(Toughts in progress - I plan to turn this into a longer post at a later point)
A couple of days ago I was biking home listening to a podcast. As the guest was going through his vision of the future I couldn’t stop being aware that I wasn’t able to believe. It was not that I didn’t agree with him - after all, it is all pure speculation - just that I simply couldn’t see that vision materialising.
As I woke up, a small debate had started around my tweet. My friend Stefano commented that “not being able to believe” makes it hard to be an investor. Malcolm Ocean chipped in with a different view. I agree with him. I don’t consider believing a necessary condition for action.
My point of departure is that of a sceptic. Maybe not always, maybe not in all fields, but I definitely find myself often in situations where I am the sceptic in the room. And yet it would be difficult to argue that I am risk averse, hesitant, indecisive, or that I don’t follow dreams, that I don’t get excited about wild projects.
So, apparently, I am able to reconcile non-believing and acting. But if not a belief, something else must be there to motivate my actions, to give me energy. Actually, I am quite prone to get excited, and if I think about it, I could even be accused of being gullible, at least at first impression. In fact, I am actually a sucker for narratives.
What makes a narrative different than a belief? A narrative is a logical/plausible argumentation of a hypothetical future 1. You can believe in a narrative but I distinguish a narrative from a belief by the fact that a belief is more intuitive - instinctive even - while a narrative requires at least the appearance of a logical argumentation.
I say “the appearance” because I am not claiming here that a narrative is necessarily superior from a “truthiness” point of view to a belief. Both can be right and both can be wrong. But a narrative has a superior argumentative content. A narrative will include a concatenation of assumptions which, individually, can be analysed as sub-narratives, until we find simple statements that can be evaluated and, eventually, confirmed or disproven. A belief has inferior argumentative power than a narrative and rests on statements like “that’s inevitable” or “is in the nature of things” and similar.
There are then situations where forming a narrative is not possible, but we can find nonetheless a reason to act. I can see two of these. The first one is hedging. Hedging happens where situations of low probability - true or perceived - can generate high costs or large missed gains. In these cases, the main motivation is regret minimization or loss avoidance. Hedging, though, is very passive in nature and doesn’t generate sufficient energy for prolonged action. There is simply not enough conviction in a hedging argument to motivate anything more than a one-off effort, for example placing a monetary bet or buying an insurance. Nobody builds a company as part of a hedging strategy2.
A second non-narrative, non-belief form of action is generated by “what-if” statements. This is essentially a matter of curiosity. What-ifs are what side projects are typically based on. Side projects lack belief and/or narrative (depending on which type of person you are) to become full-time projects but have stronger energy than mere hedging activities. Sometimes, side projects generate sufficient conviction - for example by confirming an assumption that can then become the backbone of a new narrative - to become full-time projects. In the interim, the previous full-time project - like a full-time job - moves from being the main narrative to being a pure hedging strategy. When this happens, there is simply too little energy to continue properly. These are the cases where people go to work and end up working on their side project all the time, until either they get caught - and likely fired - or they quit. Eventually, even the hedging is dropped or substituted for another less action-intensive hedging.
The investing side of what-if actions is optionality. Investors will at times make bets where there is no belief and no narrative if the upside of something realising its hypothetical potential is high enough to justify the bet and the effort - and risk taking - that goes into it. In the investor case, the difference between optionality and hedging is not that pronounced, but it is still a different thing. Optionality is about keeping a door open for future action. It is a bit like procrastinating until stronger conviction kicks in - like in the case of side projects - while hedging is mostly a one-off event to then move on.
It is often said that the ability to suspend disbelief is a key trait of entrepreneurs and investors, especially the most visionary ones. Suspending disbelief doesn’t necessarily mean believing. For non-believers, it all boils down to our degree of scepticism. St. Thomas had to touch before he could actually believe - he was an absolute sceptic, he could not suspend disbelief. Pascal found a logical trick to justify believing without believing - he was hedging. The scientific method allows us to proceed by series of guesses, as long as we are willing to test their validity by attempting to falsify them. The suspension of disbelief does not require the suspension of reason. A sceptic can also be brave.
1 It can also be an explanation/rationalisation of present or past events, but this is not so relevant for this discussion.
2 This is why most “cover your ass” corporate innovation/disruption initiatives fail - you basically hope them not to happen.