Noreena Hertz is a leading futurist, thinker and political economist whose economic predictions have proven to be both accurate and timely.
She is one of the world’s foremost thinkers on issues like corporate power and globalization and a leading political economist.
Noreena recently addressed GWS customers at an invitation-only event in London and took time to explain her thoughts on making smarter decisions in an uncertain world, a subject that she will address in her next book, The Tiger and The Snake: How to make smart decisions in a complex world”, which will be published in Spring 2013.
She argues that in today’s very uncertain, interlinked and complex world, decision making is hampered due to the fact that we have become too trusting of experts, too reliant on science, and the short-cuts that we take to cope with the information deluge that we all face make us blinkered to other viewpoints.
Why do you think that we make poor decisions?
In a world of great uncertainty our instinct is to look to experts for definitive answers. But we have become addicted to experts. We don’t challenge them sufficiently nor think independently enough ourselves. The financial crisis illustrates just how absurd it was that so much trust was put into the hands of just a few financial experts.
Also problematic is our almost blind faith in science. Mathematical models are often so simplistic and romanticized that they can’t possibly predict what will happen in a world that’s far more complex. In a world that is so interconnected, a default on a mortgage in Louisiana can have an effect on a council’s budget in Liverpool. But our models don’t typically recognize or capture such interconnections. If we trust models too literally then we risk being caught out by events as they unfold.
At the event you spoke about the information paradox, what is that?
In a world where we have more access to information than ever before, the paradox is that we are in danger of being less informed than ever. We simply can’t process the amount of data that we are confronted with on a daily basis, so we adopt strategies to cope. We often copy what others do, follow our industry’s norm, or repeat what we’ve done well in the past as an organization. But is the way that we did things in the past necessarily right for the future? Another typical shortcut is something that I call narrow-casting, which involves us unwittingly selecting information that we think is impartial but actually expresses views that we already hold from people just like us. In reality we’re falling into a very common thinking trap – we are only trusting information that confirms what we already believe. We therefore risk creating a culture of conformity, which can be dangerous. These shortcuts can serve us very badly.
What can we do to make smarter decisions?
If we are going to make smarter decisions, it’s essential that we create the opportunity for managed dissent. If we are going to have the capacity to shift paradigms and destroy myths in our organizations, we need to make sure that ideas have the space to battle it out. There needs to be a space for all opinion, including that from experts, to be challenged. We need to actively seek out different viewpoints and bring them into the discussion. Progress comes not only from the creation of ideas, but also from their destruction. Aspiring towards divergent, heretical and potentially discordant views can often be better than aspiring towards consensus. This isn’t to say that we shouldn’t co-operate, but we should incorporate different viewpoints. There’s research to suggest that organizations are smarter when they are exposed to divergent views, opinions and backgrounds. The quality of group decisions is often related to how different people are within the group, rather than their IQ scores. Managed dissent ensures that ‘voice’ is not monopolized by senior staff in a meeting. For example, the Google executive, Eric Schmidt, actively seeks out the more junior person in a meeting, the person who hasn’t said anything or looking skeptical, to bring their view into the room.
How do we think more critically?
You should question whether you’re measuring the right thing in the first place. How much is my desire to believe or not believe a finding is a reflection of what I have already invested in? Am I making the right assumptions? Had they been thinking critically, the state authorities responsible for flood defenses in New Orleans would have noticed that contractors were keeping their costs down by scrimping on materials used to build flood walls. Thinking critically means stimulating yourself to break out of common thinking patterns to question industry practices that you may have bought into. You have to have a level of acceptance that the world we’re living in is necessarily complex and necessarily changing, so we have to develop strategies to deal with that. So understanding that not everything is knowable, and acknowledging the limitations of modern projections, and then working out how we can best include qualitative data and sentiment into our analysis.
What advice would you give to organizations that want to take better decisions in an uncertain world?
We all have to learn to become more adaptive than we have been so that we can cope with what’s thrown at us. We also need to interrogate our thinking strategies on an ongoing basis, not just when we’re faced with a crisis. This means changing tack if a scenario plays out that you haven’t thought about and being more accepting of uncertainty and ambiguity. Many of the issues that we face today, such as sustainability, the changing nature of workforces, globalization and economic recession, do not lend themselves to simplistic or mechanistic explanations. They are interconnected and complex, so can we then look at their particular points of intersection and complexity. We really are living in an age that’s truly more complex, unimaginable and uncertain than ever before, so now is a time to face the world with eyes wide open and adapt, learn and decide accordingly.