Control

The illusion of control, a concept first identified by researchers Jenkins and Ward in 1965, serves as a powerful metaphor for a common pitfall in risk management that is particularly relevant in the context of Venture Clienting. This illusion, the tendency to overestimate our ability to control or influence outcomes over which we have no real power, can lead to significant misjudgments in decision-making.

In business, this illusion often manifests itself when leaders inaccurately predict their ability to control market forces, technological developments, or consumer behavior. This misperception is especially prevalent in (corporate) venture capital, where the allure of cutting-edge innovation can obscure the inherent uncertainties and volatility associated with startups and emerging technologies.

Jenkins and Ward's experiments, which form the basis of this concept, offer a clear illustration of this illusion. Their setup was simple: participants were presented with two switches and a light bulb that could be turned on or off. The experimenters controlled the correlation between the switches and the light bulb's behavior. Interestingly, even in scenarios where the light bulb's state changed randomly, with no connection to the switches, participants believed their actions (flipping the switches) influenced the light bulb. This belief persisted despite the lack of any actual control over the light bulb's state, reflecting a fundamental misperception of their influence.

This experiment parallels how companies can misjudge their impact on complex and often unpredictable market dynamics. A striking example from the business world is the dot-com bubble of the late 1990s. During this period, many companies, buoyed by digital euphoria, operated under the illusion that they could bypass traditional business metrics and sound risk management principles, believing that the rules of the old economy no longer applied. The bursting of the bubble was a stark reminder of the unyielding nature of market forces and the dangers of overestimating one's control.

If you have read about Alexander Solzhenitsyn, Victor Frankl, and Primo Levi, their stories of resilience amidst extreme adversity will not surprise you. In the harsh environments they endured, Solzhenitsyn, Frankl, and Levi each learned to identify and focus on the few elements of their situation that they could influence, even if minimal. This perspective of discerning what can and cannot be controlled under extreme circumstances is incredibly relevant to the world of Venture Clienting.

In essence, acknowledging the Illusion of Control is not about resignation to fate but about a strategic realignment of focus. It entails concentrating on areas where influence is real and measurable, and developing resilience and flexibility to adapt to those aspects beyond one's control. This balanced approach is critical for effective risk management in Venture Clienting, ensuring that you are better prepared to navigate the complexities and uncertainties of the modern business landscape.

In practice, this means that you should adopt a balanced approach. While it's important to be proactive and forward-thinking, it's equally vital to recognize the limits of our control and prepare for a range of outcomes.