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Ling- English Management People technology

Manager or Computer?

Do you think your high-paid managers really know best? A Dutch sociology professor has doubts.

The professor, Chris Snijders of the Eindhoven University of Technology, has been studying the routine decisions that managers make and is convinced that computer models, by and large, can do it better. “As long as you have some history and some quantifiable data from past experiences,” Snijders said, a simple formula will soon outperform a professional’s decision-making skills. “It’s not just pie in the sky,” Snijders said. “I have the data to support this.”

(…) Studies over the years have shown that models can better predict, for example, the success or failure of a business start-up, the likelihood of recidivism and parole violation, and performance in graduate school. They also do better than humans at making various medical diagnoses, picking the winning dogs at the racetrack and competing in online auctions.

(…) The main reason for computers’ edge is their consistency, or rather humans’ inconsistency, in applying their knowledge. (…) And critically, models do not get emotional.

They allow an organization to codify and centralize its hard-won knowledge in a concrete and easily transferable form, so it stays put when the experts move on. Models also can teach newcomers, in part by explaining the individual steps that lead to a given choice. They are also faster than people, are immune to fatigue and give the human experts more time to work on other tasks beyond the current scope of machines.

However,

(…) Many in the field of computer-assisted decision-making still refer to the debacle of Long-Term Capital Management, a high-flying hedge fund whose founders included several Nobel laureates. Its algorithms initially mastered the obscure worlds of arbitrage and derivatives with remarkable skill, until the devaluation of the Russian ruble in 1998 sent the fund into a tailspin.

“As long as the underlying conditions were in order, the computer model was almost like a money machine,” said Roger Pielke Jr., a professor of environmental studies at the University of Colorado whose work focuses on the relation between science and decision- making. “But when the assumptions that went into the creation of those models were violated, it led to a huge loss of money, and the potential collapse of the global financial system.”

The fact of the matter is

In such cases, “you can never hope to capture all of the contingencies or variables inside of a computer model,” he said. “Humans can make big mistakes also,” he said, “but humans, unlike computer models, have the ability to recognize when something isn’t quite right.”

Manager 1, Computer 0

As long as managers make a strength of their “weakness”: that they acknowledge and correct their mistakes.

 

 

By Richard Brisebois

I help companies develop their leaders. I help managers develop themselves and their teams.
Richard Brisebois is a leadership development professional who has worked with 7,000+ managers, leaders, and business owners in 40+ countries, from Fortune50 executives to SME business owners and tribal leaders. He specializes in designing and facilitating leadership development programs as well in team coaching.