1.5.12 Summary Of Human Cognitive Limitations

Judgement and intuition can be quite inappropriate in situations where complex systemic problems are involved. Kline (1995: 49-68) defines a Complexity Index, C, and uses it to soundly demonstrate that the gap between our cognitive capability (C ≈ 4) in dealing with complexity and the complexity we routinely face, (C >> 10⁹) is enormous. This, alone, suggests that using judgement and intuition in complex environments can be inappropriate, but the author’s observation is that executive managers frequently choose to ignore, or are unaware of, such evidence. These limitations impact on how we go about developing risk-management strategies and how we obtain executive-level support for them. In essence:

The concept of feedback introduced above is generally not well understood. Feedback manifests itself almost everywhere and our ability to understand it is poor (Richardson, 1991). Examples of feedback in risky situations are at Figures 2-9 and 3-5, which are discussed in detail later.
Our decision making is seriously challenged when it comes to complex and dynamic systems where feedback and delay mechanisms exist. Human ability to predict dynamic behaviour of complex systems involving feedback and delay mechanisms is poor (Sterman, 1989a; 1989b). Examples of complex risk systems involving feedback and delay are at Figures 2-5, 2-6 and 2-9.
Feedback dynamics easily elude human intuition and judgement (Sterman 1989c; Kleinmuntz, 1993; Diehl and Sterman, 1995: 198-215).
Dynamic complexity is not interpreted well by those who are responsible for managing it. See Chapters 2 and 3 particularly. Behaviour can be counter-intuitive. Consequently many strategies and policies are based on flawed or erroneous assumptions and mental models (Forrester, 1971; 1985).
Further to our cognitive limitations in dealing with complexity, we are inhibited by our inability to correctly conceptualise problems when our assumptions may be inappropriate (Meadows, 1989). Complex problems are difficult enough for us to address without being further handicapped by analysis which starts from conflicting, hidden or fallacious assumptions (Mason and Mitroff, 1981).

References

Kline, S.J., 1995, Conceptual Foundations for Multidisciplinary Thinking, Stanford University Press, Stanford, California.
Richardson. G.P., 1991, Feedback thought in social science and systems theory, University of Pennsylvania Press, Philadelphia.
Sterman, J.D., 1989a, “Misconceptions of feedback in dynamic decision making”, Organisational and Human Decision Processes, no. 43, pp 301-335.
Sterman, J.D., 1989b, “Modeling managerial behavior: Misperceptions of feedback in a dynamic decision making Experiment”, Management Science, vol. 35, no. 3, pp 321-339.
Sterman, J.D., 1989c, “Misperceptions of feedback in dynamic decision making”, in: Milling, P.M. and Zahn E.O.K. (eds), Int. System Dynamics Conf.: Computer-Based Management of Complex Systems, pp 21-31.
Kleinmuntz, D.N., 1993, “Information processing and misperceptions of the implications of feedback on dynamic decision making”, System Dynamics Review, vol. 9, no. 3, pp 223- 237.
Diehl, E. and Sterman, J., 1995, Effects of feedback complexity on dynamic decision making, Organisational Behaviour and Human Decision Processes, 62, 2.
Forrester, J.W., 1971, “Counterintuitive behaviour of social systems”, Technology Review, no. 73, January, pp 52-68.
Forrester, J.W., 1985, “The ‘model’”, versus the modelling ‘process’’, System Dynamics Review, vol.1, no.1.
Meadows, D.L., 1989, “System dynamics meets the press”, System Dynamics Review, vol. 5, no. 1.
Mason, R.O. and Mitroff, I.I., 1981, Challenging Strategic Assumptions: Theory, Cases and Techniques, Wiley-Interscience, New York.