The Art and Science of Decision-Making

1. The Art and Science of Decision-Making February 10, 2014 Robert S. Duboff Robert.Duboff@hawkpartners.com 617-576-4701

2. Course Slides The Art and Science of Decision-Making – Spring 2014 – MGMT-5750 • Week 1 • Introduction of individual students and their reasons for taking the course • Finalize syllabus as/if needed • Organization of course: address specific issues each week • Is decision-making primarily rational or emotional? • Attributes of a “good decision” • Assignment: Short essay on whether study of decision-making is an art or a scienceView Super Bowl Ads • Week 2 – Perspectives on Decision-Making • Is the study of decision-making more an art or science? • Discuss the noteworthy Super Bowl ads • Implications about how consumers make decisions • Assignment: Take MBTI

3. Course Slides • Week 3 – Individual Differences • Contexts for thinking about decisions • Rational vs. emotional • Prospective vs. retrospective • Individual vs. group decisions • Advising vs. making decisions • Personal vs. business vs. government contexts • Discuss MBTI and implications on decision-making • How can understanding personal differences help in explaining decisions? • Assignment: Read Blink by Gladwell (Chapters 1-4; Conclusion) • Week 4 – Self-Awareness • Discuss Blink and implications for decision-making • Does self-awareness help or hurt decision-making? • How does knowing yourself help in making decisions about moving or a career change; about leading a team? • Assignment: Select essay topicRead Thinking, Fast and Slow by Kahneman (Chapters 1-4, 10-13, 19-21, 27)

4. Course Slides • Week 5 – What Impacts Decisions – When and How to Make • Timing of decisions (and how to influence) • What does science (in terms of type 1 and type 2 delineation) tell us about making decisions? • Assignment: Essay due applying MBTI and reading to a past decision Read Deciding How to Decide, HBS, Nov. 2013 (from web site) • Week 6 – The Scientific Approach • Decision trees • Reprise – is decision-making art or science? • Process vs. the decision itself • Assignment: Read legal case from course web site • Week 7 – Individual vs. Group Decisions • When are group decisions better/worse than individual decisions? • In business • In families • Are juries rational or emotional? Voters? • Assignment: Decide on an advocacy role

5. Course Slides • Week 8 – Influencing Decisions • Students present their arguments for what they advocate • Role of influencer(s) • Art or science? • Assignment: Write a short paper on takeaways from the advocacies • Week 9 – Decision-Making Debrief and Decision-Making Process • What have we learned about decisions? • Best process(es) • Use of group (or not) • Role of information/ “facts” • What are the right metrics for decisions? • Assignment: Select final paper topic (3-5 pages) • Read Competing on Analytics and The Ultimate Measure (from web site)

6. Course Slides • Week 10 – Supporting Decisions • Developing the information you/someone else needs • Market research • How to make decisions with imperfect knowledge • “Big data” vs. “insights” • How should we measure/post-audit decisions? • Assignment: Select final paper topic • Week 11 – Positioning and Communicating Decisions • The importance of words • The impact of implementation on how the decision is viewed • Assignment: Read Complexity Theory and Negotiation, HBS, June 2002 (from web site) • Week 12 – Negotiation • Negotiation within a as well as between parties • Are explicit negotiation agreements (e.g., arbitration) a good model for all decisions? • Assignment: Complete final paper • Read Being Wrong by Schulz: Chapters 1-3, 13-15

7. Course Slides • Week 13 – The Decision-Making Process • What have we learned about decisions? • Best process(es) • Use of group (or not) • Role of information/ “facts” • How do you ensure there is learning; improving one’s decision-making? • Assignment: Complete final paper on a decision to be made in the future • Week 14 – How Can We Make the Process and Substance of Decisions Better? • Summary of course • Is decision-making a puzzle or a mystery?

8. Issues to Discuss • Art or science • Process vs. the moment of truth • For your consideration • Replicability; predictability • The role of risk • The role of facts

9. Quotes • “Artists take as central what scientists (and the rest of us) usually sideline as much as we can: that reality as we know it is inevitably askew, refracted through an individual and idiosyncratic mind.” • - Kathryn Schultz, Being Wrong • “We all know that Art is not truth. Art is a lie that makes us real.” • - Picasso “Advertising is fundamentally persuasion and persuasion happens to be not a science, but an art.” - Bill Bernbach “Advertising is based on fixed principles and is reasonably exact. We know what is most effective and we act on basic laws.” - Claude Hopkins

11. MBTI: Understanding Communications Preferences in Yourself and Others

12. Common Uses of the Myers-Briggs Type Indicator There are several important uses for MBTI theory: • Understand self • Explore implications for communication • Understand that others are different from you • Understand others’ preferences and how to speak their “language”

13. It is important to remember what MBTI theory is and what it is not What It Is What It Is Not • A theory describing observable personality distinctions • A measure of individuals’ preferences in communication • A framework to explain some aspects of perception and decision-making • Based on actual empirical data or “provable” experiments • A statement about who someone is or even how they commonly act • An all-encompassing explanation of personality, thought process, and individual psychology

14. Cognitive Functions & Functional Development S, N, T, and F are called the cognitive functions in MBTI theory. Humans use all 4 cognitive functions, but naturally we develop the ones that we prefer first. • Test-Retest Reliability: • <9 mos>9 mos • Same on 1 or more ~100% 99% • Same on 2 or more 98% 94% • Same on 3 or more 87% 72% • Same on all 4 51% 36% • <9 mos>9 mos • E-I 82% 75% • S-N 87% 76% • T-F 82% 75% • J-P 83% 77%

