REVIEW BOUNDED RATIONALITY
Within limits Rethinking the tenets of economic orthodoxy could help improve customer choices Writing Tom Sykes
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o you know what you want in life? Chances are that you’ve got no idea. Even if you do, it’s likely that you don’t consistently make decisions that get you closer to your goal. This is not because you are especially flawed, say Sanjit Dhami and Cass Sunstein, but because humanity is cursed with limitations on our ability to be rational. Yet economic orthodoxy asserts
that the individual is best placed to decide what is best for them. Bounded Rationality challenges that orthodoxy. It is a forensic dissection, beginning with the theoretical underpinnings of classical economics: the Bayesian Rationality Approach. It states that humans have “complete preferences” that don’t change, and that we possess infinite computational power and memory, as well as access to all information that exists about a given decision. This is plainly fanciful, but the authors don’t just dismiss it out of hand: they challenge it empirically, with comprehensive analysis and (sometimes painfully dry) proofs. Dhami and Sunstein show that our ability to make the right decision is impacted by our emotions, how a question is framed, and whether it affects us now or in the future. We are biased in all sorts of ways – and even if we weren’t, we often
lack key information. They conclude by proposing a form of libertarian paternalism that recognizes we could all benefit from nudges, better information and reality checks to make better – or at least better-informed – decisions. Product and strategy leaders in particular will find Bounded Rationality a worthwhile, albeit taxing, read. The book challenges accepted truths about human decision-making, and provides a useful framework for treading the line between coddling and enabling customers to make decisions that better align to their goals. Tom Sykes is a senior strategy professional and non-executive director
Bounded Rationality: Heuristics, Judgment, and Public Policy Sanjit Dhami & Cass R Sunstein (MIT Press)
BIG IDEAS PERRY TIMMS
The rebirth of craftmanship In a turbulent world dominated by technology and automation, the concept of craftsmanship may seem like a relic of the past. However, Richard Sennett’s groundbreaking book The Craftsman from 2008 remains a vital, highly-relevant reminder that the pursuit of excellence and the development of skills are as relevant today as they ever were. Sennett explains how the principles of craftsmanship offer valuable lessons to individuals, businesses and institutions. Craftsmanship is more than just mastering a craft; it’s a mindset and approach that emphasizes the importance of learning, practice and dedication. There are several takeaways. The first is that craftsmanship is rooted in the joy of mastery. In a
world driven by quick fixes and instant gratification, there’s immense satisfaction in honing one’s skills over time. Leaders should seek opportunities to develop and refine their abilities, understanding that the journey of mastery itself is rewarding. The second is the value of practice. In an era when people seek life hacks, Sennett encourages us to appreciate the significance of continuous, deliberate practice. The commitment to improvement can foster innovation, quality and resilience. The third takeaway is to embrace mistakes. Embracing errors, analyzing and learning from them can lead to remarkable improvements. This mindset shift can benefit organizations by promoting a culture of innovation.
Fourth, focus on the role of community. Craftsmanship isn’t solitary; it often involves a community of practitioners. Sennett emphasizes the value of collaboration, knowledge-sharing and mentorship. Businesses can gain from fostering a collaborative environment. The fifth insight is the value of longterm thinking. In a world where shortterm gains often overshadow long-term benefits, craftsmanship encourages us to think beyond immediate results and invest in sustained excellence. Sennett’s work reminds us that craftsmanship is not a relic of the past, but a timeless philosophy that can shape a brighter future. Perry Timms is founder and chief energy officer of PTHR, a consultancy aiming to create better business for a better world. He is a TEDx speaker, top-selling author, and number one on HR Magazine’s 2022 Most Influential Thinkers list
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