Introduction to Uncertainty Aversion
Announcer: You are listening to the Brainy Business podcast, where we dig into the psychology of why people buy and help you incorporate behavioral economics into your business, making it more brain friendly. Now, here’s your host, Melina Palmer.
Melina Palmer: Hello. Hello, everyone. My name is Melina Palmer and I want to welcome you to the Brainy Business Podcast. These days, it feels like uncertainty is everywhere, whether it’s AI and job security, changing algorithms and experiences, and sharing thought leadership on social media, not to mention all the instability around the world right now.
And I’m guessing, since you’re a human person, that you don’t like the way that uncertainty feels. It might impact other areas of your life and work and sleep and relationships, even when you don’t want it to. And I know it might not be logical. And while that may feel frustrating, the good thing to know is that it’s totally normal. We humans have an aversion to uncertainty and ambiguity, and it impacts the way we act, buy, show up at work, and so much more.
This concept is, of course, the focus of today’s refreshed episode, and while it originally aired back in December of 2022, I think we can all agree it probably feels more relevant now than ever, which is why I felt it was important to bring back today. As you listen today, I invite you to consider where you might be avoiding uncertainty or feeling anxious about ambiguity in a way that’s impacting other areas of your life in a negative way. Spotting them is the first step to stopping them really quickly.
Before we get into the episode, I want to be sure you know there are links in the show notes for my top related past episodes and books, ways to get in touch, and more. It’s all within the app you’re listening to and at thebrainybusiness.com/565.
Defining Ambiguity Aversion
Melina Palmer: So what is ambiguity aversion? This is also known as uncertainty aversion and is probably one of those concepts that’s pretty easy to grasp on the surface. For that reason, I’m not going to spend a ton of time on the research studies today. There are a few linked for you in the show notes, including the original research study from 1961 that really kicked off this line of thinking and some research on how this applies to doctors and how their preferences change when recommending treatment options as well as some other applied areas.
At the end of the day, the most important thing to know is that we don’t like the unknown, we don’t like uncertainty in our choices, and we prefer known risks over unknown risks. And also because our brains are lazy and rely on rules of thumb often, which will avoid making complex calculations and even some not-so-complex ones, which you heard about in Tuesday’s episode on numbers biases, which I affectionately called “Math is Hard.”
Even if the odds may be clearly really bad in the known space, we’re more likely to choose it than the unknown space just because that fear of the unknown is something we don’t like. And we tend to look at the worst possible scenario when it’s something that’s a little bit scary, again, that’s bringing in that loss aversion again. When it’s something that could be positive, though, we may let our optimism bias guide us and look at how things could be really good and maybe we will do something a little bit more risky.
Uncertainty in the Stock Market and Investing
Melina Palmer: Consider the stock market here. That can have unknown risks and so people can feel hesitant to put their money there even when the probabilities and rates of return are known. Especially now with all the news about crypto and the volatility of NFTs, I’m sure there are a lot of people who feel even less confident in the stock market and are more likely to avoid it because of the stories they’ve heard and the fear that they could lose everything.
There is, of course, some availability bias in there where the stories we’ve heard more often—those things that are on the news or in movies—impact how we feel about a particular situation. So if you’ve heard more stories about big fluctuations and maybe know people who lost a bunch of money when the dot-com bubble burst or at some other time in the market, it can impact your willingness to enter into the unknown of what might happen.
And that fluctuation, that fear, could keep you from investing in the stock market. You may opt to take a much lower return on a savings account. Or back in 2007, you may have felt like it was much safer, basically a guarantee, to have your money in real estate. But when that bubble burst and a sure thing went away, that can make any investing that isn’t under your mattress feel scary. Even though, you know, over time things tend to average out and really work out in a way that’s much more predictable than it may seem on the surface.
The Importance of Framing Information
Melina Palmer: This does bring up an important thing that we tend to ignore: even certainties aren’t certain. Nothing is known for sure. So hopefully you can use that to help you be a little more open to taking on unknown opportunities instead of immediately disregarding them for the status quo.
As with everything, when you present information, how you talk about it matters more than what you’re saying. And how it’s presented to you is an opportunity to consider: Is this everything that you should be thinking about? Is there more to this? Is there something else you can ask?
So when you’re presenting things, you can frame the information to highlight what is known to make it easier for someone to see the positive. If you dwell on all the things that aren’t yet known, all the ambiguity and uncertainty, people probably won’t like that, regardless of what the change is. If you really stress all the bad things and all this vagueness, it’s just going to make people feel nervous and make them want to turn away from whatever you’re presenting to them.
It may feel like you’re being honest and transparent and sharing all the research you’ve done and that you would want to know every little detail, but it’s more likely to backfire. So find the balance of doing the due diligence that is very important and giving people the facts and sharing information in the best way possible to help people feel good about their decision.
Change Communication at Work
Melina Palmer: So let’s jump in on those applied examples I promised. First, I want to discuss change communication. You know that humans have an affinity for the status quo and that they don’t like uncertainty and wondering about what might happen when a change is presented. And there are a lot of unknown elements in there, as there often are, so it shouldn’t be surprising that someone doubles down on their current experience, even if it’s objectively bad or risky or worse than what they would potentially get in the new scenario.
