If you are a professional of any kind from a banker to an HR executive, a COO or a dentist – you are continuously weighing up options and deciding on the best trade, payoff, treatment or even the best thing to say in a presentation or to a customer. You are a professional decision maker and I’m betting that your success depends largely on the quality of your decisions – both large and small. A good quality decision isn’t always the one with the best outcome. What’s far more important than hitting the bull’s eye every time is to foster a good decision process that ultimately results in incrementally better decisions and hence gains from those decisions over time. So what are the consistent habits or behaviours of professionals who make more good than bad decisions?
1. Be very clear on what is fact, judgement and opinion
At a dinner party this week, a friend and well respected fund manager said quite boldly that everyone is selling China. Everybody? Selling? If everybody is selling than who is buying it? Stock markets only function effectively because of an asymmetry of beliefs – where someone wants to get rid of a position and someone wants to own that same position – so they trade. His statement could not possibly have been a fact or a judgement based on fact but an opinion formed around a trend or what this person had observed in his own limited sphere. It’s fine to believe in our own opinion (self deception is one of the oldest survival techniques and a fascinating topic of decision science) but let’s be very careful when making important decision using opinion as our raw data and not the facts that those opinions interpret.
2. Understand the quality of your information
The internet is now our main font of knowledge; easy, convenient and omnipotent. Google is the McDonalds of information – serving up super-sized helpings of data that have been processed and flavoured by those that have gathered and interpreted this information. You choose the quality of the information that you consume in much the same way that you decide between McDonalds or Subway for lunch on a Tuesday. If you base your thinking, and hence decisions, on quick to access and widely available information (accepted without verification of its underlying data), then your decisions will disappoint on average. Quality information takes time and effort to gather just like a healthy, well balanced meal - there is no quick way around it. Test conclusions, verify interpretations and go to the source of data whenever you can. Actually, go to the data source always. You’ll be glad you did.
3. Distrust how information is packaged and presented
It was Socrates who first proposed that all information occurs within points of view and frames of reference and that all reasoning proceeds from some goal or objective. The poor man was executed for his outrageous thinking. Today this reasoning separates good decision makers from the rest. Without fail, every piece of information that is presented to you is done so through someone else’s frames and hence has been structured in a way that furthers their own cause. Always ask yourself what motivation the journalist, stock broker, surgeon, CEO or any other has when transmitting information. If you have sourced data yourself then beware, that data is filtered through your own mental frames as well.
4. Develop a habit of deciding how to decide first
Do you know what a metadecision is? No? It is the simple act of deciding how you will decide before you jump in and make a decision. It begins by checking that you are, in fact, solving the right problem then asks you to decide how you will solve the problem – with what tools, data and resources. It sounds like a mini project plan because it is. The metadecision forms the very first step in a good decision process because it anticipates challenges, ensures that you are using the best possible tools, ensures that your team members are all on the same page and actually speeds up the decision process. Einstein is said to have said that; If I had only had one hour to save the world, I would spend fifty-five minutes defining the problem and five minutes finding the solution. Even if it wasn’t the great man himself who said this, every great decision maker knows this.
5. Control for the impact of emotions on your thinking
Did you know that the hormones that make you feel sad also promote thinking and the hormones that make you feel so happy you could sing increase your appetite for risk in much the same way that red hot anger does. Emotions result from a cocktail of various hormones generated in response to information we receive (and interpret) through our own 5 senses. We can’t stop or remove the effect of emotions on our thinking but we can identify them and ensure that, when making important decisions, we control for the effects of our mental state – whether that be tiredness, frustration, disappointment, confidence after a successful deal or irritation at our boss. Everyone of these impact how we process and frame information.
6. Tell convincing stories to understand risk
All decisions involve risk – the bigger the decision the larger the risk but also the reward for getting it right. Risk assessment and management tools are only as useful as the skills of those who program and use them. Housing bubbles from ill thought out economic policy, stock market crashes, bank runs and corporate failures are part and parcel of our complex and risky political, financial and business environment. The risks that cause these things are usually the ones that no-one paid attention to or could have foreseen when making the decision or setting policy. Whilst it’s very hard to know what you don’t know the ability to imagine alternative futures is becoming more important around the board room table. In trying to understand the risks to your project allow team members to create narratives of future scenarios from the most likely to the most implausible. To be communicated as stories with characters of fact or fiction. History has shown us that the most unlikely scenarios at the beginning are the ones that do the most damage at the end.
7. Judge decisions by their process not their outcome
This is the fundamental premise of decision science - that good decisions are never random inspirations hastened by a moment of genius or lucidity - a process is used (consciously or subconsciously) by anyone who makes consistently good decisions because no-one is consistently lucky.
Do you have a decision making process that allows you to reflect on and refine your approach to problem solving? I won’t dictate a decision process as it’s as personal as your belief system but sound processes usually make space for
- A metadecision
- An understanding of how information is framed
- Checking for motives, mental mistakes and biases in all stakeholders
- Counteracting the effect of strong emotions
- Thorough scenario analysis
Good decision making is a science of skill and knowledge the more you practice it, the luckier you’ll become.
About the author: Tremaine is a behavioural economist and lecturer in Critical Thinking, based in Asia. Follow Tremaine on Facebook for weekly thoughts on thinking and raising your children as critical thinkers at http://www.facebook.com/tremainedupreez or her blog at http://www.tremainedupreez.com/raising-thinkers-blog/
Her latest book, Raising Thinkers - Preparing your Child for the Journey of a Lifetime will be out soon.