The other day I read about a group of banks that were subject to a numerical “stress test” by the US government. A few very notable banks failed the stress test and were “surprised” by the results and challenged the validity of the models. The banks took a swift and painful hit on Wall Street, vaporizing millions of dollars in market value.
I was visiting with a client the other day. We were talking about the possibility of building a model to support a small airline’s operation. A gentleman in the room, a subject matter expert on aviation operations, turned to me and said, “Why do I need a simulation model? I can answer the questions we have by just sitting down and thinking it through.”
I was taken aback at first. Try to design a complex set of routes, maintenance bases, schedules and the like in your head?
This may come as a surprise to you, but I am not an avid player of videogames. One might think in my professional work in simulation that I would be a natural “gamer” as they call it. However, for one reason or another, I’ve taken a rather dim view of these things, both as a professional and as a parent.
My wife finally convinced me to buy a Nintendo Wii for the kids. The games were moderately interesting , and I was impressed with the graphics processing capability of modern games.
In building business simulations, we are often called upon to create systems that mimic what humans do manually. Call them business rules, work processes, whatever you like – these are the minute-by-minute decisions and analyses that people perform, often without even thinking very hard about the complexity of their own solutions.
We have recently been working in two projects where the essence of our software simulation is the duplication of a basket of these human cognitive tasks.
Science is our profession here. Every day we navigate the fields of economics, mathematics, finance, statistics, physics…it is easy for us to get wrapped up in all of the high minded work that we do. Indeed, many of the brightest minds in research today are laser-focused in their fields, collaborating with very few peers in thin vertical slices of study.
Too bad we aren’t more like the ancient intellectuals.
It happens every time I go to the doctor. For some odd reason I want to impress him by telling him how I’ve been exercising, how well I’ve done with my diet…it is as though I’m looking for some kind of reward.
You can’t pick up a newspaper or business magazine these days without some talking head describing the “next big thing” that will revolutionize business, and perhaps life as we know it. The hype was “more or less” true about the Internet – it just took a bit longer than the breathless prose about it had predicted. The Internet has changed life as we know it – and is still changing it as we speak.
I love chess. It always amazes me how such simple rules for piece movements can give rise to matches of such extraordinary complexity and drama. Often I see corporate strategy analogized as a chess game. On the surface, that seems right – managers adeptly try to outthink their opponents in a rich interplay of competing strategies and asset positions.
However, the cold light of critical analysis casts grave doubt on this analogy.
The other day Howard and I were driving back from a client meeting. This client had a software system for managing business transactions and continuously referred to it as a “model”. It seemed odd at first, but it got us thinking…what really is the definition of a model?
