Making Decisions Under Uncertainty

Objective: Explain uncertainty and calculated risk, distinguish their meanings, and apply them to a described case.

Uncertainty: Uncertainty involves incomplete knowledge about outcomes or their probabilities. Calculated risk: Calculated risk weighs evidence, possible losses, and available safeguards. A business is a coordinated activity rather than simply a product or an exciting idea. Identify whose problem is being addressed, how value reaches that person, and what resources the organization uses. Entrepreneurial decisions often involve incomplete information. Distinguish a claim about customer demand from evidence of actual behavior, and explain which assumption would most change the proposed decision. Application: A founder lacks reliable estimates of future demand. This most directly illustrates uncertainty. A team runs a small trial before purchasing equipment. This most directly illustrates calculated risk.

Objective: Explain iteration and resilience, distinguish their meanings, and apply them to a described case.

Iteration: Iteration revises an offering through repeated testing and learning. Resilience: Resilience is the capacity to respond and recover from setbacks without guaranteeing success. A business is a coordinated activity rather than simply a product or an exciting idea. Identify whose problem is being addressed, how value reaches that person, and what resources the organization uses. Entrepreneurial decisions often involve incomplete information. Distinguish a claim about customer demand from evidence of actual behavior, and explain which assumption would most change the proposed decision. Application: A prototype changes after users encounter a difficulty. This most directly illustrates iteration. A team adapts after a supplier fails. This most directly illustrates resilience.

Objective: Explain opportunity cost and ethical responsibility, distinguish their meanings, and apply them to a described case.

Opportunity cost: Opportunity cost is the next-best alternative forgone by a decision. Ethical responsibility: Ethical responsibility considers effects on others beyond immediate financial gain. A business is a coordinated activity rather than simply a product or an exciting idea. Identify whose problem is being addressed, how value reaches that person, and what resources the organization uses. Entrepreneurial decisions often involve incomplete information. Distinguish a claim about customer demand from evidence of actual behavior, and explain which assumption would most change the proposed decision. Application: Launching a project gives up the preferred alternative use of time. This most directly illustrates opportunity cost. A team avoids misleading claims even when they might increase sales. This most directly illustrates ethical responsibility.