Bain Capital: Investors Should Use OODA Loops In Times Of Uncertainty

In his latest interview on the Masters In Business Podcast, Jonathon Lavine of Bain Capital explains how his firm uses OODA Loops to manage periods of uncertainty, like the start of the covid pandemic. Here’s an excerpt from the interview:

Lavine: Investing is not the prediction business, it’s really about adapting. And I use a framework a lot with the team called the OODA loop, which actually comes from the military and how they would teach fighter pilots to orient themselves in a dogfight, a time of high uncertainty.

And it tells you that you need to orient yourself to where you are. You need to observe what’s going on, then you need to decide, and then you need to act. And it’s a loop because you do it over and over and over again.

And at that time, it was clear that we were in a situation where we were not being asked to price risk, we were being asked to price uncertainty. And we were humble enough to see that nobody had exactly gotten this right yet and sensitive enough to recognize that there was a human toll that this was taking, both in human life and people were starting to die, as well as fear.

And I thought at the time and — and my partners and I talked about it that, boy, we don’t really know what’s going on. And sometimes people think you should zig or you should zag, but really what you should do when you don’t know what’s going on is standstill and watch. And that’s what we did.

We didn’t panic. We didn’t try to guess one way or the other. We set out a — a framework for how we’re going to look at this, how we were going to think about the safety of our team, as well as the — the security of our portfolio companies.

You can listen to the entire interview here: