Class 3 (Judgment under Uncertainty: The Difficulty of Learning)
PART A
Read: J. Edward Russo and Paul J.H. Schoemaker, Winning Decisions, Chapters 4-5, 8.
Chapters 4 and 5 of Russo and Schoemaker provide an overview of what we covered in Class 2, in particular strategies for improving judgment. The problem of improving judgment more generally, however, is more pernicious. Chapter 8 of Russo and Schoemaker points out many of the difficulties of learning from experience.
Preparation Questions:
1. Why does hindsight bias inhibit learning? Why does taking credit for success and rationalizing failure inhibit learning?
2. What steps can be taken to overcome hindsight bias in an organization?
3. What kind of feedback is necessary for learning? Is this sort of feedback also sufficient for learning (i.e., if I give you this feedback, then you will learn)? If not, why?
4. Many studies have shown that there is essentially no added value of using job interviews to predict the quality of future work experience. Nevertheless, individuals persist in using job interviews and are convinced of their worth. Why might there be such a divergence between the research results and what is commonly believed?
PART B
Read: Michael J. Roberts and Ennis J. Walton, "National Demographics & Lifestyles (A)," Harvard Business School case (9-388-043). Available in your course package.
NDL is an example of a young company struggling to grow. It is also a wonderful case example of a firm struggling with a very different kind of learning in a rich, fascinating, dynamic setting.
Prep Note (Group Assignment):
The assignment is online. Please complete the survey here. Please submit one per group. The survey should be submitted by 8:30 on Thursday morning.
http://gsbsurvey.uchicago.edu/surveys/george.wu/wuxp3.html
The questions are repeated here for your convenience.
Question 1. Rate the quality of the NDL "concept" on a 1 ("terrible") to 9 ("excellent") scale.
Question 2. Evaluate the success of the company on a 1 ("much worse than expected") to 5 ("about as expected") to 9 ("much better than expected") scale. Note that "expected" is relative to your answer to Question 1.
Question 3. What are the three main reasons behind your answer for Question 2?
Question 4. Tom Claflin wonders what's going on with NDL. Which do you think is more accurate?
- It is just taking longer to prime the pump than we expected
- There is something fundamentally wrong with the concept
Question 5. NDL experienced many unanticipated difficulties. Perhaps some of these unanticipated difficulties are inevitable for a startup firm in a new industry. How could NDL have improved their decision making process to anticipate some of these difficulties? Offer three improvements.Additional Preparation Questions (not to be handed in):
1. Evaluate the NDL concept and the company's progress to date.
2. NDL experienced many "unanticipated" difficulties. Are these unanticipated difficulties inevitable for a startup firm in a new industry? If not, what kind of decision making process could NDL have used to anticipate some of these difficulties? What implications would this decision making process have for the motivation of NDL's employees?
- Malcolm Gladwell (2000). “The New-Boy Network”, New Yorker (May 29). Available at: http://gladwell.com/pdf/newboy.pdf
- Malcolm Gladwell (2003). “Connecting the Dots”, New Yorker (March 10). Available at: http://gladwell.com/pdf/dots.pdf