On the morning after the most extraordinary day in British political history, the clamour in every publicly traded market is for certainty… about the timing of the triggering of Article 50, about the new leadership of the Conservative Party (and the Labour Party), about the terms of the agreement with the EU, about the position of the rest of the UK (in particular Scotland and Northern Ireland) etc!
As an aside, I always get nervous when some collective / invisible force is stated as the driver behind a supposed need…the market, the government, the EU, ‘they’, Investors. Whenever I’ve looked to find ‘them’, they’ve usually magically disappeared to be replaced by rational, smart individuals with relatively clear needs and aspirations.
The market demands certainty. It has become the mantra of our times. Whether it’s in the context of political events, interest rates or monetary policy (where the wording of the blandest of statements from senior Treasury officials is scrutinised for any indication of future direction). Even in the context of M&A, the pressure on leaders to pronounce with absolute certainty what the future holds in terms of financial performance, organisational structure, market positioning, branding, or synergies is increasingly being treated as a proxy for their competence. And this, at a time when the access to data is extremely limited (particularly in listed transactions), and the completion date still many months away.
So what are the consequences of this:
- Poorly / hastily researched data which has, at its core, some suspect assumptions. The output may work at a 30,000 foot level but rapidly falls apart when held up against individuals’ experience. It loses credibility quickly but also damages that of those who stand by it.
- Short term timeframes…where more certainty exists but critically no clarity about market direction. Quarterly reporting is perhaps a classic example of this.
- Within corporates, the need for business cases with regard to innovation and transformation which contain financials that are ‘rock solid’…even if the forecasting ability of the sponsor group has been proven to be poor in the past.
And all of that is understandable. The other end of the spectrum, uncertainty / ambiguity, is a deeply challenging place for us humans…stressful, worrying, all pervasive and challenging to the comfort of regular productive activities.
However…let’s consider the benefits of ambiguity for a moment. What happens when we let our minds live with uncertainty for a while.
Hofstede’s research on the subject of the Uncertainty Avoidance Index demonstrates that there is a strong national cultural dimension to this concept. An interesting piece of research I’ve read recently (Ambiguity Attitude, R&D Investments and Economic Growth by Guido Cozzi and Paolo E. Giordani…the link is here) suggests a good correlation between those countries that have a higher tolerance of uncertainty and R&D intensity (ie spend and focus)…and in turn, economic performance. The chart below shows the trend quite well.
Beyond the theoretical however, I suspect many of us have had that moment of inspiration, having chewed on a seemingly impossible challenge for a while. In the next few days and months of change, let’s give ourselves the room for deep thought and consideration and allow the benefits of ambiguity to percolate through our decision making processes.