not, knowledge can also create biases that negatively impact our decisions. Studies show that the more someone becomes an expert in a field, the more they can succumb to an ‘Expert bias’.

Success is a simple formula:

Success = talent + luck

As people gain success they often misattribute their success to talent, and underestimate the amount of luck that was involved. They begin to hedge bets on the ideas and opinions that brought them success, which can lead to a fixed mindset.

People with a fixed mindset rely heavily on their own judgment, become less willing to listen to the opinions of others, and are unwilling to admit when they are wrong. This leads to poor decisions, and success erodes.

Staying open-minded, and focusing on growth, is a key component to pragmatism. It’s okay to change your mind when presented with a compelling argument against your current stance. In fact, seeking out conflicting opinions is a way to reduce the chances of cognitive bias impacting the decision.

Smart people constantly revise their understandings of a matter. They reconsider problems they thought they had solved. They are open to new points of view, new information, and challenges to their own ways of thinking. — Jeff Bezos

Changing opinions should be exciting, as it shows that you have grown.

Planning and Analyzing Risk

A key component of pragmatism is analyzing risk when setting goals, creating plans, or making decisions. Bringing potential risk to the surface allows it to be planned for, which drastically increases the chances of success.

There are frameworks that help with determining and reducing risk, including scenario planning, thought experiments, and premortems.

Scenario Planning and Thought Experiments

Work environments are uncertain, and the future can’t be predicted. Scenario planning and thought experiments focus on defining multiple possible futures, creating a plan for that future, and then running through the possible consequences of implementing that plan.

In preparing for battle, I always found that plans are useless but planning is indispensable — Dwight D Eisenhower

It’s important to look beyond first-order consequences into second, and even third-order consequences. First-order consequences are the direct impacts your decisions make. Second-order consequences are the impacts that result from the first-order consequences, and so forth. Start with looking at the consequences at a micro-level and expand to a macro-level.

Premortems

Premortems are a fun tool for bringing worst-case scenario to the surface. They give each member of the team an opportunity to speak up about any potential risk, and then work backwards to determine how to prevent the risk from happening.

The goal of a premortem is not only to define what went wrong, but how it could go wrong. The ‘what’ defines the consequences of risk, the ‘how’ defines the risk itself.

Regardless of the chosen framework, keep in mind that people have a tenancy to act irrationally. We can take into account common irrational behavior and biases that our team or competition may fall victim to, and build it into our risk models.

Take Calculated Risks

Goals that we set, and the decisions that we make, have a varying level of risk. Perhaps not surprisingly, studies show that people are irrational with risk. We tend to take more risk when the odds are against us, and less risk when the odds are in our favor. This results in choosing goals with a low chance of success.

When there is a small amount of risk, people fixate on the potential negative outcomes, making the situation scary. However, when there is a large amount of risk, people fixate on the potential positive outcomes. This is loss aversion at work. People fear loss more than we value gain. Fear is one of the most powerful emotions, and is very hard to ignore, which leads to irrational behavior.

This can be seen daily through the stock market. The rational choice for most investors is quite simple: invest in an index fund, and be patient. The unfortunate reality is that most people are lured into the emotional side of investing. We buy stocks when they’re high thinking that we can ride the momentum up, only to sell them a short while later when they dip.

“The stock market is a device for transferring money from the impatient to the patient.” — Warren Buffett

When it comes to making decisions, it is important to understand that all decisions have a risk, and sometimes you will lose. Don’t let fear stop a calculated risk, as they are needed to drive innovation. By focusing on taking calculated risks, you’ll be right far more often than not.

If the decision doesn’t work out, view it as a learning opportunity. Failure gives us a chance to review what went wrong, meaning the next time a similar risk is taken, the chance for a positive outcome improves.

Big gambles very rarely pay off, that’s why when they do it becomes a huge news story. It’s the small, calculated gambles that drive day to day innovation. Unfortunately, it is the small risks that we are most afraid of.

If you happen to make a big gamble and win, the hard truth is that it likely had a lot to do with luck. Big gambles have a small percentage of winning, and over time the outcomes to decisions will regress to the mean. If a big gamble pays off this time, chances are high that it will not the next.

The Ideal Pragmatist

Should intuition be ignored? Absolutely not.

What is important is the ability to recognize when intuition is being used to make a decision. For small decisions where the consequences are low, making a judgment call is fine. For important scenarios, ones that require high-quality decisions, relying on intuition is not enough.

When it comes to important business efforts — such as goal setting, planning, risk-taking, and important decision making — taking a pragmatic approach will improve your chance of success.

Thanks for reading!

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