Behavioral economist Dan Ariely’s talk from the TED conference last month was recently posted online. In the first 4.5 minutes of it, Ariely (who wrote the best-selling book Predictably Irrational) addresses, through his own experience, a topic that is also quite relevant for innovators in an uncertain environment: the importance of testing assumptions through experiments.
- For more on Ariely’s ideas, read the interview with Ariely from the Winter 2009 issue of the MIT Sloan Management Review.
- For more on TED, read MIT Sloan Management Review executive editor Jimmy Guterman’s coverage of the TED 2009 conference in February.
Posted in: behavioral economics, Innovation
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In our new book “Discovery Driven Growth,” we make testing assumptions the cornerstone of the strategic management process for exactly the reasons Ariely describes. If you’re prepared to do that, you can innovate, take measured risks and seize the moment for big opportunities – without exposing yourself to huge downside exposure. See http://www.discoverydrivengrowth.com for more information.
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Testing assumptions is critical, of course, and can’t fault Dan’s case. An additional problem though is that doing the evaluation he asks for on serious strategic decisions is not so easy. For many management choices, such as the pricing decision discussed in his interview, there are complex long-run dynamics that common methods can’t handle. One approach that may help here is outlined in my book Strategic Management Dynamics from Wiley … http://www.wiley.com/go/smd