In The Case for Many-Model Thinking, we introduced seven different functions of models—REDCAPE:
- Reason – identify conditions and deduce logical implications.
- Explain – provide testable explanations for empirical phenomena.
- Design – choose features of institutions, policies, and rules.
- Communicate – relate knowledge and understandings.
- Act – do something.
- Predict – make numerical and categorical predictions of future phenomena.
- Explore – investigate possibilities and hypotheticals.
In business, there is a tendency to conflate quantitative modeling with prediction. That’s unfortunate. After all, the “fast and frugal” heuristics—the rules of thumb that guide our instinct—are often better at prediction than computation-intensive models. That’s particularly true in highly uncertain and dynamic situations. Relying on our instinct is certainly a lot faster, and speed has its own advantages. So, why do we place so much stock in developing quantitative business simulations? In short, we think building and playing with simulations help us
- Think more clearly
- Communicate more effectively, and
- Learn a little faster than we might otherwise.
Excellence is found at the margin. Being a little bit smarter can make all the difference in a competitive environment. You don’t have to be faster than the bear; you just need to be faster than your competition.
You don’t have to be faster than the bear; you just need to be faster than your competition.
