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2 months ago
Why “Many-Model Thinkers” Make Better Decisions

 

Originally published in Harvard Business Review, November 19, 2018.

Organizations are awash in data — from geocoded transactional data to real-time website traffic to semantic quantifications of corporate annual reports. All these data and data sources only add value if put to use. And that typically means that the data is incorporated into a model. By a model, I mean a formal mathematical representation that can be applied to or calibrated to fit data.

Some organizations use models without knowing it. For example, a yield curve, which compares bonds with the same risk profile but different maturity dates, can be considered a model. A hiring rubric is also a kind of model. When you write down the features that make a job candidate worth hiring, you’re creating a model that takes data about the candidate and turns it into a recommendation about whether or not to hire that person. Other organizations develop sophisticated models. Some of those models are structural and meant to capture reality. Other models mine data using tools from machine learning and artificial intelligence.

The most sophisticated organizations — from Alphabet to Berkshire Hathaway to the CIA — all use models. In fact, they do something even better: they use many models in combination.

Without models, making sense of data is hard. Data helps describe reality, albeit imperfectly. On its own, though, data can’t recommend one decision over another. If you notice that your best-performing teams are also your most diverse, that may be interesting. But to turn that data point into insight, you need to plug it into some model of the world — for instance, you may hypothesize that having a greater variety of perspectives on a team leads to better decision-making. Your hypothesis represents a model of the world.

Though single models can perform well, ensembles of models work even better. That is why the best thinkers, the most accurate predictors, and the most effective design teams use ensembles of models. They are what I call, many-model thinkers.

In this article, I explain why many models are better than one and also describe three rules for how to construct your own powerful ensemble of models: spread attention broadly, boost predictions, and seek conflict.

Click here to continue reading this article.

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