Overcoming Bias

Share this post

Fail Faster

www.overcomingbias.com

Discover more from Overcoming Bias

This is a blog on why we believe and do what we do, why we pretend otherwise, how we might do better, and what our descendants might do, if they don't all die.
Over 11,000 subscribers
Continue reading
Sign in

Fail Faster

Robin Hanson
Feb 28, 2014
Share this post

Fail Faster

www.overcomingbias.com
28
Share

It looks bad for a manager to have one of his projects fail. So to “cover his ass”, such a manager often tries to prevent any records showing that people saw failure coming. After a failure, he wants to say “this was just random bad luck; no one could have foreseen seen it.” His bosses up the chain of command tend to allow this, because they also want to avoid being held responsible for failures during their watch. So they also prefer the random back luck story.

Unfortunately, this approach tends to prevent organizations from getting signals that would let them mitigate failures, such as by quitting projects earlier. For example, most startup firms don’t fail until they have spent nearly all of the cash they were given. It is rare for a startup to admit it isn’t going to work out, and give some cash back to investors. Similarly, government agencies created to achieve some purpose rarely recommend to legislatures that they be eliminated when their find that they aren’t achieving their intended purposes.

Of course bosses don’t want to be too obvious about silencing possible signals of failure. They find it hard to silence what have become standard signals, like cost accounting measures.

A great application of prediction markets is to give better and clearer warnings of upcoming failure, to enable better mitigation, such as quitting. Of course project bosses anticipate this, and oppose prediction markets on their projects, for exactly this reason. But we can still hope that prediction market warnings may someday become a standard signal, and thus hard to silence:

I hope prediction markets within firms may someday gain a status like cost accounting today. In a world were no one else did cost accounting, proposing that your firm do it would basically suggest that someone was stealing there. Which would look bad. But in a world where everyone else does cost accounting, suggesting that your firm not do it would suggest that you want to steal from it. Which also looks bad.

Similarly, in a world where few other firms use prediction markets, suggesting that your firm use them on your project suggests that your project has an unusual problem in getting people to tell the truth about it via the usual channels. Which looks bad. But in a world where most firms use prediction markets on most projects, suggesting that your project not use prediction markets would suggest you want to hide something. (more)

Share this post

Fail Faster

www.overcomingbias.com
28
Share
28 Comments
Share this discussion

Fail Faster

www.overcomingbias.com
RobinHanson
May 15

Yes, but I recall that they weren't allowed to offer any substantial value to market winners - medical professionals were *very uncomfortable with letting winners get cash, so all winners got was "attaboys."

Expand full comment
Reply
Share
brendan_r
May 15

Robin, have prediction markets ever been employed in drug discovery and development? Lit says a core predictor of R&D productivity is ability to fail fast - kill bad drugs early. Seems a simple and very high value application for these markets.

Expand full comment
Reply
Share
26 more comments...
Top
New
Community

No posts

Ready for more?

© 2023 Robin Hanson
Privacy ∙ Terms ∙ Collection notice
Start WritingGet the app
Substack is the home for great writing