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Management article
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Reference no. R1109E
Published by: Harvard Business Publishing
Published in: "Harvard Business Review", 2011

Abstract

Mauboussin is the chief investment strategist at Legg Mason Capital Management and a leading exponent of how to navigate complex systems in financial markets and other aspects of life. He points out that biology is full of complex adaptive systems:an ant colony is a prime example. Each ant has a decision role but works only with local information; it has no sense of the global system. Ant colonies solve very complicated, very challenging problems with no leadership or strategic plan. People, however, are hard-wired to link cause and effect - which aren't clear in complex adaptive systems - and they believe that certain causes will lead to particular effects. In addition, they tend to listen to experts and to aggregate information poorly. To best deal with complexity, managers should surround themselves with cognitive diversity and extract unshared information for evaluation. Small experiments with controls can be a valuable aid.

About

Abstract

Mauboussin is the chief investment strategist at Legg Mason Capital Management and a leading exponent of how to navigate complex systems in financial markets and other aspects of life. He points out that biology is full of complex adaptive systems:an ant colony is a prime example. Each ant has a decision role but works only with local information; it has no sense of the global system. Ant colonies solve very complicated, very challenging problems with no leadership or strategic plan. People, however, are hard-wired to link cause and effect - which aren't clear in complex adaptive systems - and they believe that certain causes will lead to particular effects. In addition, they tend to listen to experts and to aggregate information poorly. To best deal with complexity, managers should surround themselves with cognitive diversity and extract unshared information for evaluation. Small experiments with controls can be a valuable aid.

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