An old friend of John D. Rockefeller once recalled that—despite being one of the wealthiest people to ever live—Rockefeller would insist that they switch to old golf balls when playing around water hazards.
In fact, when Rockefeller noticed other players using new balls in treacherous areas, he exclaimed, “They must be very rich!”
Doubtless his mother’s words to him as a child—“Willful waste makes woeful want”—came to him as he approached the tee. Though a great golfer, he knew that the mere presence of a water hazard made it more likely that his ball would land in it.
In his own way, he was employing the concept of “Base Rates.” Or the “outside view” versus the “inside view.”
Instead of exclusively considering his chances of avoiding the hazard, he considered the overall likelihood that anyone would land in the water, and he prepared accordingly.
“Only a fool learns from their own mistakes,” Bismark is supposed to have remarked. “The wise learn from the mistakes of others.”
We mustn’t only consider how we’ll do, we must consider how other people would fair or have faired in similar circumstances.
If most people end up in the water hazard, switch to an old golf ball.
If every project of this type goes over budget, adjust your own budget accordingly.
If most people who have tried this particular tactic have failed, factor that into your decision.
If you see a lot of people start a particular effort but rarely repeat it, you may want to skip it entirely.
Yes, there may be exceptions. We may, indeed, be special.
But as Rosser Reeves wrote, “Roulette wheels, in the long run, do not lose money on exceptions, nor do [marketers], in the long run, make money on them.”
Most of the people who lost their golf balls at the bottom of the pond didn’t get unlucky—they aimed right for it, but assumed they were special and would make it over.
And most marketing problems aren’t the result of bad luck, they’re the result of wishing for the best possible outcome instead of planning for the most likely one.
So when we work with clients on their marketing strategy, we often take them through a framework for making major marketing decisions, designed to employ base rates and the “outside view.”
Does this opportunity or idea reinforce our market position directly to our ideal audience or their influencers? Does it give us the chance to demonstrate what we do, how we do it, and who we primarily do it for in a clear, creative way? Even if the marketing tactic doesn’t take off spectacularly, will it still have reinforced our position among the people it did reach?
If no—document the idea and set it aside for now.
2) Most Likely Outcome
According to the “outside view” or “base rate,” when you survey the market and industry, and assess this particular tactic, what is the most common result? Do projects like this always go over budget? Are they attempted often but repeated rarely? Do they typically fizzle out without much notice? Or do they sometimes have clear, long-lasting positive effects?
If a unacceptably large (risk tolerances vary) percentage fail—document the idea and set it aside.
If an acceptably large percentage succeed—proceed.
3) Worst Possible Outcome
What is the absolute worst (but still possible) outcome that could result from pursuing this idea? What if it went spectacularly wrong—would it present an existential threat to your business or reputation? Would it take the rest of your budget? Would it be the last thing you could ever attempt? When people have tried this and regretted it, why did they regret it?
If the worst outcome takes you out of the game entirely—document the idea and set it aside.
If the worst outcome is recoverable and reversible—proceed.
4) Best Possible Outcome
What is the absolute best (but still possible) outcome? Would it completely overwhelm your capacity to run your business? Would it be a curse in disguise? Would it lead to an abrupt spike in demand that would be unmanageable? Would it create customer service requests you wouldn’t be able to fulfill? When people declare that this was “too successful”, what do they mean?
If the absolute best possible case ruins your business or your well-being, set the idea aside, it’s not the right time.
If the absolute best case would be amazing, sustainable, and profitable—proceed.
5) Make the Bet
If the proposed marketing effort has made it this far, it’s time to determine whether it’s worth it to pursue. We do that by assessing whether the costs for this idea or opportunity are proportionate to the most likely positive outcome and its probability—not the best possible outcome.
We’re not looking to decide whether the absolute best case is worth it, we want to know whether the most likely outcome most people would get is worth the price.
In essence, would you be willing to bet the cost of the initiative that it will work?
Then, set your budget accordingly. If you would bet $1,000 that your ads will provide a greater than $1,000 return, they may be worth doing. However, if you’d be unwilling to make that bet, then you should be less willing to set that budget.
If you’re wondering whether you should spend $100 a month on new marketing software, ask yourself if—right now—you’d bet $1,200 that in a year you’ll be happy you spent the money.
If you’re trying to decide between two ad concepts, consider doing both, proportioning your budget based on the estimated probability of each one’s success.
Whatever the cost of the marketing initiative, reframe it as a bet on its probability of success and the resulting payout. Don’t avoid the risky bets, just don’t bet everything you have on them, and proportion your spending according to the odds.
This process may feel overly conservative or onerous. You might think, “But aren’t I supposed to make crazy, wild bets? Don’t I need to go all-in to win big?”
As former professional poker player and decision consultant Annie Duke wrote, real-life isn’t all or nothing, and you don’t need to go all-in. Life and business are more like another sport: archery.
“Archery isn’t all or nothing, where you get points only for hitting the bull’s-eye and everything else is a miss,” Duke says. “An archer gets points for hitting the target at all. Decision-making is similar. The value of guessing isn’t in whether the guess is ‘right’ or ‘wrong.’”
Like an archer, it’s not about getting it completely right every single time. And, like a golfer, it’s not about one powerful drive that gets us a hole-in-one (or sails over the green).
It’s not about this particular shot in isolation, it’s about our cumulative score over time.
You might not get all the way there on your first attempt, but you’ll get some reward for landing in the vicinity. Like an easier shot next time.
“The important thing,” Duke says, “is to take aim.”
And aiming requires a sense of the territory, the situation we’re getting ourselves into, and the base rates of previous attempts.
We’re always in dangerous territory, we’re always risking something. Whether it’s marketing budget or merely time, we’re betting that what we’re attempting will pay off.
But as Duke says, “An unwanted result doesn't make our decision wrong if we thought about the alternatives and probabilities in advance and allocated our resources accordingly.”
If we’ve thought about the most likely outcomes and budgeted accordingly, it’s okay if it doesn’t work. We’ve learned something, made progress, and set ourselves up for a better result next time.
And so our decisions will be better informed when we review the base rates, and the results of others, and plan accordingly.
They’ll have better outcomes when we focus on the process and how we can make progress even if we don’t hit the bull’s-eye or get a hole-in-one.
And they’ll get easier when we follow a framework to keep us on track, and keep our emotions from from taking control when our minds should be calling the shots.
“Your arrows are going to hit something,” Duke reminds us.
Your golf ball is going to go somewhere.
“Better to take off the blindfold and shoot with eyes wide open.”