15. The Four Scales I Where do you get energy? E Extravert Introvert S How do you take in information? N Sensing Intuition T F How do you make decisions? Thinking Feeling P J How do you deal with the outside world? Judging Perceiving

16. Extraversion vs. Introversion Where do you get energy? E I Extravert Introvert Learn best through doing or discussing Characteristics: Focused on outer world of people and external events Prefer to communicate by talking Tend to speak first, reflect later Sociable and expressive Learn best by reflection Characteristics: Drawn to their inner world of ideas and thoughts Prefer to communicate in writing Tend to reflect before acting or speaking Private and reserved

17. Extraverts/Introverts within the U.S. Population Extraverts 49% 51% Introverts Men: 48% E 52% I Women: 50% E 50% I Class ‘13: 62.5% E 37.5% I This Class:61% E 39% I Source: Center for Applications of Psychological Type (capt.org)

19. Sensing and Intuition How do you take in information? S N Sensing Intuition Characteristics: Characteristics: • Take in information through five senses • Focus on what is real and concrete • Value practical applications, common sense • Want information step-by-step • Trust experience and facts over gut instinct • Use details to build up a big picture • Oriented to the present • Take in information through “sixth sense” • Focus on possibilities • Value innovation and imaginative insight • Jump around, leap in anywhere • Trust inspiration, “gut feel” • Start big picture, don’t want details • Oriented to the future

20. Sensors/Intuitives within the U.S. Population Intuitives 30% 70% Sensors Men: 68% S 32% N Women: 72% S 28% N Class ‘13: 52% S 48% N This Class:25% S 75% N Source: Center for Applications of Psychological Type (capt.org)

22. Thinking and Feeling How do you make decisions? T F Thinking Feeling Characteristics: Characteristics: • Use cause-and-effect reasoning • Focus on content and analysis • Look for outcome that “makes sense” • Strive for impersonal, objective truth • Reasonable • Can sometimes be too critical • Guided by values and feelings • Focus on affect and emotions • Look for outcome that “feels right” • Strive for personal harmony • Compassionate • Can sometimes be illogical

23. Thinkers/Feelers within the U.S. Population 55% Feelers 45% Thinkers Men: 61% T 39% F Women: 29% T 71% F Class ‘13: 55% T 45% F This Class:29% T 71% F Source: Center for Applications of Psychological Type (capt.org)

25. Judging and Perceiving How do you make decisions overall and about your time? J P Judging Perceiving Characteristics: Characteristics: • Systematic, organized, structured • Plan – and stick to it • Like closure – to have things decided • Like to make lists – and want to get everything crossed off • Create agendas – and stick to them • On time • Spontaneous, open-ended, flexible • Adapt – strive for quality • Like things loose and open to change • Avoid lists, or at least completing everything on them • Don’t always stick to agendas • Casual about time

26. Judgers and Perceivers within the U.S. Population 43% Perceivers 57% Judgers Men: 58% J 42% P Women: 56% J 44% P Class ‘13: 68% J 32% P This Class:82% J 18% P Source: Center for Applications of Psychological Type (capt.org)

28. Each of our cognitive functions also have a preferred “attitude” “Attitude” refers to whether a function is used in an introverted manner or in an extraverted manner. For example: • Introverted Sensing (Si) reviews prior facts, instructions, and details in one’s mind • Extraverted Sensing (Se) gathers facts and details from the outside world • Introverted Thinking (Ti) analyzes things logically before taking action • Extraverted Thinking (Te) organizes things logically while taking action An ESTJ or ISTJ will typically practice Si and Te, while an ESTP or ISTP will typically practice Se and Ti.

29. Tips for Communicating with… Es Is • “Rope-a-dope” • Voicemail • Meetings • Respond quickly • Materials in advance • Email • Breaks from meetings • Respect personal space

30. Tips for Communicating with… Ns Ss • Start with the headline, conclusions, big pictures • Ask before giving details • Use analogies • Focus on possibilities • Start with the data..let them play with it • Exhaust all questions • Be specific • Focus on process

31. Tips for Communicating with… Ts Fs • Appeal to logic; “I think…” • State criteria first • Include human issues as a criteria if appropriate • Deal with logic, structure • Appear organized • Appeal to emotions • “I feel…” • Focus on the human implication • Can include the need for people to think the decision is a good one • Deal with values, impact on others • Appear friendly

32. Tips for Communicating with… Js Ps • Don’t (appear to) force a decision • Allow questions • Provide choices, outcomes • Provide a threshold for a decision to be made • Do not appear to expect a particular outcome • Expect, respect schedules, deadlines, etc. • Come to a conclusion • Provide a time for a decision to be made • Set expectations for outcome

33. The 16 Types – General Population (Class) Sensing Types Intuitive Types ISTJ ISFJ INFJ INTJ 13% (5%) 12% (7%) 2% (11%) 3% (11%) Introverts ISTP ISFP INFP INTP 7% (0%) 5% (0%) 4% (7%) 5% (0%) ESTP ESFP ENFP ENTP 4% (0%) 3% (0%) 7% (11%) 7% (0%) Extraverts ESTJ ESFJ ENFJ ENTJ 11% (7%) 4% (28%) 2% (7%) 11% (7%)