Better Decision-Making and the Problem with SWOT – With Dr. Gleb Tsipursky
Despite the lightning-fast pace of our world, it requires time for new knowledge to seep into our collective conscious. Discoveries about rational decision-making are a perfect example. Research on this topic often involves cognitive biases, which were first identified in the 1970s. Yet research only opens the door of knowledge wide enough to pique general interest. That’s where applied science — typically from second-generation researchers like Dr. Gleb Tsipursky — comes into play.
Dr. Tsipursky (a.k.a. Dr. Gleb) is CEO of the future-proofing consultancy Disaster Avoidance Experts. He has also authored seven books, including the 2019 global best-seller, Never Go With Your Gut: How Pioneering Leaders Make the Best Decisions and Avoid Business Disasters.
I recently asked Dr. Gleb to bring his program How Outstanding Leaders Avoid Decisions Leading to People Disasters to several of the Vistage groups I work with. He dove right into cognitive biases and offered proven techniques for mitigating them to clear the way for making rational decisions.
Among the areas we dug into during our eye-opening sessions were some of the common problems with strategic planning and issues surrounding the overused SWOT analysis. I felt this was a topic worthy of a deeper dive. So, the week after our sessions, I pulled up a virtual chair for an online chat with Dr. Gleb. To hear our full discussion, watch our interview now — or scroll down to read the transcript.
Chad Harvey (00:00): Hey, everybody. Chad Harvey here with Dr. Gleb Tsipursky. May I call you Dr. Gleb, by the way?
Dr. Gleb Tsipursky (00:07): You may very well. You may definitely call me Dr. Gleb.
Chad Harvey (00:10): Very good. All right. Dr. Gleb is a world-renowned thought leader in future-proofing, decision-making, and cognitive bias risk management in the future of work. He’s the CEO of the Future-Proofing Consultancy Disaster Avoidance Experts and the bestselling author of seven books, including his 2019 bestseller, Never Go With Your Gut. I was very fortunate to have the opportunity to do some work with Dr. Gleb last week with a few Vistage groups that I chair. His program with them was how outstanding leaders avoid decisions leading to people disasters.
Chad Harvey (00:44): But today, I want to focus on a little different track here, something that we got into last week, in terms of strategic planning, and I’m very interested to ask you what is a strategic planning technique that most people think works and they’d be very surprised to learn it actually does not.
Dr. Gleb Tsipursky (01:01): Yeah, there’s a technique that provides a great deal of comfort to people, but it provides a false sense of comfort and that’s the SWOT analysis where people examine the strengths, weaknesses, opportunities, and threats for their company or their business unit, whatever it is. Now, the problem with the SWOT analysis is when people do it, they feel good about it. They feel comfortable. They feel that it’s the right thing, but they have two great [inaudible 00:01:30] expectation of the problem-solving consequences of the SWOT analysis.
Dr. Gleb Tsipursky (01:37): They greatly exaggerate their strengths. They underestimate weaknesses. They list way too many opportunities that don’t pan out, and they underestimate the threats. And that’s because of these cognitive biases that you kindly mentioned in your introduction, the dangerous judgment errors we make because of how our mind is wired. There’s one that’s really big for the SWOT analysis called the planning fallacy, where we greatly underestimate the risks and threats and problems that are coming down the pipeline. I mean, who anticipated the pandemic, right? Who anticipated the inflation, the supply chains, right? If you anticipated those, you’re in a good spot right now. Hopefully, you’ve hedged your bets. So, I’d like to see your stock portfolio.
Dr. Gleb Tsipursky (02:19): But that is an example where people don’t integrate these cognitive biases when they do the SWOT analysis, and there are over 100 of these cognitive biases. And so when you’re doing the SWOT analysis and you’re not accounting for these cognitive biases, you’re putting yourself into a world of hurt, and that’s why you see a lot of strategic plans that start up with great and people are excited about them. But within six months, they deviate away from reality and they end up on the bookshelf, in the bottom drawer for the next five years of the strategic plan. So that’s a big problem with the SWOT analysis.
Chad Harvey (02:56): It almost sounds from our conversation here like SWOT analysis was tailor made to interface with people’s biases, which is why everybody is running out and using it all the time.
Dr. Gleb Tsipursky (03:06): Yeah, so you have a lot of people who would tell you that you should go with their gut and follow your intuitions and trust your heart. People like, I don’t know, Tony Robbins, who would tell you be primal, be savage, kind of go with your intuitions. Well, the problem with your intuitions is they’re actually created, evolved for the savannah environment. Ancestral savannah, not the modern world.
Dr. Gleb Tsipursky (03:28): So what you really want to do is be civilized, not be primal, not be savage, but it doesn’t feel good to be civilized. It does not feel right. It does not feel intuitive. So people get paid, like Tony Robbins, to tell you to do what it already feels like the right thing to do. And business leaders tend to do what feels right to them, and that’s a big problem because they go with SWOT analysis because it feels right to them. It feels comfortable to them. It feels good to them, but it doesn’t result in a good outcome. And so that is a bad, bad problem for business leaders, so you’re exactly hitting the nail on the head, Chad.
