A well-known joke tells of the economist in the wilderness who, when he sees a bear approaching, pulls out his computer and begins to calculate an optimal strategy. His colleague, appalled, says: ‘We don’t have time for that!’ ‘Don’t worry,’ replies the economist smugly, ‘the bear has to work out an optimal strategy too.’ Behind the joke lies a deeply serious point. The bear gains a decisive advantage by not suffering the illusion that the approach based on calculation might work.

Conclusions

21. The practice of obliquity

There is not, and will not be, such a science. Our objectives are typically imprecise and multi-faceted, and change as we work towards them, and properly so. Our decisions depend on the responses of others and on what we anticipate those responses will be. The world is complex, imperfectly known, and our knowledge of it is incomplete, and theses things will remain true however much we learn and however much we analyse it.

We do not solve problems in the way the concept of decision science implies because we can’t. The achievement of the great statesman is not to reach the best decision fastest but to mediate effectively among competing views and values.

The managers and financiers who destroyed great businesses in the unsuccessful pursuit of shareholder value. The architects and planners who believed that buildings could be designed from first principles, that vibrant cities could be drawn on a blank sheet of paper, and that expressways should be driven through the hearts of communities. The politicians who believed they could improve public services by the imposition of multiple targets. Acknowledging the complexity of the systems for which they were responsible and the multiple needs of the individuals who operated these systems would have avoided these errors.

Real businesspeople operate in ‘large worlds’, in which problems are ill defined and there are no objectively correct answers. Moreover, the ‘right’ answer will often not be apparent, even in retrospect. Effective decision-makers in large worlds are not maximising; they do not have and never can have the information needed to make the relevant calculations. They confront radical uncertainty. Often they not only do not know what will happen but do not even know the kinds of things that might happen. Although we must abandon ‘the pretence of knowledge’, individuals, institutions and businesspeople need to act in the face of uncertainties.

It’s easy to take comfort in the fact that other people agree with us. As legendary investor Warren Buffett pointed out, though, “The fact that other people agree or disagree with you makes you neither right nor wrong. You will be right if your facts and reasoning are correct.”

The people executing established practices say they want new ideas, but they don’t want the bad ones. And because they so want to avoid the bad ones, they never deviate enough to find good ones.