Prediction and Judgment: A powerful combination

All organizations need people at every level and in all areas who can make smart decisions, especially when having less information than they would prefer. This is what Warren Bennis and Noel Tichy have in mind in their classic work, Judgment, when observing In the first chapter that what really matters “is not how many calls a leader gets right, or even what percentage of calls a leader gets right. Rather it is important how many of the important ones he or she gets right.”

They go on to suggest that effective leaders “not only make better calls, but they are able to discern the really important ones and get a higher percentage of them right. They are better at a whole process that runs from seeing the need for a call, to framing issues, to figuring out what is critical, to mobilizing and energizing the troops.”

In Prediction Machines, Ajay Agrawal, Joshua Gans, and Avi Goldfarb explain what they characterize as “the simple economics of artificial intelligence.” They observe that those economics underlie all the arguments in their book. “Prediction and judgment are complements, as the use of predictive increases, the value of judgment rises. Teams are increasingly bringing in new senior advisers who sometimes may not have the first-hand experience playing the game and — true to stereotype –may not be an obvious fit in the jock world of professional sports.”

However, “even nerds recruited into this setting require a deep understanding of the game because using prediction machines in sports management means an increase in the value of people who have the judgment to determine payoffs and, therefore, the judgment to use predictions in decisions”

Michael Lewis’s book and the film based on it, Money Ball, examines how Billy Beane, general manager of the Oakland Athletics, uses statistical prediction to overcome human biases, reducing uncertainty and improving the players’ performance. Bill James generally credited with introducing “Sabermetrics” when he was hired by the Boston Red Sox to use statistics to make more accurate predictions — based on degree of probability — about players’ performance and thereby their team’s performance.

Keep in mind that players are thoroughly scouted by opponents. This explains how batters are pitched to and where infielders and outfielders are located. Accurate and sufficient statistical data are more easily obtained than explained. Also, adjustments are made when statistical analysis indicates the need for them. Long agi, Albert EInstein defined insanity as doing the same thing obver and over again and then expecting different results.

Here’s the key point: prediction and judgment in combination do NOT necessarily guarantee success but they can certainly improve the odds that the right decision will be made.

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