Mastering Probabilistic Thinking: A Key to Success in Entrepreneurship

What exactly is “probabilistic thinking”? First of all, we need to realize that one of the important factors affecting the success of entrepreneurship is probability.

From the first day of starting a business, founders will face countless decisions every day or even every hour, and most of the decisions are “incomplete information decisions.”

If we are sure that we can make 5 yuan by choosing A, but we can’t make any money by choosing B, we will definitely choose A. This kind of decision-making with all the information in hand is a “complete information decision-making”. The reality is often that there is no accurate data on how much money you will earn by choosing A and B; it is also unclear whether there are other options besides A and B.

Faced with this kind of “incomplete information decision-making”, no matter how smart and hard you work, you may face failure. This is the “probability problem” caused by incomplete information. Therefore, we must understand probability, acknowledge probability, and then find some ways to hedge against probability and reduce the impact of probability on us.

So how to hedge the probability? First, find something that has a high probability of success.

In terms of importance, it can be divided into several levels: thousands, hundreds, tens, and units. Time is the first factor in hedging probability, and I rank its importance in the thousands. Those who adapt to the times can gain huge probability advantages and achieve success.

For example, data shows that wireless transactions in e-commerce account for more than 90%. In other words, in this era, more than 90% of online shoppers place orders through mobile phones.

This means that times have changed. The original method of displaying product information on a PC (personal computer) is no longer feasible. Now product information must be explained clearly on a screen of about 5 inches in order to enjoy the probability advantages brought by the times.

At number one hundred is strategy. In the past, Chinese companies had a very important strategy called follow-up strategy. The Germans are doing better than us in the manufacturing industry, the Japanese are doing better than us in the service industry, and the Americans are doing better than us in the high-tech industry. They are leading the way, and we are following behind. When we reach an intersection, some people turn left and some turn right. If everyone who turns right dies, then we only need to learn from those who turned left. This is the following strategy. If you choose to turn to the right, it will be useless no matter how smart, hardworking, or good at management you are.

Follow-up strategy is equivalent to others helping us eliminate a certain probability of failure. Therefore, strategies are also specifically used to hedge probabilities.

The tenth position is governance. Governance refers to structures, such as equity systems, partnership systems, etc.

There is a saying that “If the structure is wrong, nothing is right.” For example, if two people start a business together and each holds 50% of the shares, it will most likely be difficult for the company to develop. Because there are a lot of decisions to be made in the future, and they hold the same shares, which means that no one will listen to the other. Without core leadership, everyone will quarrel and the company will die in the initial stage.

If you make half a mistake in the thousands, hundreds, or tens, your subsequent efforts will seem insignificant.

In the single position is management. Management refers to many matters such as whether you have found the right people to do the work, whether you have sorted out the process, and whether you have designed an incentive mechanism for employees. Management is very important. If it is not managed well, the probability of success will also be reduced.

“Probabilistic thinking” requires you to calmly admit that even if you do everything right, the probability of success is not high. Taking today’s Internet industry as an example, the success rate is no more than 5%. Then you should think about ways to increase the probability.

In the thousands place, by sensing the pulse of the times, we can improve by 12%; in the hundreds place, by choosing the right strategy, we can increase it by 5%; in the tens place, by designing a reasonable organizational structure, we can increase it by 2%; and finally, by doing a good job in the units position Management, improve 1%. In this way, a total increase of 20%, plus the original 5%, your probability of success becomes 25%.

This is probabilistic thinking, and it is the underlying thinking that entrepreneurs in this era should adhere to. Only by understanding and using probabilistic thinking to increase good luck and avoid pitfalls and traps can entrepreneurs go further on the road to success.

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