Prediction disability: Nassim quotes a famous baseball coach Yogi Berra in The Black Swan, “It is tough to make predictions, especially about the future”. Black swan wisdom says that we can’t predict a black swan especially in Extremistan where a single event in future can dwarf all other events cumulatively occurred so far. However, prediction is deeply institutionalized in our world and we routinely fill probability of events in the risk plan templates. If we apply the traditional risk plan template of a maintenance project to innovation management, it becomes easier to predict the future of the innovation. If Marissa Mayer had applied risk plan template to Paul Buchheit’s idea of AdSense, perhaps Google wouldn’t be where it is today (see the AdSense story). So if prediction of success is not the way to go in evaluating ideas, what do we do?
How to evaluate ideas? Here is an approach which does not require either the innovator or review committee to predict the future. Every idea comes with a set of assumptions why it makes sense (about needs, technology, production capability, profitability). While one can’t predict probability of each assumption turning real, one can estimate (a) cost of an experiment that can validate or clarify each assumption and (b) implication of an assumption turning true or false. For example, in case of Apollo 13, Ken was in a position to tell the cost of implementing his idea and the impact of success was saving lives. Similarly, cost of prototyping the AdSense technology was very low (Paul did it overnight) and implication of the acceptance of this idea was a huge upside. We can plot these ideas with costs on the x-axis and impact on the y-axis. Then we can decide to fund all the ideas in quadrant D and selected ones in quadrant A & C.