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Thriving in a New and Uncertain Economy

Finally, some evidence that the economy is starting to show signs of life!

In its June 2009 Investment Outlook, Morgan Stanley Smith Barney reported that eight of their nine economic signposts for 2009, which represent a varied mix of indicators from consumer sentiment to U.S. leading economic indicators, have posted an upward trend since the beginning of the year.

Many economists and financial experts have been predicting the demise of the current economic recession. But this is the first solid evidence I have come across that suggests it’s time for business leaders to start poking their heads out of the trenches and look at what they need to do differently over the next 12 to 18 months. Of course, just today, different economists questioned any positive news and the markets dropped. Keep in mind that most economists have been wrong quite a bit of the time these last few years, so don’t completely jump out of that trench just yet!

What should leaders do to prepare for the turnaround?

  • Show me the data! Start by paying very close attention to the data in your industry. Look beyond the media hype and “feel good” projections from pseudo-experts and get as much real data as you can about what is happening in your market. Don’t ignore your gut, but don’t make any important decisions without the hard facts to support them.
  • Look beyond your immediate world. Collect information and monitor trends outside your own industry. We live in a highly connected world. The more data you have about the business world in general, the more informed decisions you can make about how to behave in your own market segment.
  • Question authority. Whose authority? Yours! Pause and think hard about the assumptions and beliefs you formed over the last year or two. Then ask, “Is it time to change any of these beliefs? If so, which ones and what do I need to change them to?”
  • Adjust your expectations. Over the last decade, we came to expect rapid growth as the norm. But the “new normal” may be slow and sustained growth rather than a hockey-stick recovery curve. Instead of waiting for some economic miracle to rescue your company, ask, “How can we make the best of what we’ve got? How can we re-focus some energy and resources on growth versus cost cutting?”
  • Get comfortable with uncertainty. If you’re hesitant to invest because you aren’t certain what the future holds, get over it! You may never be sure again, especially in the short-term. Don’t make rash, uninformed decisions. But if you wait for absolute certainty, you will never get out of first gear.


Of these suggestions, perhaps the most important going forward is to challenge your own thoughts, beliefs and assumptions (your thought bubbles). Check your thought process as you quickly climb what is known as the Ladder of Inference (originally developed by Chris Argyris). The world is changing faster than ever, and what you knew to be absolute fact a year or two ago may no longer be true.

Since our beliefs and assumptions are deeply held, challenging them is often easier said than done. I recommend a process called “climbing the ladder of inference.”

Developed by Chris Argyris, a Harvard professor and pioneer in the field of learning organizations, the ladder of inference is a mental construct that helps human beings interpret data, make decisions and take actions as we interact with the world. It consists of six rungs that form a mental pathway of increasing abstraction:

  • Rung 1 (bottom): We gather and mentally record observable data and experiences.
  • Rung 2: We select data from all that we have observed.
  • Rung 3: We add meanings to the data we select.
  • Rung 4: We make assumptions based on those added meanings.
  • Rung 5: We draw conclusions based on our assumptions.
  • Rung 6 (top): We adopt beliefs about the world and take actions based on those beliefs.

Here’s the problem. This process is so quick and largely unconscious that our self-generated thought bubbles almost never get tested. We instinctively feel that our bubbles represent the truth and that the truth is obvious. We also feel that our bubbles are based only on real data, which is not always the case. As a result, our untested thoughts, beliefs and assumptions often get in the way of achieving the results we want.

We can’t live without adding meaning to the data we gather or without drawing conclusions and having bubbles. But we can avoid falling victim to faulty conclusions by using the ladder of inference in three distinct ways.


In the Fifth Discipline Fieldbook (Senge, et al), they advocate first, become more aware of our own thinking and reasoning (reflection). Second, make our thinking and reasoning more visible to others (advocacy). Third, delve into the thinking and reasoning of others (inquiry).

What does this process look like?

Imagine you have proposed a marketing initiative that represents a new direction for your team. It sounds great in your own head, but you want to use the ladder of inference to check your reasoning.

Start by presenting your own thinking. State your assumptions and describe the data that led to them. Explain your assumptions, including who will be affected, how they will be affected and why, and give concrete examples of what you propose. For example:

  • Here’s what I think and here’s how I got to this point…
  • Based on the data I have, I assumed that…
  • I came to this conclusion because…

Next, publicly test your thinking by encouraging others to explore your model, assumptions and data. Reveal where you are least clear in your thought process and refrain from defensiveness when others provide feedback. Listen, stay open, and actively solicit different points of view. Public testing statements sound like:

  • What do you think about this data?
  • Do you have different data, assumptions or beliefs about what I am proposing?
  • Here’s one aspect where you might help me think it through.

Finally, ask others to make their own bubbles and thinking processes visible by walking them down the ladder of inference. Explain your reasons for inquiring and check your understanding of what others have said. Inquiry statements sound like:

  • Can you go through the data that led you to that conclusion?
  • Help me understand your thinking here.
  • I’m asking about your assumptions because….

In simpler times, leaders could get by with thinking they had all the answers. In today’s complex, interconnected world, the winners will be those who excel in two key areas — constantly challenging what they think they know about the world, and making informed decisions based on gathering as much real data as possible rather than solely relaying on their (probably outdated) bubbles.

For more thoughts, tools and techniques on how you can thrive in this new and uncertain economy, contact The Human Factor, Inc. today!

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