One of the interesting premises of the book is our need to accept human limitations and start using reasonable heuristics to compensate for shortcomings of our brain.
The Four Villains of Decision Making
- You encounter a choice. But narrow framing makes you miss options.
- You analyze your options. But the confirmation bias leads you to gather self-serving information.
- You make a choice. But short-tern emotion will often tempt you to make the wrong one. “What would our successors do?” – Andy Grove (Intel)
- Then you live with it. But you’ll often be overconfident about how the future will unfold.
WRAP process of decision making:
- Widen your options.
- Reality-test your assumptions.
- Attain some distance.
- Prepare to be wrong.
Widen your options
A: Buy Snapple
B: Don’t buy Snapple. Keep the $1.8 billion for other purchases.
A: Fire an employee who excel at one task but fails in another task.
B: Is it possible to reorganize work to allow the employee work on more tasks where he/she excels?
“Whether of not” decision should set off warning bells.
Multitracking – consider more than one option simultaneously.
Web designers designing online ads simultaneously created more successful and creative ads – and were more satisfied with the process.
Beware of “sham options.” (Kissinger: “Nuclear was, present policy, or surrender.”) One diagnostic: if people on your team disagree about the options, you have real option.
Toggle between the promotion and prevention mindsets. Prevention focus = avoiding negative outcomes. Promotion focus = pursuing positive outcomes. Companies who used both mindsets performed much better after a recession.
To widen your options:
- Find someone who solved your problem.
- Look for your own “bright spots
- Look for analogies in other areas: Fiona Fairhurst designed a speedier swimsuit by laddering up and analyzing “anything that moves fast,” including sharks and torpedoes.
Reality-Test your assumptions
Consider the opposite. Use devil’s advocate, murder boards, etc.
We can test our assumptions with a deliberate “mistake:” a firm won a million dollars in usiness by experimenting with the RFP process.
“Zoom in, zoom out:”
- If you can not find a “base rate” ask the expert. Experts are good for base rate, but not good for predictions of the future.
- “Zoom-in” Xerox: Anne Mulcahy overcome an issue of her executives distance from the customers. Executives on rotating basis serve as customer officer of the day. The customer officer of the day dealt with all complaints that came to the company that day.
Ooch: Ooching – running small experiments to test our theories.
- Ooching is useful when we can predict the future, but can try (students volunteering in their chosen field before finalizing their major)
- Research shows that experts’ predictions are worse than simple extrapolations from base rates.
- CarsDirect tried selling cars over the internet before major business investment.
Common hiring error: We try to predict success via interviews rather than ooching. Studies show that interviews are less diagnostic than work samples, peer rating, etc. Can you nix the interview and offer a short-term consulting contract?
Attain distance before deciding
10/10/10 rule provides distance by forcing us to consider future emotions as much as present ones.
- How would you feel about your plan in 10 minutes?
- How would you feel about your plan in 10 months?
- How would you feel about your plan in 10 years?
What would I tell my best friend to do in this situation?
Pursue core prioreties: On the USS Benfold, the crew actively fougth the List B items like repainting( e.g., by using stainless-steel bolts that would not leave rust stains).
Prepare to be wrong
Bookend the future – consider the range of outcomes from very bad to very good.
Use premortem: “It is a year from now. Our decision has failed utterly. Why?”
Use preparade: “It is a year from now. We are heroes. Will we be ready for success?”
Anticipating problems helps us cope with them. The “realistic job preview”: Revealing a job’s warts up front “vaccinates” people against dissatisfaction.
Set a tripwire. Tripwire can snap us awake and make us realize we have a choice. Zappos’ $1000 “to quit” offer created a conscious fork in the road for new hires. Tripwires can have a safe space for risk taking.
Trusting the process: decisions made by groups have an additional burden: They must be seen as fair.