The Wizard of Oz Decision Strategy

By Adam Rifkin


Every day as entrepreneurs we are called upon to make decisions. Many times we face pretty straightforward line-items that do not call for a tremendous amount of deep thought or self-reflection. For instance, should I offer unlimited caffeinated beverages to my programmers? HELL YEAH! Bam, you're done and can move on to the next thing.

But most of the important decisions facing entrepreneurs require a rare combination of logic, intuition, and emotion. For example, any startup founder choosing a co-founder on the basis of a resume and a couple of coffee dates is asking for the disaster that will surely befall them. And yet, such critical decisions must be made relatively quickly in business, and cannot be passed upstairs or put off indefinitely. A framework for thinking through these important multifaceted choices must be efficient, offer a course of action, and instill more confidence than simply flipping a coin or just choosing anything.

The framework I have employed for years I call the Wizard of Oz Decision Strategy.

Ask IN THIS ORDER the following questions (with apologies to fans of the movie musical, I mix up the order of the "If I Only Had a Brain/Heart/Nerve" song):

1. What do the facts say?
2. Do I have the courage for this?
3. What are my emotions telling me?

 

 

The reason this order is important is that we must face the facts and then face our fears before we can truly understand (and listen to) what our emotions are telling us. Paraphrasing Ben Horowitz, the hardest part of business is managing our emotions; information and courage are management tools. First up is the parable of the Scarecrow.

 

1. BRAIN: Do you have the necessary data to make an informed decision? If not, why not and how can you gather data quickly? Specifically, is this the best trade-off between quantifiable factors -- including opportunity costs -- that you can make at this time?

We begin here because, in many ways, this seems like the easiest of the three to explain and execute -- especially for the analytic, data-driven people who drive business today.

However, it can be surprisingly tricky when you ask the questions precisely. An illustrative example is financing a startup. Every entrepreneur's dream scenario is to get a lot of excellent term sheets, and then just pick the best one. However, that ignores the fact that you could always choose to keep looking for a better deal -- which of course runs the risk of losing all the good deals on the table -- or that terms are never exactly apples-to-apples scenarios, or that term sheets are nonbinding, or that analysis paralysis is often worse than not having enough options.

When you've made your pro-con lists and decision trees and still don't have a clear answer, it's time to move to the parable of the Cowardly Lion.

 

 

2. NERVE: What are you most afraid of in this decision? Why? Specifically, is it even the right thing to be afraid of?

I've often read that courage is not the absence of fear; it's the ability to listen to that fear and do the right thing in the circumstances anyway. As an entrepreneur, if you don't have any fear you're probably not listening to the right channels and processing them in the right way -- because entrepreneurship is inherently sort of terrifying!

Not to sound too new-agey, but in my experience less-experienced entrepreneurs tend to externalize their fears while being unaware of the far more common sources of failure. Concretely, this means that aspiring startup founders tend to spend far more time than necessary worrying about questions like "How can I protect myself from this VC/partner/employee/competitor stealing my ideas?" or "How do I pick a VC/cofounder who won't try to fire me?". Conversely they tend to spend far less time than they should asking themselves questions like "Do my cofounders get along with each other?" and "Am I really the best CEO for this company, and how long will that be true?".

One thing I regret about the current startup environment in Silicon Valley is that it seems to favor the falsely confident and punish the honestly self-assessing. But if you pass this harder test, you're ready for the parable of the Tin Man.

 

3. HEART: Does this decision make you feel alive and most yourself, or anxious and burdened? What do you really want?

This is the real test for entrepreneurs but perhaps the hardest to describe to those who haven't been through the process. How do we listen to our hearts in business?

Technical people tend to discount our emotions and intuition as a legitimate channel for information that can be far more efficient than analysis. There is also increasing evidence that decisions simply CANNOT be made without emotion -- because without emotion, there can be no true preference. As a founder, your preferences and feelings are going to be the guiding light of your company for a surprisingly long time.

 

For example, it's not uncommon to hear about startups that sold when they seemed to be doing fine. In many such cases, a deeper examination of the situation would reveal something I call "founder fatigue": the founder realizes that he or she just doesn't really want to run this particular startup any more. Maybe the exciting part of creating the product is over and now it is just the stresses that come with success. Maybe being the final arbiter of all things is lonely and isolating. Whatever the reason, if the founder is done and the opportunity is there, it is often a good idea to sell the company.

The key is to give yourself permission to acknowledge your feelings and to act upon them. If you have a funny feeling about hiring that seemingly great executive, you get excited about a skunkworks project even though you should be working on something else, or you realize you can barely make yourself care about your company any more -- those are all important data points that you need to include in your decision making process.

The whole point of the Wizard of Oz Decision Strategy is to give due weight to all the major factors that influence your happiness and effectiveness as an entrepreneur. Although it might seem like a whimsical practice, I have found it very helpful to follow the yellow brick road every time I needed to make a critical decision in my business life.

 

People have asked me if I have novel techniques for building courage if they find themselves lacking. First, I recommend "How to Escape from Bad Decisions" by Adam Grant. That post thoughtfully explains what to do when we realize we've made a bad decision; once we master recovery, we learn not to fear bad decisions.

 

This post contains a powerful message. It's time this message went viral. Basil Venitis, venitis@gmail.com, http://themostsearched.blogspot.com, @Venitis