Chad Harvey (04:02): You’re reminding me of a coaching engagement I got called into about five years ago with the second generation owner of a fairly large regional company. And he had been making… I don’t want to say he was making errors. He was having problem after problem. And by our third coaching session, we’d managed to shine a light on a couple different aspects of what was going on. And I distinctly remember him turning to me in that session saying, “I made a lot of decisions with my gut,” and after our coaching time together, he said, “I think that I just need to run 180 degrees opposite from what my gut is telling me.” I said, “Well, I don’t know if we want to get that far down that road.”
Dr. Gleb Tsipursky (04:40): [inaudible 00:04:40].
Chad Harvey (04:40): But the fact that you’re acknowledging the inherent problems with shooting from the hip and making those snap judgment, gut type decisions, it goes right to what you’re talking about here, Gleb.
Dr. Gleb Tsipursky (04:51): It does, and there’s a reason about half of all new businesses fail within the first five years and three-quarters fail within the first 15 years. It’s because leaders tend to go with their gut and follow their intuitions and trust their heart. Now, what happens eventually for the quarter of businesses that survive is that leaders often learn to not trust their intuition, that their intuition often leads them in the wrong direction.
Dr. Gleb Tsipursky (05:14): I think we got into some of that in the Vistage presentations, that leaders who had a lot of experience were saying that, “Well, when I started, I was making a lot of gut mistakes, and over time, I learned that my gut was often not going to lead me in the right direction, and I learned that I have to do a little something a little bit different.” And so that’s kind of the civilized behaviors that people learn.
Dr. Gleb Tsipursky (05:37): Now, unfortunately, you don’t learn that about the SWOT because how often do you do the SWOT analysis, right? You do the SWOT analysis, what, for a five-year strategic plan. So you do it… let’s say you started a business 20 years ago. So you did it five to four times. That’s how often you did it, right? You don’t have experience with it. It’s not something you learned over time, doesn’t get you in the right direction.
Dr. Gleb Tsipursky (05:59): So people do it. They think it gets them in the right direction, but it actually doesn’t because they don’t have nearly as much experience with this issue as with many other issues that they learned that their gut is often going to lead them in the wrong direction. And many people and I think we got into that in some of the Vistage groups, they never learned that their gut is not to be trusted.
Dr. Gleb Tsipursky (06:17): I was working with a large restaurant chain, national restaurant chain, and a big problem that the leader… and this was founded, I want to say, in 1985, and so something around there, mid-1980s. And the leadership of the restaurant chain still keeps making the error that whenever they are thinking about a project, they get over-excited, and they never ask whether the project will fail. That’s never a question that’s on the table. People get excited, and they’re interested [inaudible 00:06:49] enthusiastic.
Dr. Gleb Tsipursky (06:50): In fact, a big reason for their hesitation to start working with me was me insisting that they ask the question, “What if this initiative fails? What if this restaurant opening in Topeka is not going to go the way you want,” right? That is a fundamental question that you really need to ask. And that is not something that they were asking, and they were running into a lot of trouble and opening a lot of restaurants that turned out to be unprofitable or sucking resources and barely profitable over time, and that’s even a worst choice because not cutting their losses in a timely manner. So this is a big problem that businesses function with all the time.
Chad Harvey (07:32): You just highlighted something that’s near and dear to my heart, which is the decisions that folks make are based on our past experiences. And if we’ve experienced success even a slight majority of the time or perhaps, if we fool ourselves and we think it’s more than it actually is, we base our decisions based on that “success.” One of the most difficult lessons, I think, for people to learn is just because you succeeded doesn’t mean you made the right decision, right? We succeed all the time when we should have failed. And we don’t often ask ourselves, like you’re asking here, that form of that question, but we don’t often ask ourselves, “What should we have done,” and did we succeed despite ourselves,” right?
Dr. Gleb Tsipursky (08:15): You’re absolutely right. And we can look at this purely mathematically. So let’s take a look at stock traders, right? Stock advisors. Let’s say that there are 10,000 stock advisors, and half of them say, “Invest in Stock A” and half of them say, “Invest in Stock B.” Then over time, Stock A goes up, Stock B goes down. Let’s just use that simple math [inaudible 00:08:35]. Then, you have 5,000 who, next year, are saying, “We won. Stock B went up. Stock A went down,” and then they say, “Keep investing in Stock B or don’t or invest in different stocks.” So then half are right again. Half are right or half a wrong next year. So that’s 2,500 who are right in year three. That’s 1,250 who are right in year four and so on. And so you get into those similar numbers.
