In their FAZ guest article "Illusion of Predictability", Burkhard Schwenker and Franz Schencking are of the opinion that modern business administration will gain "credibility and persuasive power" if it gives up the illusion mentioned in its title.
Individually perceived events with a profound effect on companies, such as an unexpected pandemic or a war that suddenly began, elude the predictability assumed in conventional business administration, but could probably be captured in the formation of scenarios and the entrepreneurial reaction to them.
These reactions should be subject to a new kind of rationality.
However, this concept contains a variety of assumptions that are also well known in conventional business administration and can guide entrepreneurial action.
A “rational choice” is regarded as the “theoretical basis” of the predictability of business decisions, which assumes means-end relationships with certainty or with “objectively determinable probabilities”.
Such a narrow perspective appears in business administration at best in illustrative model considerations for gaining a basic understanding of certain relationships.
There is no need to invent a new business administration
In this respect, the question does not arise as to whether these assumptions are “still” tenable.
At least since Frank Knight's book "Risk, Uncertainty and Profit" from 1928, business administration has known and used both the concept of subjective uncertainty, in which probabilities are roughly based on different assessments of the world, or objective uncertainty, in which no subjective probabilities can be estimated either are.
The subjective probabilities are not taken into account in the FAZ guest article.
It seems that this is the only reason why “calculability is lost”.
The authors conjure up an illusion of unpredictability.
This also raises the question of where the scenarios come from as a basis for decision-making.
If no idea succeeds in developing a certain scenario, then it cannot be relevant to the decision.
If there is an idea about a scenario, then the individual decision-maker - also considered in the article - can endeavor to develop subjective probabilities of occurrence for it.
What does the Delphi method show?
In response to the question posed in the article, among other things, how long the war in Ukraine will last, periods of time covered with different probabilities can be developed.
Experiments with the Delphi method of prediction have revealed that such probabilities depend, among other things, on the individual level of information and can be influenced by the supply of information from other people.
Therefore, all scenarios do not have to appear “equally probable” to the individual decision-maker “in a first approximation” – apart from what kind of probability the authors have in mind here.
Many other similar examples can be cited, such as the concept of risk-bearing capacity developed by Harry Markowitz or the buffer for financial balance developed by Abraham Charnes and William Cooper.
It is therefore not necessary to invent a new business administration if one examines the entire stock of methods and concepts with regard to their applications and, if necessary, adapts them to new, even imaginary, situations.