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The 2020s have been a tumultuous time, particularly for “geriatric millennials” like me, who grew up in a period of unprecedented peace and prosperity. The shocks of the Covid-19 pandemic, the war in Europe, the rise of an antagonistic China and social upheaval in the U.S. can seem at once surreal and psychologically overwhelming. Despite these challenges, many of us continue to carry on with business as usual, only to be caught off guard by further outlier events. So why do we continue to operate in this way, and what can be done about it? The answer lies in understanding and overcoming a pervasive thought process known as the “normalcy bias.”
Put simply, the term refers to a tendency to underestimate the likelihood of unexpected events, and so assume that things will continue as they have in the past. This heuristic can lead to serious errors in judgment, particularly when it comes to occurrences like pandemics, financial collapses or natural disasters.
One of the key dangers of the normalcy bias is that it can blind us to the possibility of such events. This can be particularly problematic when dealing with inherently complex and unpredictable systems like global politics, finance and technology. To illustrate this point, we need only consider the early days of Covid-19, when the idea of a global pandemic killing millions seemed like a conspiracy theorist’s fever dream.
Entrepreneurs and leaders of all stripes have a particular responsibility to be aware of normalcy bias and to guard against its potential pitfalls. They can begin by seeking diverse perspectives and opinions, which also means surrounding themselves with people who think differently than they do, and who are willing to challenge assumptions. By hearing a range of viewpoints, leaders can gain a more nuanced understanding of complex issues, and so reduce the risk of making hasty and ill-informed decisions.
Another way to guard against normalcy bias is to rely on data and objective analysis. While past experiences can be valuable sources of information, they can also be misleading. Focusing instead on internal company and external market research produces a more accurate and comprehensive understanding of factors driving just about any situation.
It’s also important for leaders to be willing to take calculated risks and to be prepared for the unexpected. While it’s impossible to predict the future with complete accuracy, taking steps to prepare for a range of possible outcomes is part of a leader’s mandate. This means being willing to invest in contingency planning — building resilience in organizations and developing strategies for responding to unforeseen events. For example, a business could invest in crisis management training or establish a dedicated risk management team to proactively identify and address potential threats.
While it may seem pessimistic to acknowledge the difficulties that lie ahead, it’s important to recognize the unprecedented risks we face. From the pandemic to the breakneck speed of AI development, the future is fraught with unpredictable and potentially destabilizing circumstances. And the tendency to think statically is not just an individual problem, but a systemic one: Scores of institutions and organizations are built on assumptions of stability and predictability. As a society, we need to be willing to build more resilient systems that can adapt to unexpected changes.
So, as leaders and entrepreneurs, it’s our responsibility to be proactive and prepared — to embrace the possibility of outlier events and plan for a range of scenarios. In doing so, we will lead organizations through uncertain times and emerge stronger and more resilient.