Economic uncertainty is hard: hard on people, hard on companies, hard on the economy. But in times of economic uncertainty, building resilence to shoulder through is essential. Our research on leading through change and uncertainty, uncovered many tools for dealing with economic uncertainty and building what we call “uncertainty ability,” or the ability to lead through uncertainty to find the hidden opportunities
The Power of Learned Optimism
One of the most powerful tools for developing our uncertainty ability comes from the research of Martin Seligman, professor at University of Pennsylvania. Seligman’s insight arose from his early work exploring learned helplessness, or when subjects no longer try to change an adverse situation because they believe they are powerless. For example, when dogs were given a shock in a closed room, if they were later given the chance to escape the shock by leaping over a small barrier, most dogs did not try to escape. They had learned to be helpless! But while this pattern held among animals, Seligman discovered that among humans, some people were able to resist learned helplessness, no matter what you threw at them!
When Seligman’s research team dug in to understand why, they observed that the reason some people resisted becoming discouraged in hard situations had everything to do with the explanatory style they had learned to use to explain the world to themselves. Some people had learned to view situations and setbacks as permanent, pervasive (impacting every aspect of their lives), and personal, blaming themselves for what went wrong. These people who had a learned pessimistic style tended to get discouraged and paralyzed by setbacks like layoffs or budget cuts. By contrast, people who had learned to see problems as temporary, isolated (it doesn’t affect everything in their life), and impersonal (a by-product of many causes rather than just their fault) proved incredibly robust to challenges. These “learned optimists,” could re-energize themselves, in hard situations.
While we might have been born with an instinct tending towards one explanatory style, Seligman’s research has shown that just by becoming aware of our beliefs and learning to “dispute” them, we can develop a more optimistic approach. Studies of groups taught “learned optimism” showed a 50% decrease in anxiety among students, 35% increase in salespeople effectiveness and increased function for children suffering brain injuries–not because the children had implemented learned optimism but because their caretakers had!
Arguing with the Situation
How can this tool help us lead through economic uncertainty? First, it is appropriate to acknowledge the uncertainty. Seligman’s research is not meant to encourage toxic positivity. It’s ok to sit with hard emotions for a moment. But then we need to pause, argue with ourselves, and attempt to see what we are facing through Seligman’s formula: argue until we make the situation temporary, isolated, and impersonal. For example, recently I had a conversation with the new CEO of a major retail group. She was incredibly depressed as a result of the last bout of economic uncertainty, the inflation that followed Covid.
“The results are terrible,” she explained, and while she put on a brave face in public, privately I could see the discouragement and exhaustion. Standing on the lawn at INSEAD I used Seligman’s technique and helped her argue with the situation.
“First, the recession won’t last forever. What do we know about economic cycles? They come and go, they go up and they go down. What is down will go up again,” I explained. What was I really doing? I was turning the situation—the economic uncertainty—into something temporary rather than permanent.
“Second, is everything ‘terrible’ or are there some bright spots in the business?” I asked. The CEO admitted there were some higher performing areas. If she had said no, then I would have shifted to her personal life, or her goals and interests. I was searching for something to show her that although the economic uncertainty felt global, in fact it was isolated. Just as the research suggests, we have to isolate the problem rather than make it global.
“Finally, you didn’t make the recession. Honestly, you just took the job, you didn’t even have time to get ready for it. This isn’t your fault,” I argued. What was I doing? I was making the economic uncertainty impersonal, rather than her fault.
What happened? As I spoke, I watched her face brighten up and filled with new resolve and energy she was ready to do something to address the situation! I have used and seen this tool used in many other situations, some of them quite disastrous.
We can all agree that the economic uncertainty, and the painful by-products in terms of lost jobs, lost opportunities, cancelled projects, and wasted work are immensely discouraging. It’s appropriate to stop, pause, and acknowledge this. But we can’t stay there forever. The next step is to use the Learned Optimism tool to build reslience and make the best of the situation.