Reference no: EM131979990

Nelson and Winter introduce the notion of the "competency puzzle" to distinguish the extensive foresight and broad level of rationality ascribed to actors in the neoclassical model with the bounded sort of rationality assumed in evolutionary models. The competency puzzle captures the paradox of our willingness to place our faith and even lives in the hands of firms that we are confident can perform highly complex and difficult tasks even as we recognize that these same firms are relatively incompetent from other perspectives. The solution to the puzzle does involves:

a. Recognizing that high competency is often achievable where complex skills can be learned and perfected through practice

b. Understanding that learning stimulated by positive short-term feedback is often particularly effective for mastering complex activities

c. Appreciating that sophisticated foresight, logical deliberation, and effective improvisation involve very different mental processes than do routine, learned behaviors

d. Accepting that when rich and relevant information becomes available to an organization, it usually finds routinized ways of exploiting it.

e. All of the above are parts of the solution to the competency puzzle.