Good Decisions Don’t Grow on Trees
You probably would say that you make good decisions, and would probably be hard-pressed to find somebody who admitted to being a bad decision maker.
But in reality, good decisions don’t just grow on trees – good decisions take a lot of effort and thought.
Further, we could all probably benefit from strengthening our decision making skills. Most people tend to fall into the same decision making errors on such a consistent basis that researchers have been able to identify and name these behaviors. These biases and heuristics that people use as mental shortcuts in decision making reliably result in less-than-optimal decisions.
A famous example is called “anchoring”. Anchoring is the reason commercials often say things like “the suggested retail price is $12,000, but we will sell it to you for $9,999”. Your brain gets hooked onto the first number ($12,000), and causes you to think “oh wow, $9,999 is less than $12,000, I must be getting a great deal”. Whether it is actually a great deal or not is another question altogether.
Other biases include favoring actions that perpetuate the status quo, making decisions based on sunk costs, and being overconfident in our estimates of uncertain quantities (1). These unconscious biases also affect how we collect data – we tend to seek out information that confirms what we already believe, and discount evidence that contradicts our beliefs. This is known as “confirmation bias” (1).
Daniel Kahneman, psychologist and Nobel Laureate in Economics, describes that we makes these routinely bad decisions because we essentially have two settings in our brain for how we think – fast and slow. Most of the time we use our fast system, which to us seems automatic. If we are asked if we would rather have chocolate or vanilla ice cream, we can nearly instantaneously choose which flavor we prefer. But if you are asked to plan an entire birthday party, on a fixed budget, including ice cream, cake, activities, etc., then you switch to your slower thinking system. This system takes a lot more mental energy. The problem is that while this way of thinking produces better outcomes, it is a lot of effort, and so we come up with mental shortcuts, like the ones described above, to reduce the cognitive load (2).
The problem is that when we are trying to make an important decision, we obviously want to make the best decision we can. And that cannot happen if we unconsciously sabotage ourselves through decision making biases. For instance, if we collect data that only confirm what we already believe or want to believe, regardless of whether it is true or not, then we really are not making informed decisions. And if we allow ourselves to be anchored to certain alternatives, then we may be missing out on other alternatives, leaving value on the table.
Similar to going to the gym to exercise our muscles to get stronger, we need to practice our decision making muscles. If we don’t build these decision making skills, we run the risk of making sub-optimal decisions.
And in the same way that it helps to have a personal trainer when you go to the gym, having a trusted advisor who is trained in the discipline of decision analysis can help guide you on the path of making well-informed decisions and avoiding common pitfalls. Working with someone who can provide proven methods and tools can help you learn the art and science of decision making which you can carry into the future.
The best decisions are those that are well thought out, and consider all of the available alternatives, data, uncertainties, and personal preferences. This takes effort to do effectively – so why not enlist the help of a decision making expert?
Collier Research Systems possesses exactly the expertise needed to help your company make tough strategic decisions, and can help you build your decision making skills and competence. To learn more about how we can help you strengthen your decision making muscles, visit www.collierresearchsystems.com.
(1) Hammond JS, Keeney RL, Raiffa H. 2006. The Hidden Traps in Decision Making. Harvard Business Review, January 2006.
(2) Kahneman D. 2011. Thinking Fast and Slow. Farrar, Straus and Giroux: New York.