Decision Making

1. Decision Making Decisive: How To Make Better Choices in Life and Work Chip Heath and Dan Heath, Crown Business, 2013

2. The Four Villains ofDecision Making • Narrow framing: • 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.

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. • Overconfidence: • People think they know more than they do about how the future will unfold. • Punditry is the perfect example.

4. Making Good Decisions • 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.” • Reality-test your assumptions: (overcome confirmation bias) • How can you get outside your head and collect information that you can trust?

5. 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. • Prepare to be wrong: (overcome overconfidence) • Plan for an uncertain future – have a Plan B and Plan C.

6. W.R.A.P. • Widen your options. • Reality-test your assumptions. • Attain distance before deciding. • Prepare to be wrong.

7. Effective Decision Making Based on the book Smart Choices: A Practical Guide to Making Better Decisions, John S. Hammond, Ralph L. Keeney, Howard Raiffa, Harvard Business School Press, 1999.

8. The Eight Elements of Effective Decisions • Problem • Objectives • Alternatives • Consequences • Tradeoffs • Uncertainty • Risk Tolerance • Linked Decisions

9. Problem • Be creative about your problem definition • Turn problems into opportunities • Reexamine your problem definition as you go • Maintain your perspective

10. Objectives • Let your objectives be your guide • Objectives determine what information you seek. • Objectives can help you explain your choices to others. • Master the art of identifying objectives

11. Alternatives • Don’t box yourself in with limited alternatives • Use your objectives and ask “how?” • Set high aspirations • Ask others for suggestions • Give your subconscious time to operate • Incubate • Never stop looking for alternatives • Think outside the box, brainstorm

12. Consequences • Compare alternatives using a consequences matrix • Use experts to help define consequences

13. Tradeoffs • Use swaps • Determining the relative value of different consequences is the hard part

14. Uncertainty • Use risk profiles to simplify decisions involving uncertainty • What are the key uncertainties? • What are the possible outcomes of these uncertainties? • What are the chances of occurrence of each possible outcome? • What are the consequences of each outcome? • Use experts to help define possible outcomes

15. Uncertainty • Use a Decision Tree • Alternatives - Uncertainty - Consequences

16. Decision Tree B Go A Go B No Go A B Go A No Go B No Go

17. Risk Tolerance • Understand and calibrate your group’s tolerance to take risks • Incorporate your risk tolerance into all of your decisions

18. Linked Decisions • Linked decisions are complex • Ask: “How will this decision affect other people, other departments, other divisions, partners, your industry?”

19. Decision Making Summary • Problem • Objectives • Alternatives • Consequences • Tradeoffs • Uncertainty • Risk Tolerance • Linked Decisions

20. Seven Basic Rules • Make bold decisions that challenge the status quo • Avoid choices that justify past bad decisions • Check for faulty cause-and-effect reasoning • Test your decisions with experiments (shoot bullets, not cannonballs) • Root out unconscious prejudices • Foster and address constructive criticism • Defeat indecisiveness with clear accountability