making good decisions somik raha 4/16/2011 [email protected]
TRANSCRIPT
About me• Spent 6 years at Stanford
• 2 getting a Masters in Org. Behavior & Strategy• 4 getting a Ph.D. in Decision & Risk Analysis
Quick Exercise
For each situation below, write down whether you agree or disagree.
A. “The terrible situation in Iraq is proof that Bush made a bad decision invading it.”
B. “I decided to breakup with my boyfriend and am so happy now – that shows my decision was good.”
C. “The Challenger shuttle blew up and therefore the decision to let it launch was a bad one.”
How do you judge the quality of a decision?
You cannot judge the quality of a decision from the outcome!
Drive Drunk, Crash
Drive Drunk, Safe
Drive Sober, Crash
Drive Sober, Safe
Bad Outcome
Good Outcome
Bad Decision
GoodDecision
What do you say now?
For each situation below, write down whether you agree or disagree
A. “The terrible situation in Iraq is proof that Bush made a bad decision invading it.”
B. “I decided to breakup with my boyfriend and am so happy now – that shows my decision was good.”
C. “The Challenger shuttle blew up and therefore the decision to let it launch was a bad one.”
Quick ExerciseFor each situation below, write down whether you agree or disagree with the reasoning below.
A. “We have invested so much time in Afghanistan, and all of that effort would have been for nothing if we pull out now.”
B. “I have invested so much time on my relationship and I don’t want to move on or else all of that investment would be a waste.”
C. “We have spent so much money on tutors and my skills have still not improved. Even though I believe the next tutor will succeed, I have lost too much money to justify any further expense.”
The Sunk-Cost Principle
The past matters only for learning, not for accounting!
What do you say now?For each situation below, write down whether you agree or disagree with the reasoning below.
A. “We have invested so much time in Afghanistan, and all of that effort would have been for nothing if we pull out now.”
B. “I have invested so much time on my relationship and I don’t want to move on or else all of that investment would be a waste.”
C. “We have spent so much money on tutors and my skills have still not improved. Even though I believe the next tutor will succeed, I have lost too much money to justify any further expense.”
How do you know you’ve made a decision?
When you’ve made a somewhat irrevocable allocation of resources
Who is the best judge of a good decision?
How do I judge the quality of my decision?
From the process used to make the decision
The Six Elements of Decision Quality
Alternatives
What you can do
Information
What you know
Preferences/Values
What you want
Logic
FRAME
Commitment to action
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The Six Elements of Decision Quality
Creative Alternatives
Useful Information
Sound Reasoning
Commitment to Follow Through
Helpful Frame
Clear Values
What are my choices?
What do I know?
Am I thinking straight about this?
What consequences do I care about?
What is it that I am deciding?
Will I really take action?
Spider Diagrams
John’s Decision Spider
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Exercise• Need a volunteer with a real decision problem• Let’s draw your Decision Spider• Now, let’s test each element and see how we can improve
it
Your turn• 6 volunteers who have decision problems that they are
happy to share: DECISION MAKER• Teams of decision coaches
• Task 1: Produce a spider diagram for the decision-maker• Task 2: Ask questions to help improve the quality of the weakest
elements• Task 3: Reassess spider diagram• Task 4: Decision-maker records 3 things he/she has learned
through the process• Task 5: Decision coaches record 3 things he/she has learned
through the process
Group Decision-making• There’s no such thing, sorry!• If there was, no political science, no marriage counseling• We can, however, agree to align our values, beliefs and
alternatives to act as a single unit
Mistakes in Framing• Too narrow• Too broad• Assumptions not made explicit• Art, not science• Takes many tries
DECISION HIERARCHY
GIVENS
CURRENT DECISION
FUTURE DECISION
Decisions that have already been made
Mistakes in Preferences• Not clear about what is of direct and indirect value to you• Not clear what is on intrinsic value, prudential and
systemic value• If you can’t separate what you care about from who you are, you
are talking about intrinsic values• If you can tell me why something is important, that is probably a
prudential value• If you are counting something (e.g. profit) or dealing with
constructs/laws/rules, those are systemic values
• Knowing your intrinsic values is about knowing who you are• Separate class on The Value of Values tomorrow
Mistakes in Information• Cannot distinguish between data and useful information• Useful information is that information which changes your
decision• How to find out what is useful?
• If there were a clairvoyant in the room who could answer only factual questions about the future, what would you ask regarding your decision situation?
• Let’s try it now!
• Associative logic errors• Males and Haemophilia• Are you considering sample size?
Mistakes in Alternatives• Already decided what you want, and stack it up against
terrible alternatives: “Advocacy-driven decision-making”• There is NO decision to be made between good and bad
alternatives• Decisions have to be made when we don’t know what is
good; when we are confused
If you are not confused, are you coming from a space of clarity, or a space of advocacy?
Mistakes in logic• Being inconsistent with your preferences• Once you learn the math behind this, easy to prevent this
altogether
Mistakes in commitment• Analysis Paralysis• You cannot be a decision-maker without commitment to
action• Question for you: Does commitment reduce your
freedom?
Three Types of Decisions
LegalPrudential
Ethical
Morality
What part of your personal ethical code are you willing to impose on others by force?
Majority of financial decisions fall in this space
Things you can do
Next Steps:1) Check the Decision Education Foundation (decisioneducation.org) 2) Learn Decision Analysis when you get into grad school
Open House
Seed thoughts:A) ETHICS: It ALWAYS makes sense to tell the whole truthB) LAW: It is possible to construct voluntary social systems to solve any
social problemC) PHILOSOPHICAL: Is love/hate a decision or a condition?