Decision Making

Report
Decision Making
Decisive: How To Make Better Choices
in Life and Work
Chip Heath and Dan Heath, Crown Business, 2013
The Four Villains of Decision Making
1.
Narrow framing:
–
2.
The tendency to define our choices too
narrowly, to see them in binary terms.
Confirmation bias:
–
To develop a quick belief about a situation
and then seek out information that bolsters
our belief.
The Four Villains of Decision Making
3.
Short-term emotion:
We are governed in decision making by how
we feel about a situation and not necessarily
about the long-term effects of a decision.
–
4.
Overconfidence:
People think they know more than they do
about how the future will unfold.
–
•
Punditry is the perfect example.
Making Good Decisions
1.
Widen your options: (overcome narrow
framing)
– How can you expand your set of choices?
• Rather than “either/or” binary options, uncover new
options and think “this and that.”
2.
Reality-test your assumptions: (overcome
confirmation bias)
–
How can you get outside your head and
collect information that you can trust?
Making Good Decisions
3.
Attain distance before deciding: (overcome
short-term emotion)
– Wait a couple of days—sleep on it. Use Ben
Franklin’s method of making a long pros and
cons list over several days, and then analyzing
it objectively.
4.
Prepare to be wrong: (overcome
overconfidence)
–
Plan for an uncertain future – have a Plan B …
and Plan C.
WRAP
•
•
•
•
Widen your options.
Reality-test your assumptions.
Attain distance before deciding.
Prepare to be wrong.
Heuristic Biases and
Cognitive Traps
The Ascent of Money: A Financial
History of the World
Niall Ferguson, Penguin Press, 2008
1.
Availability bias:
– Causes us to base decisions on information
that is more readily available in our memories,
rather than the data we really need.
2.
Hindsight bias:
– Causes us to attach higher probabilities to
events after they have happened (ex post)
than we did before they happened (ex ante).
3.
The problem of induction:
– Leads us to formulate general rules on the
basis of insufficient information.
• The Polo Assumption
4.
The fallacy of conjunction (or disjunction)
– We tend to overestimate the probability that
seven events of 90 percent probability will all
occur, while underestimating that at least one
of seven events of 10 percent probability will
occur.
5.
Confirmation bias:
– Inclines us to look for confirming evidence of
an initial hypothesis, rather than falsifying
evidence that would disprove it.
6.
Contamination effects:
– We allow irrelevant but proximate information
to influence a decision.
7.
The affect heuristic:
– Preconceived value judgments interfere with
our assessments of costs and benefits.
8.
Scope neglect:
– Prevents us from proportionately adjusting
what we should be willing to sacrifice to avoid
harms of different orders of magnitude.
– Promotion focus versus a Prevention focus
9.
Overconfidence in calibration:
– Leads us to underestimate the confidence
intervals with which our estimates will be
robust (.e.g. to conflate the “best case”
scenario with the “most probable” scenario).
10.
Bystander apathy:
– Inclines us to abdicate individual responsibility
when in a crowd.
• Akin to Group Think

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