Published on February 14, 2014
The Battle of Decision DETERMINISTIC VS. PROBABILISTIC PERSPECTIVES Muder Chiba
CHANGE IS ACCELERATING "Everybody has accepted by now that change is unavoidable. But that still implies that change is like death and taxes — it should be postponed as long as possible and no change would be vastly preferable. But in a period of upheaval, such as the one we are living in, change is the norm." - Peter Drucker , Management Challenges for the 21st Century (1999) "The rate of change is not going to slow down anytime soon. If anything, competition in most industries will probably speed up even more in the next few decades." - John P. Kotter , Leading Change ―We‘re entering an age of acceleration. The models underlying society at every level, which are largely based on a linear model of change, are going to have to be redefined. Because of the explosive power of exponential growth, the 21st century will be equivalent to 20,000 years of progress at today‘s rate of progress; organizations have to be able to redefine themselves at a faster and faster pace.‖ - Ray Kurzweil , Perspectives on Business Innovation Muder Chiba
INSIGHT IGNITED DECISIONS Market Complexity Information Complexity Decisions Deterministic , Or Probabilistic? Muder Chiba
PHYSICS IGNITED WISDOM Information Complexity ―This is the course in advanced physics. This means that the instructor finds the subject confusing. If he didn‘t , the course would be called elementary physics‖ –Luis Alvarez, Nobel Laureate 1964 quoted in Strategy Safari: A Guided Tour Through The Wilds of Strategic Management By Henry Mintzberg, Bruce Ahlstrand, Joseph Lampel ―So far as the laws of mathematics refer to reality, they are not certain. And so far as they are certain, they do not refer to reality‖ – Albert Einstein Muder Chiba Decision s The more precisely the position is determined, the less precisely the momentum is known in this instant, and vice versa. Heisenberg, uncertainty paper, 1927
SCIENCE IGNITED WISDOM Information Complexity ―Heisenberg‘s principle has the consequence that no physical events can ultimately be described with absolute certainty or with “zero tolerance,” as it were. The more we know, the less certain we are.” -Dr. Bronowski Muder Chiba Decision s
SPECULATIVE FICTION IGNITED WISDOM Information Complexity Decision s ―In fact, the mere act of opening the box will determine the state of the cat, although in this case there were three determinate states the cat could be in: these being Alive, Dead, and Bloody Furious.‖ ―Terry Pratchett, Lords and Ladies ―They believed that prediction was just a function of keeping track of things. If you knew enough, you could predict anything. That's been cherished scientific belief since Newton.' And?' Chaos theory throws It right out the window.‖ ― Michael Crichton, Jurassic Park Muder Chiba Schrodinger's cat Lorenz Butterfly Effect
NEUROSCIENCE IGNITED WISDOM Information Complexity ―The most elementary level of brain function is that of the molecules that allow neurons to communicate with each other…the next level is of the cell…the next level is the domain of integration. The neurons constituting complex networks form integrated systems such as the visual system‖ – Nicole Fiori , Cognitive Neuroscience Muder Chiba Decision s
PSYCHOLOGY IGNITED WISDOM Information Complexity ― …seeming contradiction that we must be fully committed , but we must also be aware at the same time that we might possibly be wrong… our commitment to an idea is healthiest when it is not without doubt , but in spite of doubt” -Psychologist Rollo May quoted in Being Wrong, Adventures in the Margin of Error ―I have concluded that the essence of wisdom is to hold the attitude that knowledge is fallible and to strive for a balance between knowing and doubting” –Psychologist John Meacham quoted in Hard Facts , Dangerous Half-Truths and Total Nonsense, Profiting from Evidence-Based Management Muder Chiba Decision s
STATISTICS IGNITED WISDOM Information Complexity ―…includes the critical element of judgemental inputs. This very important element has more to do with the art of forecasting . Forecasts containing judgemental inputs usually result in more accurate forecasts than those generated strictly mechanically‖ -John Crosby , Cycles ,Trends and Turning Points Muder Chiba Decision s
ECONOMICS IGNITED WISDOM Information Complexity ―I find it scandalous that in spite of the empirical record we continue to project into the future as if we were good at it, using tools and methods that exclude rare events. Prediction is firmly institutionalised in our world. We are suckers for those who help us navigate uncertainty, whether the fortune- teller…or civil servants using phony mathematics‖ “What I call Platonicity…is our tendency to mistake the map for the territory…when these ideas and crisp constructs inhabit our minds , we privilege them over less elegant objects , those with messier and less tractable structures…‖ Nassim Nicholas Taleb , The Black Swan Muder Chiba Decision s ― We are prone to overestimate how much we understand about the world and to underestimate the role of chance in events. Overconfidence is fed by the illusory certainty of hindsight…intelligently explore the lessons that can be learned from the past whilst resisting the lure of hindsight and the illusion of certainty‖ Daniel Kahneman (Nobel Laureate in Economics) , Thinking Fast and Slow
MANAGEMENT IGNITED WISDOM Information Complexity ―…the world is too complex to allow strategies to be developed all at once as clear plans or visions. Hence strategy must emerge in small steps ,as the organization adapts or ‗learns’ -Mintzberg , Ahlstrand and Lampel, Strategy Safari Learning School ―The term strategic planning is an oxymoron. Planning is about laying out the details of what you intend to do …But strategy is the step before that .... Too many executives confuse strategy with planning, seeking solace in detailed spreadsheets that project (mythical) costs and revenues far into the future. But if you‘re entirely comfortable with your strategy, chances are it isn‘t very good. Rather than the result of careful planning , strategy should arise from a rough-and-ready process.‖ – Roger Martin Muder Chiba Decision s ― While I had the fundamentals , cultivated over a long period of time, in my mind, the reality in their sequencing and actual execution evolved by ―muddling through.‖ While I now have more clarity , I certainly did not have all the answers when I started‖ – AG Lafley ,Chairman and CEO of P&G , The Game Changer by Lafley and Ram Charan
IGNITED DECISION WISDOM- AT THE CORE Information Complexity Decisions Deterministic perspective: Letting the „data‟ take the decision , elements of „lazy‟ thinking , the rear-view determines the destination, safe decision-making tools, more static and less responsive to change Probabilistic perspective : Using data to take decisions , thinking fast and slow , alert and ready to course-correct basis the road ahead , Heuristic decision-making systems and Learning skills , energetic ,fluid and market-responsive decision-making Muder Chiba
Information Complexity Deterministic Decision s Probabilistic Stochasm is inevitable. Design for it. Reflect, and Decide. Muder Chiba
Muder Chiba EPILOGUE !
THE CASE FOR DETERMINISTIC POSTURES • Simple, easily understood, linear paths • Takes away stress from decision-making - norm/algorithm/benchmark • Provides a sense of security in an uncertain world • Ease of communication across structures /silos- stable shared language • Independence from people and skills- process/model • Scalable and profitable Muder Chiba
Deterministic vs. Probabilistic Deterministic via Probabilistic Muder Chiba Perspectives
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