Dr. Russo and Dr. Schoemaker: Decision Traps
Good coaches help people realize their full potential. They focus on a few key points—often simple points. Once you master these points, your play improves enormously.
Becoming a good decision-maker is like becoming a good athlete.
You need to examine the process of decision-making systematically.
You need to know how each part of the process contributes to an excellent decision, and to know the errors associated with each part. And you need to work consistently on eliminating errors you still commit in each phase.
The right way to play golf often violated your intuition. (Most beginners for example think that they should bend their arms as they swing a golf club.)
So also, the right way to make decisions often violates your national inclinations.
4 key elements:
- Framing
It is important to define what must be decided and determine what criteria would cause you to prefer one option over another. Simplify the world by deciding what aspects are important and which are not.
Ex. In deciding whom to promote, you may simply define the problem as “Selecting the person whose leadership is likely to produce the best performance in the work group.” Note that this viewpoint pushes other aspects of the issue into the background, such as the ability to connect with other parts of the organization, rapport with external clients, etc.
- Gathering Intelligence
Seeking both the knowable facts and the reasonable estimates of the unknowns which you will need to make the decision.
Good decision-makers manage this gathering with deliberate effort to avoid such failings as overconfidence and confirmation bias.
- Coming to Conclusions
A systematic approach forces you to examine many aspects and often leads to better decisions than hours of unorganized thinking would.
- Learning from Feedback
Everyone needs to establish a system for learning from the results of past decisions. This usually means keeping track of what you expected would happen, systematically guarding against self-serving explanations, and making sure you review the end result. (Peter Drucker-esque feedback analysis)
Decision Trap 2: Frame Blindness
Setting out to solve the wrong problem because you have created a mental framework for your decision, with little thought, that causes you to overlook the best options or lose sight of important objectives.
Companies frequently suffer years of losses because they box themselves into sensible-sounding, but fundamentally inappropriate, frames.
The best frames will highlight what is important and relegate to the shadows what is not.
Rational decisions should be based on comparisons between future gains and future costs. (Not past losses which are irrelevant)
“The test of a first-rate intelligence is the ability to hold two opposite ideas in mind at the same time and still retain the ability to function.” —F. Scott Fitzgerald
The key to sound decision-making is knowing your own frames.
You need to understand how you have simplified your decisions.
A key to communicating with other people is: Know their frames.
If you understand how others frame problems, you can tailor your communication to them.
Decision trap: Overconfidence in Your Judgement
Failing to collect key factual information because you are too sure of your assumptions and opinions.
Confirmation bias - An inherent human tendency is to seek opinions and information that favor or support our current beliefs and to dismiss evidence that contradicts them.
David Oglivy says he succeeded in advertising because he was always ready to run a few ads he deemed to be losers. Invariably, some were big hits, leading him to revise his theories.
Intuition-based decision making is fine for small scale decisions, however for larger decisions you can make big mistakes.
Intuition suffers from inconsistency.
Intuitive decisions are not only affected by the factors you should be considering, but also by factors such as fatigue, boredom, distraction, and recollection of facts.
They key benefit to intuition is that it takes less time making a decision than using a more systematic method.
Rules are for the obedience of fools and the advice of wise men.
Conflict among ideas is necessary and valuable if a group decision making process is going to accomplish more than simple groupthink.
Humans have an inherent need for control.
Ex. Two experimental groups of workers were made to endure the same distracting background noise. One of the groups, however, were informed that they could turn off the noise at any time. Although they never touched the control switch, the group with control performed better than the group with no control.