When you’re presenting a change at work, there are so many variables at play. And if you leave a lot of uncertainty and ambiguity—say you share too early or in an incomplete way—there’s a good chance that people will rebel against that unknown future state, even if it’s objectively better than where they are now.
Considering what people need to know, when, what questions they might have, what matters to them, and what will cause a strong aversion if it’s ambiguous in a way that could ruin their feelings toward everything that’s going to come after is important before you share anything.
The Burden of Sharing Information Too Early
Melina Palmer: Now, a real problem I see a lot is that the person who already has the information can suffer from a confirmation bias and focusing illusion problem where they feel a compulsion to share much, much sooner than they should. The closest thing I relate this to is feeling both guilty that you know something other people don’t and focusing on it. It feels like everyone knows and they’re going to judge you and be mad at you if you didn’t tell them when you knew the thing.
This stress, this worry about being rejected from the “herd,” can be really, really agonizing for people, especially if they’re not prepared for it. So the real problem that can occur—and something that’s unfathomably detrimental to change initiatives at work—is when someone is given information that is ambiguous and they feel the need to get their own brain relief by reducing their mental burden. They want someone to help fill that void and will find any possible way to justify telling someone else, or in some cases many someones, to kind of bury that uncertainty.
The problem is this often backfires as the urge to tell comes before there’s enough information where it would be valuable to tell. When you drop a “knowledge bomb” of possibility with no details, curiosity acts like an itch on the brain that we need to scratch. When there isn’t helpful information to fill the gap, it can turn into gossip, fear, and doomsday-style planning for the worst.
Strategic Questions for Communicating Change
Melina Palmer: As a manager or leader, it is critical to plan who gets to hear what and when. I encourage you to take a step back and consider: what is the best thing to do for the person you’re putting the burden of this information upon? Here are some questions you can ask yourself to help determine when to share:
- Why do I feel like I need to talk about this now?
- Is it to scratch my own brain itch of uncertainty?
- What’s the best case scenario? What’s the worst case scenario?
- What ambiguity exists that they might have questions about?
- How much about telling them is for me feeling better versus helping them to be prepared?
- What information are we missing that we should have before sharing?
Forcing yourself to take a step back and putting in some thoughtful “beneficial sludge” can be really helpful. Take the time to do the work. Really look for the opposites of what your brain is telling you and consider how your choices might change based on the framing.
The “No-Update Update” Strategy
Melina Palmer: The flip side of this is that you don’t want to wait too long to share anything. People can often sense that something is up, and if they don’t know what it is, water cooler conversation becomes nothing but gossip.
This is where the “no-update update” is really helpful. You owe it to your employees to relieve some of that stress periodically. This could be done by saying that at 3 PM every day you’re going to send an update. And note: 2:59 is not the same as 3:01. You always want to be posting earlier than you promised.
Even if you don’t have a definitive update, you can say: “Today we met about the laptops and made progress. We don’t have a final decision yet, but we are working on it. More to come in tomorrow’s update.” This shows people you are thinking about multiple things, they are on the horizon, and you have them covered. It diffuses pressure when things are scary on the other side of the decision.
Fighting Ambiguity in Customer Experience
Melina Palmer: Let’s look at the customer-facing side of this. We like to think that people want a lot of choices and custom experiences. While that can be true, having a “custom offering” is sometimes an excuse to not commit to creating a process.
I’m guessing that whatever industry you’re in, you could sell more if you had an unambiguous process that was clearly documented up front. When there’s a lot of unknown, it can feel risky for a customer to take the leap. A clearly documented process feels safe and calming.
Use testimonials, social proof, and case studies to fight ambiguity aversion. You don’t need to share every tiny nuance, but let them know there is a process. This doesn’t mean you can’t customize; however, you need to customize from something they can grasp. Ask yourself:
- What happens every time?
- What should always happen first?
- What will the outcome be at the end?
- How much time should they expect to spend?
There’s comfort in knowing there’s enough experience to have a documented process. It makes it easier for people to choose you and do business with you.
Closing Thoughts and Proactive Communication
Melina Palmer: So, what got your brain buzzing as you learned about uncertainty aversion today? For me, I always go back to the power of the no-update update. When you’re trying to implement changes at work, uncertainty is the enemy of progress.
Take the massive shifts to AI going on right now. If you think your team members aren’t concerned about their jobs, you are mistaken. It’s impacting the way they are showing up for work. You can proactively and thoughtfully communicate on a consistent schedule to help make that easier for everyone.
Be concrete and clear when you can, and when you can’t, explain why. Make it as tangible as possible to avoid that feeling of uncertainty that comes from abstract language. If you or your team are interested in training on this—including how to frame problems and communicate more clearly—I’d love to talk. Send an email to melina@thebrainybusiness.com to start that conversation.
Announcer: Thank you for listening to the Brainy Business Podcast. Melina offers virtual strategy sessions, workshops, and other services to help businesses be more brain friendly. For more free resources, visit thebrainybusiness.com.
