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Leadership, Epistemic Arrogance and Knowledge

February 24, 2016

Epistemic ArroganceI mentioned, in a previous post, that I liked the phrase coined by Nassim Nicholas Taleb (NNT), “epistemic arrogance.” I will avoid trying to expand on the meaning of the phrase, but instead will refer you to NNT’s book. Suffice it to say that many studies show that we humans are far too confident in what we believe we know about our complex world. And the more education, the more hubris. I know I fall prey to this all too human trap of thinking I “know” what I need to know, completely. If I am not careful, if I do not go out of my way I will make important decisions based on incomplete, faulty or misguiding information.

Epistemic arrogance bears a double effect: we overestimate what we know, and underestimate uncertainty, by compressing the range of possible uncertain states (i.e., by reducing the space of the unknown). — Taleb, Nassim Nicholas (2010-05-04). The Black Swan

As leaders, specifically as business leaders, we have to strike the balance between analysis paralysis and epistemic arrogance. It is appropriate to frequently question our basic assumptions and even to demand of ourselves and our team full identification of all the assumptions being made about future markets, products and business models. And, as previously mentioned, we should not believe in our own forecasts! Our economy is far too complex for us to reduce the future revenues, profits, market share or product sales to a single number. More important, perhaps, is understanding that our epistemic arrogance affects more than just our forecasting — it affects the way we organize our businesses, the models we use to provide products and services as well as the view (judgments) we have of our customers and their customers.

In order to achieve the more mature, open-minded view of future events and our own ability to know what is really happening, we have to create a safe environment for ourselves and our employees. We need to be able to function without knowing precisely what is going to happen and we have to be able to admit to that lack of precise knowledge. Otherwise, we could easily come to believe our own “spreadsheets,” errors and all! That can be deadly hubris in the totally indifferent universe and business environment.

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