The Judgment Deficit

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The Big Idea

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Statistical models have deprived the financial sector ofthe case-by-case judgment that makes capitalism thrive. That must change . by Amar Bhide

44 Harvard Business Review September 2010
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Amar Bhide is the Schmidheiny Professor at Tufts University's Fletcher SChool. He is the author of A Collfor Judgment:

Sensible Finance for a D ynamic Economy (Oxford University Press, :2010), on whic h t his
article is based.

he modern economy creates and spreads unprecedented prosperity by drawing on the resourcefulness and enterprise of the many, not by blindly following the dictates of a few. Individuals today make and act on their own judgments to a degree that would have been unimaginable to our forebears. Indeed, many of us value this humanization of our work as highly as we do the material comforts that the work secures. (The great virtue of a dynamic capitalist ..... economy, the economist ". Edmund Phelps argued in his 2006 Nobel prize lecture, lies in the opportunities it provides for more engaging work rather than for more leisure.)
septembe r 2010 Harvard Business Review 45
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THE BIG IDEA THE JUDGMENT DEFICIT

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This triumph of independent initiative and judgment- ot what I call the venturesome economy-is, however, far from absolute, nor should it be. Yes, the collapse of the Soviet Union and of top-down, Sovietstyle management in monolithic corporations liberated millions from mindless, unp roductive toil. But we are all su bject to traffic laws telling us which side of the road we can drive on, and that's a good thing. The designers of the iPho ne and iPad (and of their apps) defer in matters large and small to the dictates of Steve Jobs, to the benefit ofApple consumers and shareholders alike. Discerning the appropriate balance between top-down com mand and control, on the one hand, and individual... [continues]

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