Published on: Wednesday, March 30, 2011

Uncertainty Breeds Success

Posted By: Robyn Greenspan
Filed Under: world business forum, robyn greenspan, leadership, innovation, hsm, steve levitt, uncertainties, freakonomics

Comments (4)

Did you hear the story of how seven million American children vanished overnight and the IRS employee who was behind it all?

At the 2010 HSM World Business Forum in NYC, where ExecuNet exclusively reported, Steve Levitt, author of Freakonomics and a professor in the University of Chicago's economics department, asked the delegates this question. He went on to tell the story of one IRS employee's idea to require taxpayers to report the Social Security numbers of children they claimed as dependents on their tax forms that not only outed a lot of tax cheats, but also added $20 billion into the United States Treasury.

"He didn�t get a raise. Didn't get a promotion. Didn't get a parade," Levitt said. "He had a great idea�but he got no rewards, either social or financial."

Sometimes, it seems, a single individual with no grand plan beyond making a process work better and more consistently can usher in such a profound change that it makes a huge financial impact. And sometimes, for some of those same innovators, the rewards that follow are all self-endowed.

As a tenured professor, Levitt is free to conduct research, publish and pursue academic questions. Academics, he added, are happy to admit they don�t know the answer to a question, but strive to learn how to figure it out.

In business, on the other hand, leaders have customers to satisfy, reports to file and any number of fires to put out. �I never hear anyone in business say they don�t know the answers to questions." Businesses, and business leaders, Levitt said, would be wise to utter some acknowledgement of their uncertainty, their lack of data, and their lack of answers at least once a day. "People won't run an experiment because it's an admission they don't know the answers to questions. If you don't work at changing that, you can never get better," Levitt said.

In today�s business environment, business leaders are faced with incredible uncertainties, a lack of data and a set of business conditions and competitive challenges that are opaque if anything. That�s why it's more important now than ever before to gain the clarity for decision making that only comes with intense research of complex business problems and the willingness to let the answers be as they may.

"For the firm that can create a culture of experimentation...I think there's tremendous opportunity in that," Levitt added.

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Robyn Greenspan's avatar Robyn Greenspan
Robyn Greenspan is the Editor-in-Chief at ExecuNet, where she is responsible for setting and driving the editorial content engagement strategy across the private business network's publications and expert-led programming. She is also a Huffington Post blogger. You can follow her on Twitter @RobynGreenspan

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Posted by Hans Ulrich van Holt
09/30 @ 04:14 PM

See the performance of the former incompetent top management of the GM automobil industry. If the board of directors would have questioned them selves and these incompetent loosers, they would have fired that type of CEO/COO several years earlier. Therefore the Levitt statement is very valid: �I never hear anyone in business say they don�t know the answers to questions."

Posted by Daver Lapka
09/30 @ 11:34 AM

With all due respect--I think you mean, "was true."

In yesterday's world where change wasn't at lightspeed there were certain business constants. The last several years the Congress has been debating current year tax laws into January of the following year when the payments are due anyway. So what might have been true all year long as a sound business reason could be negated and reversed after the fact by virtue of tax law changes. ie..discussions of removing the mortgage tax for individuals--but for businesses.

Yes--it'd be nice to know with certainty that a businesses actions would result in something, but corporations for all practical purposes are like people and the changes (necessarily limited in experiments) can no longer be controlled in reality.

Posted by Hans Ulrich van Holt
09/30 @ 10:57 AM

What levitt is saying is true.
BR
UvH

Posted by Daver Lapka
04/04 @ 11:50 AM

Sounds like a self-serving commercial to me. Mr. Levitt's books are very intrigueing and certainly prompt some well-deserved head scratching--but they also emphasize that what we think we know is limited by what correlations we apply to whatever result we experience. ie.. who knew Roe V Wade would lead to crime reduction in NYC. Most even-headed people who read that chapter still question the cause and effect though the logic is clear. So what would Mr Leavitt have businesses do--analysis paralysis, or an endless series of experiments prior to any bold actions?

What I read from the article is a concise explanation as to why academics make the worst beauracrats as the smart ones prefer pragmatism to action and the idealogues almost by definition make the facts fit the desired result anyway like the proponents of Global Warming blaming blizzards on global warming.