How diversity pays off

Scott Page’s new book The Diversity Bonus: How Great Teams Pay Off In The Knowledge Economy looked timely, arriving as it did on my desk just before the Google memo furore. It’s a continuation of his previous book The Difference, putting logical detail and empirical evidence on the claim that when problems are hard and multidimensional, they are better addressed by cognitively diverse groups of people. This is a generalisation in a way of Philip Tetlock’s work described in Superforecasting, as his super-forecasters were people applying a range of models to their forecasting problems. Predicting is one kind of problem; Page considers the whole gamut – problem solving, truth seeking, creating – of non-routine cognitive tasks.

He emphasises that he is making a pragmatic case, although this does not mean the normative case for diversity is unimportant. He also stresses that random diversity will not do the trick. The character of the problem shapes the types of diversity required. But without it, the outcome is the madness, not the wisdom, of crowds.

Page categorises people’ cognitive repertoires in terms of five tools: information (data, facts); knowledge (expertise in a domain); heuristics (rules of them, techniques); representations (perspectives on the situation); and mental models (simplified, systematic descriptions). The group’s repertoire will be the union of the individual members’ repertoires. Diversity is emphatically not like portfolio diversification. Spreading risks, diversification, gives an average outcome. Diversity gives the outer envelope of the team’s combined various abilities.

Putting these together helps think about the link between cognitive and identity diversity, and there is a link. Some problems are more multi-dimensional than others, and have aspects that speak to group identities. Some parts of the cognitive reperoire depend more closely on group identity because they will be determined in part by individual experience. Take representations: there is a lovely example of how different the range of possibilities will seem – given that we start from where we are – to someone trained in the grid of Cartesian geometry and someone trained with a polar perspective: square versus wedge-shaped ‘adjacent possibilities’. Combining the square and the pie slice gives a bigger space of possibility.

As for the Google memo issue, Page notes that where organisations and societies are now is only partially informative about the value of diversity. Repeated acts of discrimination will inhibit people’s interest in pursuing certain paths they would do well in, so there will have been ample prior self-selection that sheds no light at all on how much better challenges could be met with more diverse teams. “The evidence we have of diversity bonuses understates the potential contribution of diversity because the evidence comes from the world as it is, not the world as it could be. A more inclusive world would produce larger bonuses.”

And the evidence is pretty compelling, although I was pre-disposed to believe it. As the book concludes, modern knowledge economies are complex. Team work is almost universal. Any organisation wanting to do better – in any of the ways listed above – will be committed to diversity. This very clear and compelling book will help people consider specifically what shape their challenges and problems take and what kind of diversity will help address them. So the moral is not that HR departments should seek to hire identity diverse people for the sake of it, but that they understand the needs of their organisations and the mapping from identities to cognitive repertoires. But in any case, the outcome will be more diverse in every sense than it is currently.

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Learning from books

It’s obvious why Camus’ The Plague came to my mind at the weekend: “[Rieux] … knew … that the plague bacillus never dies or disappears for good; that it can lie dormant for years and years…”

IMG_4288I read it again quickly in the past couple of days & flashed back to being so gripped by it as a young teen that I stayed up into the night reading it. As I finished, I noticed a blister on my arm, and ran to my bemused mum calling out that I had the plague. In the unheated house we lived in, we went to bed with cylindrical metal hot water bottles stuffed into old socks, & I’d failed to notice mine burning me through a hole in the sock. At that age, and being so literal minded, I didn’t spot the book’s metaphorical meaning….. As Camus says, there is much we can learn from books, if we pay attention.

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FT Business Book longlist

The Financial Times Business Book of the Year longlist has just been published, and most of the titles sit in my two favourite categories: economics and technology. Even better, I’ve read five of the books already, and they are all excellent candidates, although I have my preferences. If I had to pick from these, I’d be torn between Lo and Tirole. But there are lots on the longlist still to read… quite a few of these are very tempting.

Here are the shortlisted books I’ve reviewed on this blog.

The Wisdom of Finance by Mihir Desai

Adaptive Markets by Andrew Lo

Grave New World by Stephen King

The Great Leveler by Walter Scheidel (I don’t seem to have written a review of it, though I cite it here)

The other title I’ve read, having had the privilege of helping prepare the English edition, is

Economics for the Common Good by Jean Tirole; out in October, with superb insight into using economics in public policy, and also into the strengths and limits of economic research

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Other minds

I’ve been dipping back into a lot of my collection on welfare economics, for various reasons. I.M.D. Little (A Critique of Welfare Economics) has a wonderfully spiky style, absent from modern academic writing (well, any kind of style really):

“It is clear that if one accepts behaviour as evidence for other minds, then one must admit that one can compare other minds on the basis of such evidence. Therefore those who ‘deny’ interpersonal welfare comparisons must deny the existence of other minds. The only possible alternative is that by some extraordinary kind of intuition, they can get to know that other minds exist but that the cannot know anything about them.”

IMG_4275(I’m having what I believe we now call an Adonis Day of idling around ….)

 

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Must read

Hooray! Proofs of Dani Rodrik’s new book have arrived here.

IMG_4272There’s something good on every page I’ve opened.

IMG_4273Pre-order now folks – it’s out in November. Here’s the book blurb.

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