Dr. Gleb Tsipursky (08:59): And in [inaudible 00:09:00] 10 years down the road, you’ll find that there are 100 stock advisors who have been right 10 years out of the last 10 years, out of the 1,000 that started. And they say, “We are brilliant. We have been right for the past 10 years,” but it’s just due to dumb luck. It’s completely dumb luck. It’s complete randomness. And year 11 is not going to be…the fact that they were right the past 10 years is not going to mean that they’re going to be right in year 11.
Dr. Gleb Tsipursky (09:28): So you have to be very careful about whose stock advice you trust. You also have to be very careful about whether you were right based on luck or based on skill, and you have to be quite careful to examine both your successes and your failures. The biggest problem I see in this area is business leaders not examining their failures, just going on. They don’t want to think about it. They say, “Okay, I failed, whatever. I’m just going to go on, and I’m not going to think about why I failed” because it feels uncomfortable. It feels bad. It feels counterintuitive to examine your failures, to do a postmortem. It doesn’t feel right. And business leaders just want to focus on their successes.
Dr. Gleb Tsipursky (10:04): But if you really focus on your failures, and this is something that I’m trying to get the restaurant chain to really focus on, why did some of the restaurants they opened fail, so that they can learn from those examples as opposed to just shutting their eyes and moving forward and trying again. Then, they can be in a much better spot to spot what areas and what opportunities, what projects will be successful.
Chad Harvey (10:27): The only thing that concerns me about everything you just said, Dr. Gleb, is I’m probably going to get hate mail from the financial advising community now, but that’s all right.
Chad Harvey (10:37): One last question here to round out our conversation, focusing on failures and talking about that. Do you find that there’s an understanding now among the leaders that you’re working with that the pace of change is accelerating? We’ve coined the phrase, “the exponential age that we live in right now.” Do you find that there’s an understanding and acknowledgement that the pace of change is accelerating, and so the failures, especially the more recent runs, are extremely valid with respect to future decision-making or are folks still trying to stick their head in the sand and do what they’ve always done, hoping for success again?
Dr. Gleb Tsipursky (11:14): People do recognize that change is accelerating, especially with the pandemic. That’s definitely brought to people’s awareness that the world truly is global, that it’s not simply United States. I mean, even, let’s say 2008, 2009 fiscal crisis, right? That was still US-centered. Let’s be honest. And so people did not… people thought that, “Well, it’ll be US [inaudible 00:11:34],” but this pandemic was coming from China and this Ukraine-Russia war is coming from that part of the world, right, and it’s very much impacting us.
Dr. Gleb Tsipursky (11:43): And so people are realizing that it’s not only the US. They can’t have simply look at the US and think, “Well, if I look at the US, then I’ll have a grasp of what kind of change is going on.” No, it has to be global. And so the pace of change is accelerating partially because of how much more intertwined we’re becoming with the rest of the globe and leaders are increasingly recognizing this.
Dr. Gleb Tsipursky (12:04): I’m trying to really encourage this mentality that this is global and you really can’t see everything that’s going on. That’s why you really want to be focusing on well, what is this planning fallacy, right? How can your plans go wrong? And the way to address that is to have some slack in the plans, to have a cash reserve, not to simply invest, invest, invest in things that… think that things are going to go well. That is a big, big problem because you’ll often have to change your projects and once you sunk some money and it’s hard to cut your costs.
Dr. Gleb Tsipursky (12:39): And so this is why you should often not start projects. You should have a cash reserve. And only when you see that things are going well, then you should invest some money, but still kept a cash reserve at all times.
Chad Harvey (12:52): Great tips. So to round out today, number one, don’t use SWOT, throw it away. Number two, examine your failures. And number three with planning, if I heard you correctly, make sure you establish reserve and you’ve got some elasticity in there so that you can adjust on the fly. Is that fair?
Dr. Gleb Tsipursky (13:08): Absolutely. Great. Three great takeaways, Chad.
Chad Harvey (13:11): All right. Very good. Dr. Gleb, it’s been an absolute pleasure. I’ve been chatting with Dr. Gleb Tsipursky, the founder and owner of Disaster Avoidance Experts, the author of too many articles and books for me to list here, but we will drop a link at the end of this video. Gleb, any final words of wisdom for our audience here today, as you play us out?
Dr. Gleb Tsipursky (13:31): Well, as my book title suggests, you really should not trust your gut. So never go with your gut. You might be right or it might be wrong in any instance, but it will always feel right. It will always feel intuitive. And often, just like the coaching client you had, Chad, you should not go with what feels intuitive. You should be counterintuitive. And so you have to learn that. This is the civilized behavior where you go against your primary natural impulses, and so you want to think about being civilized and not going with your gut, despite your gut telling you that something is right.
Chad Harvey (14:05): I love it. If I could fit that on a bumper sticker, I would, but maybe I’ll just boil it down to “be civilized.”
Dr. Gleb Tsipursky (14:10): There you go.
Chad Harvey (14:12): Dr. Gleb, it’s been a pleasure. Thank you.
Dr. Gleb Tsipursky (14:14): Thank you very much, Chad.