The Principles of Epistemology in Management

Psychologists say that most businessmen have primAtive thinking (from the word primate, not to be confused with primitive).
The owners of this type of thinking make decisions, as a rule, on the basis of their intuitive feelings.
By analogy with the well-known concept of “political beast”, meaning a politician who instinctively feels the necessary decisions, primative businessmen can be called “managerial beasts”.

Intuitive solutions are quite effective in simple cases.
In complex problems, especially innovative ones, intuitive solutions often turn out to be ineffective and even unprofitable.
Solutions to complex problems can be profitable, most likely if they are accepted on the basis of scientific knowledge and methods.

A necessary sign of the scientific nature of knowledge and methods is their compliance with the following classical principles of epistemology:
– Present knowledge in the form of separate descriptions of the properties of the studied and designed objects;
– Avoid incorrect terms, logical contradictions, inconsistencies with facts;
– Evaluate projects based on the materials of correct discussions between their proponents and opponents.

Natural sciences and engineering are based on these principles.

Knowledge is the collection of individual descriptions of the elementary properties of the objects under study.
Therefore, knowledge has a discrete structure.
A description of one property is a thought.
Each thought should be separated from other thoughts and visually highlighted, for example, in a separate paragraph.
Scientific knowledge, scientific thinking, and scientific communication must be discrete and must operate with separate descriptions of the properties of objects.
The discrete structure is the necessary property of scientific knowledge.
Knowledge devoid of discreteness and presented in streaming format cannot be considered scientific.

The main function of scientific communication is to identify errors in the descriptions of individual properties of objects – incorrect concepts, logical contradictions, and inconsistencies with facts.
Therefore, the subjects of scientific discussions are separate descriptions of specific properties of objects and the alleged errors in them.
Analysis and discussion of texts in which descriptions of individual properties of objects are not highlighted accurately enough are significantly complicated and ineffective, up to their sterility or impossibility.

Despite the long-standing triviality of the principles of epistemology, the practice of corporate and public management shows a massive disregard for these principles in design and decision-making.
Instead of describing individual properties of projects in a discrete format, managers often use information in the streaming format, which contributes to errors and complicates their identification, repeatedly complicates logical thinking and intellectual communication.
They make incorrect terms, logical errors, inconsistencies with facts.

Managers spend a lot of time on ineffective meetings and make decisions without correct procedures for discussing projects.
So they make bad decisions that worsen governance and hurt corporations.
The more complex a project and an object of management, the more the epistemological principles are violated, and decisions are made on the basis of not knowledge and logic, but more on the basis of rhetoric.

Top managers often make decisions about the implementation of inventions, technologies, industries, investment and corporate projects that change very complex economic and social systems.
These systems have technical, organizational, financial, market, competitive, legal, advertising, labor, psychological, logistic, environmental, political, and other components.
In the vast majority of cases, these systems are too complex.
Therefore, managers do not know their properties sufficiently and are unable to foresee the results of their changes.
Therefore, decision-making based on the personal knowledge of managers, in most such cases, causes erroneous decisions, implementations of which reduces profits and increases losses.

Managers have neither the time, nor the energy, nor the desire to study the rationale for projects proposed by experts. Therefore, they, as a rule, intuitively trust some experts and accept their draft decisions.
But the interests and competencies of experts, even trusted ones, differ from the interests and competencies of managers to one degree or another.
Therefore, their projects often do not optimally achieve goals of managers and owners.

The “court” method, which minimizes the likelihood of errors when making complex decisions, has long been known in scientific methodology.
It does not require managers to have special knowledge of the properties of mutable systems and to study projects in detail.
Its main function is to identify possible project errors – incorrect terms, logical contradictions, and inconsistencies with facts – in the process of text discussions of projects between their proponents (authors) and opponents (critics).
Opponents report alleged project bugs. Proponents report errors in opponents' arguments. Moreover, between proponents and opponents, a “conflict of interest” must act.
Managers mainly study only controversial theses of discussions, draw conclusions about the presence or absence of project errors and reject projects containing errors.
For managers to remain objective in assessing the arguments of the debaters, they themselves should not participate in the discussions.
Thus, decision-making consists of three stages – preparing projects, discussing them by experts, and evaluating the discussion materials by managers.
Materials of projects and their discussions should be presented in the discrete format.
Each paragraph should describe one elementary property of the system being changed or the process of changing it.

As is well known, each project must contain three mandatory parts:
Description of the current state of the modifiable system with a description of the problems that the project should eliminate, and the factors causing them.
Description of the target state of the system, which should be achieved as a result of the implementation of this project, with the criteria for achieving the goals of the project.
Description of the process of changing the system from its current state to the target state, indicating the resources available and required for the implementation of this project.

Despite the triviality of this requirement, in practice, these parts are often combined to one degree or another. Causes of problems are not well described. The criteria for the optimal achievement of project goals are not formulated accurately. Sometimes, there are no descriptions of the current and target states at all. This makes it much more difficult to identify project errors and adequately assess them.
The described method is universal and can be applied in the management of factories, corporations, and ministries, for making decisions in political parties, parliaments, and governments.
To some extent, this method is similar to the well-known “Japanese” management method, in which draft decisions are discussed with all the departments involved.

The more complex the projects, the more this method reduces the likelihood of erroneous decisions relative to traditional methods. In corporate projects, this probability decreases several times. In social projects, it decreases tenfold.

Despite the effectiveness of this method, it is rarely used in management. Some managers just don't know it. Others save on expensive experts. Still, others are simply too lazy to strain their brains by studying the materials of the discussions. “Management alpha males” prefer to sit out thousands of hours in ineffective meetings, revel in their power over them, and make important decisions in restaurants and saunas.

Because of the traditional, archaic management, corporations suffer huge losses.

The likelihood of erroneous decisions about investing in innovative enterprises that do not have reliable statistics by definition is especially high. Evaluation procedures for such projects are based only on intuitive feelings of venture capitalists. Therefore, investors often finance unprofitable projects and reject potentially profitable ones.

Thus, the application of the principles of epistemology in management includes the following practical measures.
Establishing a corporate standard for the discrete document format and prohibiting the publication of documents in the traditional, streaming format.
Establishment of the “court” method of project evaluation – the procedure for discussing projects between their proponents and opponents and consideration of their materials by managers, as well as rejection of the ineffective, “deliberative” decision-making procedure.
Establishing the requirement for three separate parts in each project – descriptions of the current and target states of the system and the transition process between them, as well as criteria of optimization of the system change.

The ability and skills to comply with the principles of epistemology are one of the most important qualities of an effective top manager.
Therefore, as an expert, I recommend to shareholders of corporations:
– to hire only those top managers who make decisions, observing the principles of epistemology;
– to form the skills of adherence to these principles among existing managers through special trainings;
– to prohibit publishing documents in the streaming format and establish formats and procedures for document flow, projecting and making decisions in accordance with these principles;
– to invite university and business school associations to teach students these principles;
– to require leaders of business associations to observe these principles when making decisions.

Investors evaluating projects should apply the following procedures.
Accept project documents for consideration only in the discrete format, in which each elementary property of an object and of the process of its creation (modification) is described in a separate paragraph.
Instruct their experts to identify specific project errors – incorrect terms, logical contradictions, inconsistencies with facts.
Organize online textual discussions of alleged project errors in the discrete format between their proponents and their experts.
Evaluate the profitability of projects, first of all, based on the materials of expert discussions of their alleged mistakes.
Observing the performances of proponents, to evaluate not the properties of their projects, but only their psychological parameters – psyche strength, speed of thinking, enthusiasm, charisma, sociability.

E. Gershman
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