updated at 18:18 hrs
Lloyd Blankfein, Goldman’s current chief executive, loves to tell people that he spends “98 percent of my time thinking about 2 percent probabilities." ... It becomes the alpha priority especially in the area of managing risk in different situations.
In your competitive terrain, where do you think that 2% is located at ?
Do you think that you can capitalize on the 2% before your competition can?
- Source: Dao of Strategy
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Q: Why do you think the 2% is focused on?A: The 2% depicts whether the best case or the worst case scenario would happen at all.
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The Charlie Rose View
This past Tuesday night, I saw a superb Charlie Rose interview with Lloyd Blankfein. It revealed the strategic mindset of Mr. Blankfein in regards to how he strategizes from a top-bottom view..
This past Tuesday night, I saw a superb Charlie Rose interview with Lloyd Blankfein. It revealed the strategic mindset of Mr. Blankfein in regards to how he strategizes from a top-bottom view..
# From Businessinsider.com
Lloyd Blankfein
called himself "a highly functional paranoid" on Charlie Rose
last night.
"...when the
phone rings too late at night or too early in the morning I'm
going, "Oh, my God, what happened?"
He
continued: "...I spend about -- I have the unhappy life of
having to spend about 98 percent of my time worried about the 2
percent worst contingencies."
Here's a partial
transcript:
...
Lloyd Blankfein: Well,
I'm in the risk management business, so I don't take it for
granted that I can see behind -- I don't think I can see
four inches into the future. I'd say that most of my --
Charlie Rose: [laughs]
Yeah, but your firm has a reputation of being pretty good at
understanding the future and being able to make some
analysis as to about what risks to take.
Lloyd Blankfein: Well,
I'll confess to you that what I think we aspire to is
less foresee the future and more be a great
contingency planner because -- and sometimes you
contingency plan really well and you can respond very
fast to what's happening because you thought through all
the possibilities, you can get off the mark so quickly
it looks like you false started, it looks like you
anticipated the start when all you've really done was
listen so closely and knew what you were going to do
that you got off the mark quickly. I think it's hard
enough to -- I think it's hard enough to predict the
present. You know, think about it, perspective, it's
very hard to step out of your context and see what is
happening. I have views about the future but I will
tell you we're not in the – you wouldn't be a very good
risk manager if you let what you think was going to
happen have too great an influence on what you plan for
and protect it against. What we really do is we really
contingency plan, what might happen, what could happen.
Charlie Rose: What is
your core competence?
Lloyd Blankfein: Personally?
Charlie Rose: Yes.
Lloyd Blankfein: You
know, I think I am -- I think I have -- I am a highly
functional paranoid.
Charlie Rose:[laughs]
Lloyd Blankfein: And
if I'm -- if I've taken some -- if I've overstated
[unintelligible] highly functional part, I'm sure I'm a
paranoid.
Charlie Rose: [laughs]
Paranoid about what?
Lloyd Blankfein: Well,
I have to worry about stuff, you know, every -- listen, when
the phone rings too late at night or too early in the
morning I'm going, "Oh, my God, what happened?"
Charlie Rose: "I don't
want to answer it."
Lloyd Blankfein: "What
is somebody --" no, I have to answer. And, in fact, if it
stopped ringing I'd call everybody I knew at work to find
out what I missed.
Charlie Rose: [laughs]
Lloyd Blankfein: No,
I'm -- you know, I spend about -- I have the unhappy
life of having to spend about 98 percent of my time
worried about the 2 percent worst contingencies.
Perhaps that's why sometimes he prays for a
rainy weekend so he can just lie on the couch.
- Source: Businessinsider.com...
There are many ways to perform scenario modeling. I preferred to use the "Temple Victory" process.
“Before the contest, the successful strategists resolve in their operations room (temple) that they will be victorious, have determined that the majority of factors are in their favor. … If those who find that the majority of factors favor them, will be victorious. … When observing from this viewpoint, victory and defeat will be apparent.”
- Art of War 1 (Paraphrased from the Sawyer's translation)
Is it that simple?
The real challenge is knowing what factors are in play and the mathematics behind it. ...
The Li Quan Perspective
"Those who excel in warfare contend for advantage with others only after determining through temple calculations that they will be successful. Attacking the rebellious and embracing the distant, toppling the lost and solidifying the extant and uniting the weak and attacking the benighted are all manifestations. The interior and exterior becoming estranged, as in the case of the Shang and Chou armies, is what is referred to as having determined victory through temple calculations before engaging in combat. According to T'ai-yi Tun-chia assessment method, anything above sixty a majority, anything below sixty is a minority. ... In all these cases, victory and defeat are easily seen. "
- Li Quan's T'ai-pai Yin-ching
Based on the "completeness" of one's assessment, the successful strategists determined the strategic efficiency of their situation and decides whether it is possible to prevail in any specific contest.
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