The importance of trial and error in today's complex world

Posted by Unknown on 22:16
As Tim Harford points out in a recent TED Talk presentation, 10 percent of American businesses disappear every year. However the U.S. economy is still the world's greatest economy. How can this be? It turns out that the high failure rate that exists in America is actually a good thing for the economy because it forces American businesses to evolve faster than in other countries through a process of trial and error.

There are two ways to make a decision. One is to study a problem and then find a solution and the other one is to test different solutions in order to understand the problem. Harford believes that the reason why we tend use the first technique more often than the second one is because we are affected by the so called "God complex". In other words, our brain can be easily persuaded to believe that we actually understand the world around us and therefore we can make reasonable choices based on our knowledge. The only problem is that our understanding of the world can only function if we develop some basic assumptions that allow us to reduce the uncertainty that surrounds us and frame the problem more easily. And guess what? Assumptions are not always true.
If you think that it is often hard for teachers to control a class of more than 20 students, now imagine being able to predict what almost 7 billion people around the world will do tomorrow. How likely is it?

Through technology and research, today we have a better understanding of our world, but also of our limitations as human beings living in a complex system. Trial and error is often a great way to find out what works and what doesn't. As Tim Harford points out in his talk, research shows that the use of trial and error as a way to solve problems is actually a common characteristic of successful organizations. However, even if people today realize the importance of trial and error (and it might also seem obvious to talk about it), if we think about the way we actually make most decisions in our life we realize that we rarely use this method.

If you are interested in the subject, I suggest reading Freakonomics: A Rogue Economist Explores the Hidden Side of Everything and The Black Swan: The Impact of the Highly Improbable. These two books will teach you the importance of challenging the conventional wisdom.

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