Managing Excerptations: The Illusion of Understanding

Risk Digital Transformation

I started my blog to kick my non-writing habit. I've now got enough material to start blocking out a book (hooray!). So while I'm doing that, I thought I'd start a small series looking at some of the books that have influenced me.

"Managing expectations" is one of my least favourite managerialisms. I cringe whenever I hear it. Expecting is about hope, which is the only thing that keeps many professionals going. We take what we can from life and do our best with it.

So this series is about some of the excerpts that caught my eye over the last six months. They're part of what gives me hope about the profession of management.

What does 'quality' look like in digital transformation?

If we've genuinely transformed, surely what we deem as quality must change. This is because digital transformation is a qualitative change. If our definition of quality hasn't changed, then either we've not transformed or we're using the wrong measures.

Not answering this question is a sign we're reinforcing our illusion of understanding. This illusion is an inevitable consequence of how our brains are wired. Consider also that 95.1% of the total mass-energy universe consists of dark matter and dark energy. It's dark because it doesn't interact with electromagnetic radiation. It's there but we can't see it.

So we can't detect most of what's around us. Even if we could we'd be dealing with incomplete information. The tech industry teases us with promises of 'all the information', but it's a hollow promise. The physicist Emerson Pugh remarked (obliquely) about this,

"If our brains were simple enough for us to understand them, we'd be so simple that we couldn't"

I'm a big fan of Daniel Kahneman. I use his work to guide my practice and to inform the strategic thinking class I teach. He's done a lot of work on the illusion of understanding. In his 2011 book 'Thinking, Fast and Slow' he wrote,

"You cannot help dealing with the limited information you have as if it were all there is to know. You build the best possible story from the information available to you and if it is a good story, you believe it. Our comforting conviction that the world makes sense rests on a secure foundation: our almost unlimited ability to ignore our ignorance"

I work in the risk management domain. Risk is the chance and cost of being wrong. How we view the chance of being wrong is tied up in how our brains deals with uncertainty. 9 times out of 10 I see a strong preference for people to leave their illusion of understanding unchallenged.

Our experiences, somewhat paradoxically, don't help with mitigating our illusion of understanding,

"The core of the illusion is that we believe we understand the past which implies that the future also should be knowable but in fact we understand the past less than we believe we do. To think clearly about the future we need to clean up the language we use in labelling the beliefs we had in the past."

Because we constantly rewrite our memory in light of what we wish to believe is true, we can really only rely on the past if we record our beliefs and expectations as we go. But because people mistake 'learning' for 'mistakes', we don't tend to do this. This means we can't really trust our recollections of the past,

"A general limitation of the human mind is its imperfect ability to reconstruct past states of knowledge or beliefs that have changed. Once you adopt a new view of the world you immediately lose much of your ability to recall what you used to believe before your mind changed."

We might not think this is a particularly big deal. Observations like 'Things turned out ok' can take us down treacherous paths. This is because our imperfect view of the past gives us cause to misunderstand our role in contributing to that past.

"Hindsight bias has pernicious effects on the evaluations of decision makers. It leads observers to assess the quality of a decision not by whether the process was sound but by whether the outcome was good or bad. Because luck plays a large role, the quality of leadership and management practices cannot be inferred reliably from observations of success."

When we look at the cult of the hero leader, are we looking at good decision makers, or just lucky people who tell a good story? It's probably safer to assume the latter. At least if we do that we can start to control for the effects of hindsight bias.

Image via Gratisography