4. Limitations of Knowledge

Jeremy Thomas and Myron Weber discuss some of the key ideas that define and illustrate the limitations of knowledge that impact the ability of organization to plan and execute toward achieving goals.

Key ideas:

1. General limitations of knowledge
   1. Three body problem from physics
   2. Hayek on the limitations of knowledge: “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”
2. Feedback loops & unintended consequences
   1. Heisenberg’s Uncertainty Principle
   2. System Dynamics: application of physical systems theories to human systems by Jay Forrester of MIT. The Fifth Discipline (Peter Senge) is a popular book based on many of these ideas.
3. Case Study Mythology
   1. Survivorship bias: we don’t know how many failures resulted from the risks taken by the winners
   2. Post Hoc fallacy: incorrectly attributing causal success/failure linkages to cherry-picked factors
   3. Annie Duke – lessons on decision making and the limitations of knowledge from the world of professional poker

Key Meta-ideas:

1. Richard Feynman: “The first principle is that you must not fool yourself and you are the easiest person to fool.”
2. Peter Klein: Theory tells us what, not how. How requires experience, intuition, and experimentation.
3. Peter Drucker: the “what” supersedes the “how.”
4. Myron Weber: Yes, we need practical solutions, not just theory. But which solutions are more likely to work: those based on sound theory, or those not?

Application:

1. Use a deductive approach to deriving solutions (objectives) to the problems (goals). Start from principles (theory, models, objective reality) and then move to practice.
2. Define and use experiments (formal or informal) to test the hypotheses with regard to solutions aka Proof of Concept or Prototyping
3. Make distinctions between the “what” and the “how” – don’t blend them.
4. A business case or use case starts with a hypothesis. That hypothesis consists of 3 distinct parts: 1) Problem/Opportunity, 2) Effective Result, 3) Solution

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