ABSTRACT
Two phenomena are characteristic of decision-making in general, and decision-making in business in particular; namely (i) what Simon [1955] called "bounded rationality", and (ii) what Polanyi [1967] has referred to as "tacit knowledge". Bounded rationality simply postulates that simplified, and normally biased, or erroneous perceptions of reality necessarily underlie decisions in complex situations. Hence, deliberate risk taking and frequent mistakes are necessary characteristics of economic life. "Tacit knowledge" means that the competence to decide and take action is embodied in individuals, or teams of individuals. Advanced competence needed for many critical business decisions as a consequence cannot easily, or at all, be communicated to others. In particular, it cannot be traded in bits and pieces in markets.
