MIT formula for uncertainty: pad your estimates

I don’t have the time to delve into the entire article, so I may be misrepresenting the thrust of Spyros Makridakis, Robin M. Hogarth and Anil Gaba’s Winter 2010 article in the MIT Sloan Management Review (full article here).   Or more properly, I hope that this Forbes excerpt — Why Forecasts Fail. What To Do Instead — misrepresents the piece.  For instance, what do the authors mean here?

Say you’re a publisher and have an unknown author selling her first novel. Publishers should look at the sales track records of first-time novelists in general. The uncertainty surrounding your author shouldn’t differ from the wider population of new authors. You should be able, therefore, to estimate how low or high the sales might go. That range probably covers 95% of all possible outcomes. The next step would be to take the estimated range and increase it. 

Wow…I guess the WAG now has the MIT Sloan seal of approval.  Or perhaps it is CYA that’s now approved.  Other than allowing a forecaster to say — “I told you so” —  is there really all that much use in simply increasing the range of estimates? 

Maybe we should spend our time learning how to distinguish the outliers quickly — e.g., from distinct initial sales patterns or unusually intense media coverage — so we can take appropriate action?


How Managers Exert Influence

I run hot and cold on Henry Mintzberg, but I was taken with his thoughts in a Monday interview (published in the most recent “MIT Sloan” special section of the WSJ, here). 

Mintzberg’s observations on influencing action — and the limits of that influence — are particularly acute. He outlines three “planes” of influence: through direct action, through other people, and through information.  This last approach comes in for some withering criticism.  Per the example below, it is apparent that Mintzberg believes managing through information is what often passes for leadership these days:

Today I think we have much too much managing through information—what I call “deeming.” People sit in their offices and think they’re very clever because they deem that you will increase sales by 10%, or out the door you go. Well, I can do that. My granddaughter could do that; she’s four.

He also touches on the “Manager vs. Leader” question I’ve posted on here. Work calls, however, so I’ll get to that in a later post.

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