Projective Logic

Much of day-to-day business life involves projecting – imagining alternative states of affairs and reasoning about them. For example, we imagine ‘the Third Quarter, in which revenue has increased by five percent’ and we reason about how this can be achieved. Projecting is typically associated with particular business functions – financial or sales forecasting or strategy, for instance – but it is inherent to every role in the organization. Any forward movement from A to B involves envisioning B and reasoning how best to realize it.  

Although states of affairs are dynamic and continually changing, they are causally related to subsequent states of affairs. Projecting ‘works’ because causalities are part of the environment and because we have the cognitive ability to reason about and, within limits depending on the case,  influence those causalities. Realizing a projected state of affairs is strongly determined by the clarity with which it is imagined and the quality of the reasoning that relates the existing to the projected space. If we project an outcome pursuant to a plan, it is because we have a sense of how particular causal relationships can be made to connect the present to the future. We have an explanation for how it will have occurred that B is realized.

When we decide to act in furtherance of a projection, it is ordinarily with a belief in the likelihood of the outcome’s realization. In most cases, if we did not have a belief that the outcome was likely, we wouldn’t proceed. Indeed, the fact that action is taken in furtherance of a projection is strong evidence of this belief, particularly in cases where significant resources have been committed to enact the plan. Except in unusual circumstances, to commit resources to a plan whose likelihood of success we doubted, would be irrational. Explanatory power and likelihood-of-outcome are linked - the quality of our projecting and the probability of a projection’s realization are correlative. 

In many circumstances of business life, however, projected states of affairs are realized less often than we would expect given the probability we attached to them when the commitment was made to move forward. Our belief in the projection’s likelihood, which was a predicate of our decision to proceed, turns out to have been incorrect.  

In some cases the disparity in probabilities would not have affected our plan even had we known better. But in other cases, we would have executed a different plan – with different resource commitments, different schedules, different hedges, and so forth; or we would have chosen a different version of the projected state of affairs; or we would not have moved forward at all.

We refer to these as ‘Regret Cases’. In Regret Cases a projection is materially deficient and the probability of the projected state of affairs is materially lower than we had thought. Regret Cases as we define them cannot be excused by pointing to factors beyond one’s control. Different action would have been taken had the firm known better and – in retrospect – there is an acute sense that it should have known better. 

It is in this respect, however, that Regret Cases are vexing. For, although the organization in some way erred, this is not to say the outcome resulted from foolish mistakes that easily could have been forefended if the firm had merely been more careful. Regret Cases occur with the frequency they do because the lapses that cause them typically are not obvious. (If they were, there would be fewer Regret Cases.) Unlike errors that might be attributable to a kind of folly, Regret Cases cannot be explained in that fashion. They thus pose a special cognitive challenge.

Like many actions of day-to-day business life that are largely second-nature, projecting occurs without our understanding (or even thinking it necessary to understand) the logic of its efficacy. But because this logic has not previously been made explicit, firms are not sensitive to the important ways it departs from typical patterns of intuition. Projective Logic shows these patterns in new light to help firms avoid Regret Cases.