Decisions, decisions...
Professor Stein W. Wallace, Management Science
10.40 am
Why is it difficult to make decisions? Why do we need large planning departments in major companies? And why do we have to spend so much time recovering when things do not go as planned? From my perspective, there are two major reasons, complexity and uncertainty. Try to set up bus schedules for London. All integral parts may be available to you, travel needs, resources available to you, travel times at different hours of the day, costs... Still, you will not be able to set it up by hand - it is simply too complex.
Complexity is rather simple to comprehend, though maybe not to handle. Uncertainty is a much more subtle phenomenon. Uncertainty is about lack of information; information which is relevant to your problem. What will be the demand for our product, what can we sell it for? What will the weather be like during our out-door concert? Will the government change the VAT or the interest rate? Hidden in all these questions is a "When will we know?" Can we postpone the decisions until we know more (or everything)? Or do we have to decide now not fully knowing what will happen? Uncertainty relates to information and its arrival over time. Without uncertainty strategic decisionmaking would not exist.
Uncertainty and complexity often hit us in the face simultaneously, and handling them together becomes an overwhelming task in most cases. What can we do? In management science and related quantitatively oriented fields it is very common to drop the uncertainty and use expected/average demand, price or weather. The arguments follow many lines: "We don't know anyhow", "handling the complexity is bad enough", "we can always check afterwards if our plans are good even if our guesses were a bit off". Are these valid arguments? Is it safe to always give complexity priority over uncertainty? The goal of this talk is to indicate why the answer normally is "no", and to indicate what we lose when taking this shortcut.
Biography
Stein W. Wallace is Professor of Operational Research at Lancaster University Management School. He came to Lancaster from The Chinese University of Hong Kong. He has also held professorships at Molde University College, Norway, and The Norwegian University of Science and Technology. His main interest is decision-making under uncertainty, with a focus on mathematical modelling and industrial applications. He co-authored the world's first text-book on stochastic programming in 1994 and chaired the international organization for stochastic programming (COSP) 1992-95. He came to Lancaster under the LANCS initiative, an EPSRC funded major investment to strengthen operational research in the UK.