What’s So Great About Tacit Knowledge?

26 October 2006 at 6:48 pm 5 comments

| Peter Klein |

The knowledge management and capabilities literatures are in love — in love with tacit knowledge. Managing tacit knowledge, leveraging tacit knowledge, growing tacit knowledge — these are seen as the keys to achieving sustained competitive advantage. Economists, too, have gotten into the act, asking how incentive plans and the allocation of decision rights affects employees’ use of dispersed, specific knowledge. And, of course, F. A. Hayek’s analysis of socialism is built on the notion that centralized systems without markets and prices cannot make effective use of tacit knowledge.

But is tacit knowledge always “better” — more correct — than explicit knowledge? The knowledge management and capabilities literatures seem to take this for granted. And yet, a growing body of evidence on behavioral anomalies suggests that cognitive biases and heuristics can render individual judgments unreliable.

This came to my mind when reading Alex Tabarrok’s recent comments on the surprisingly primitive practice of medicine (here and here).

As Alex points out, diagnoses made by expert systems are on average more reliable than diagnoses made by physicians, despite the latter’s personal relationships with, and specific knowledge of, their patients. Doctors, quite simply, forget things and make mistakes. It’s not their fault; they are only human, after all. But that is the problem. Writes Alex: “we (doctors and patients) have a model in our head of the nearly omniscient doctor carefully attending to the needs of every patient on an individualized basis — medicine as craft. Instead what we need is medicine by the numbers.”

Incidentally, the Cantillon-Knight-Mises notion of entrepreneurship as judgment, discussed in several of these papers, does not assume that entrepreneurial judgments are necessarily correct, or more accurate than forecasts made by computers, only that the market process embodies a filtering mechanism for selecting those entrepreneurs whose judgments are better than those of other market participants. (See also the discussion here.)

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5 Comments Add your own

  • 1. JC  |  26 October 2006 at 11:32 pm

    Ah well, what is tacit knowledge anyway? If we knew what it was it wouldn’t be tacit would it?

    Hari Tsoukas and Steven Gourlay have probably done as much as any two English-speaking chaps to help us make something useful out of the concept. But for the most part, the discussion of tacit knowledge is sheer obscurantism.

  • 2. Joseph Mahoney  |  27 October 2006 at 9:38 am

    First, Peter, I believe that a world class social scientist in psychology could give you a serious answer to “what’s so great about tacit knowledge”? in which s/he might discuss Gestalt psychology and “indwelling.”

    At best what I can do is to offer a look at the words of an original thinker on the subject of skills (Polanyi, 1962: 49):

    “I shall take as my clue for this investigation the well-known fact that the aim of a skillful performance is achieved by the observance of a set of rules which are not known as such by the person following them. For example, the decisive factor by which the swimmer keeps himself afloat is the manner by which he regulates his respiration: he keeps his bouyancy at an increased level by refraining from emptying his lungs when breathing out and by inflacting them more than usual when breathing in; yet this is not generally known to swimmers.”

    And lets take Nelson and WInter (1982: 78):

    “It seems clear that the “tacitness” of a skill, or rather of the knowledge unifying a skill, is a matter of degree. Words are probably a more effective vehicle for communicating the skills of elementary algebra than for those of carpentry, and more effective for carpentry than for gymanistic stunts. Also, a trait that distinguishes a good instructor is the ability to discover introspectively, and then articulate for the student, much of the knowledge that ordinarily remains tacit.

    Also, Peter, in response to your comments, what comes to mind is the following from Polanyi and quoted on Nelson and Winter (1982: 119):

    “Even in modern industries the indefinable knowledge is STILL AN ESSENTIAL PART OF TECHNOLOGY. I have myself watched in Hungary a new, imported machine for blowing electric lamp bulbs, the exact counterpart of which was operating successfully in Germany, failing for a whole year to produce a single flawless bulb.”

    In the management literature, Nonaka and Takeuchi’s THE KNOWLEDGE-CREATING COMPANY has thoughtful commentary on tacitness.

    I also believe that some of the more important ideas that we learn in our life we take to the grave, the rest of it we put into our research articles.

  • 3. Peter Klein  |  27 October 2006 at 4:07 pm

    Joe, I don’t disagree at all with the statements by Polyani and Nelson and Winter about the potential value of tacit knowledge. I’m simply suggesting that the KM literature is not sufficiently comparative, failing to take into account the potential drawbacks of reliance on tacit knowledge as well. Clearly tacit knowledge has value. But so does explicit knowledge. In some cases — as in medicine, it seems — the costs of heavy reliance on tacit knowledge may outweigh the benefits.

  • 4. Joseph Mahoney  |  28 October 2006 at 10:17 am

    Peter, being a doctoral student of Oliver Williamson in the Economics Department at University of California at Berkeley — can you detect a hint of jealousy from me — makes you “relentlessly comparative.” And, the Nonaka and Takeuchi book on THE KNOWLEDGE-CREATING COMPANY may resonate with you.

    That said, I think the main point of Polanyi’s (1962) PERSONAL KNOWLEDGE is that we have no choice but to rely on tacit knowledge. To read Polanyi’s words closely: “We know more than we CAN tell.”

  • 5. Patrick Herron  |  1 November 2006 at 11:41 pm

    You may have missed perhaps the definitive critique of ‘knowledge management,’ authored by TM Wilson. (see http://informationr.net/ir/8-1/paper144.html).

    In his highly cited “The nonsense of ‘knowledge management’,” Wilson uses Polanyi’s text to examine problems with how KM people use ‘tacit knowledge.’

    The “that’s not what Polanyi meant by ‘tacit’” critique of KM has been taken repeatedly in information science (IS) since Wilson’s article. It has even been more recently expanded upon in JASIST, a journal that is sort of the Nature of IS (http://dx.doi.org/10.1002/asi.v56:6).

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