Are we understanding human behavior?

Herbert Simon was the founding father of artificial intelligence. No other scientist better understood the future of machines and the ultimate importance of computers. Already in 1965, Simon was certain that “machines will be capable of doing any work a man can do”. His farsighted perspective on decision-making processes, climate change and flaws in economic theories prove to be even more relevant and crucial in the 21st century. Today, we still learn from his genius, and are maybe more capable of understanding the trends Herbert Simon had already anticipated in the 1960s. He takes us back into the past, just to provide us with the answers to our future.

Herbert A. Simon

The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, 1978

At a glance

Born: 1916, Milwaukee, Wisconsin, USA

Died: 2001, Pittsburgh, Pennsylvania, USA

Field: Management Science

Prize-winning work: Research into the decision-making process within economic organizations

A pleasant surprise: Was awarded the Nobel Prize although he hadn’t taught an economics course in decades!

Joke Line: Described himself as always trying to make people laugh. Even though, so he admitted, people sometimes got angry at his humor

What makes decision-making so difficult?

Simon lived life in an unusual, unique way. He didn’t watch television, nor did he listen to the radio or paid attention to the newspapers’ headlines. "First, a lot of what’s in the paper today was in the paper yesterday," Simon claimed. "Second, most of the things that are in the papers today that weren’t yesterday I can predict, at least in general terms."

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Convinced that the unconventional path was the right one, Simon wanted to step into an unexplored, less advanced field of scientific research. He made his move into social sciences, creating a basis for forthcoming advancements in research into decision-making processes. Simon countered the two traditional key assumptions: future predictions and clear knowledge about alternatives. He stated that people aren’t awfully good at predicting the future and that they have great difficulties comparing their own preferences.

He also described how an economy spends a lot of its efforts designing and producing products that serve as alternatives but, contrastingly, allocates very little time to chose among them. "Before you even start the choice process, somebody has presented you with this, and this, and this alternative." Is simple decision-making to be achieved by reducing the oversaturated presentation of alternatives? "Partly," argued Simon, "I think the difficulty of decision making centers very much around the degree of uncertainty and the gaps in our knowledge."

Do we need a change in the economic methodology?

Underlining that economic theory and methodology needed a change, Simon focused his research on challenging existing presumptions. "For every problem, one has a theory, a way of addressing the problem," Simon pointed out. "Unfortunately, for many of the important problems in life, there’s a bad theory."

He repeatedly stressed that "before you can have mathematical structures in a science, you have to have data, you have to understand the phenomenon". He pointed to crucial developments in other academic fields that hadn’t yet been achieved in his own area of research. "Before biology became modern molecular biology, with exact knowledge of genes and of chemistry, many people had to go out and collect countless plants to find out how they were put together. We haven’t done that yet in the social sciences." He warned, inspired and motivated scientists to approach problem solving in a new way - by starting to collect as much data as possible.

Asking the climate change question early

Simon knew the environment would become a key concern in the future, and that drastic measures would be needed to ensure the survival of subsequent generations. He pointed to questions of long-run solutions that have become more pressing in recent years, focusing on sustainable energy, taking action against pollution, and changing political processes. "What do we want for the present, and what are we willing to give up in order to preserve the future? There’re problems to which we simply don’t know the answer yet, but there’re some things we can take actions on now, which we should take actions on now!"

The responsibility of endless knowledge

Simon spent his time trying to interpret correlations and understand cultures, to ultimately reach a deeper comprehension of human emotions and the reasons for their decisions. "My work has not been aimed at immediately improving the decision process, but at understanding it." He had influenced an extensive range of academic fields, publishing works on cognitive psychology, computer sciences, economics, mathematics and many others.

If you asked Simon for the main reason behind his tremendous efforts, he'd express his feeling of responsibility towards humanity. "You haven’t created anything until you’ve communicated it. Communication is an essential part of the scientific activity." The enormous knowledge he acquired and shared founded a base for new computer programs, artificial intelligence, as well as other critical areas of science.

How do we learn to grow up?

Simon’s remarkable confidence and his profound interest in humanity were features that made him stand out both professionally and personally. "Human beings get a tremendous advantage from the influence of other people around them. That’s the way we learn." When asked what advice he’d give the next generation, his response was straightforward and kind: "One thing that I would like to suggest is to think about the goals one is trying to accomplish, without losing sight of the living itself. The most important thing is the journey. If we live well, then these distant goals will take care of themselves. You’re not going to live well and you are not going to do anything outstanding unless you find some things that you can do with enjoyment."

One of the most important lessons one can learn from Herbert Simon is the importance of understanding data. Even though most people are only interested in the nature of causality - what causes what - Simon concentrated on digging deeper. Rather than taking correlations as given, he tried to understand their background. Why does A provoke B? He planted into our heads a new approach of thinking. "Perhaps the right way to move is to understand before one predicts." Observing, learning, comprehending, embracing all phenomena to make a change.

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What does Simon's work mean for us?

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"It isn’t sensible for everyone in a large organization to think about every challenge the organization faces. Instead, smaller teams focus on smaller tasks - it’s a logical way to get things done.”

Tim Harford
Financial Times columnist and author of
The Undercover Economist

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“Disagreements within a large company is part of what Simon’s Nobel laureate was all about. It is also something that investors need to be doubly aware of.”

Paul Donovan
Global Chief Economist
UBS Wealth Management

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