The art and science of making better decisions: Lesson 3

Welcome to the third week of 'The art and science of making better decisions' boot camp!

Last week we got to know ourselves as decisions makers in an attempt to understand the context of our decisions and our capabilities as decision makers, and learned about ourselves and our personalities through the Big Five personality trait test.

This week, we'll be learning about why we might make decisions for reasons we can't understand: we'll explore biases, blind spots, and behavioural limitations, and strategies to overcome them.

Required

1. Read an introduction to this week's topic (10 mins)

In no other profession does absolute objectivity play such an integral role as for judges.

It is typical that judges are granted significant discretion in terms of timelines and procedural rules to ensure that each case is ultimately decided based solely on merits so that justice can be served.

Against this backdrop it is quite surprising to learn that hungry judges seem to give out harsher rulings.

In a thought-provoking study conducted in Israel in 2011, a group of researchers found out that the percentage of favorable rulings decreases consistently from ~65 per cent to almost zero as sessions go on, only to return to ~65 percent after the judge has had a break.

What exactly is going on here?

First, it may all be a case of correlation and causation. In fact, later studies and simulations have proposed that harsher judgments earlier in the day may simply be a matter of how difficult cases are scheduled.

What the original study proposed however, was that judges that have engaged in a long series of difficult decisions may come to suffer from ‘ego depletion’ and make harsher decisions as a result.

The theory of ego depletion assumes that all of us have a limited pool of willpower and mental stamina, which we tap into when engaging in activities that require mental acumen and self-control. Once the pool is exhausted, making complex decisions successfully becomes more difficult, and we are likely to find ourselves focused for the next chance at rest and recuperation instead. This is also a wonderful explanation for why skipping the gym and hitting the cookie jar feels so good after a particularly long and dreary day at work!

Ego depletion is by no means the only threat to successful decisions out there.

Many of you will have already heard of the following biases that harm our ability to make rational decisions:

Inertia Past performance is often a strong indicator of future success, which is why repeating what used to work can quickly become the default way of doing things. However, in the realm of complex decisions however, there are no guarantees that what worked yesterday will work equally well tomorrow. Also, we should be much more critical about choosing what is offered to us by default. As Professors Thaler and Sunstein showed in their book “Nudge”, humans are suckers for the default option. In fact, most of us are more than content with maintaining the status-quo - adapting to or inventing novel solutions is mentally more challenging than keeping things the way they are.

Example: Instead of taking last year’s budget as a given default starting point, we could improve our budgeting accuracy by building budgets dynamically based on expenditure assumptions that are tailor-made for the next year.

Peer conformity A close sibling of inertia, our tendency to maintain social conformity with our peers and within our personal networks can lead us to making decisions that are suboptimal at the individual level. While “keeping up with the Joneses” or gushing about the emperor’s new clothes may be a smart social move, it also puts our ability to approach a problem objectively at risk.

Example: In open feedback situations the first discussants tend to set the tone for the remainder of the discussion as many of us find it easier to follow along instead of changing the tone ourselves.

Loss aversion The fact that humans react more strongly to similarly sized losses than gains was introduced to the zeitgeist by Nobel prize winner Daniel Kahneman. While the primordial instinct to avoid losses and remain risk averse served early humanity well, the same bias now threatens our ability to accurately calculate and react to probabilities in connection to complex decisions.

Example: Imagine finding $100 on the way to the grocery store. What luck! Now imagine that you dropped the $100 for someone else to find and rejoice over. If you are anything like the rest of us, the imaginary loss felt worse in relation to the joy of the unexpected windfall. This is loss aversion in action.

The compelling nature of consistency Complex decisions are almost always made in a social context. The act of making a public decision ties the choice we’ve made together with our social image, sense of pride, honor and self-worth. Like sticking up with a sinking ship, the bias of forced consistency makes it difficult to change our minds once we have really put our foot down on a topic.

Example: Most of us find it extremely difficult to undo a decision that has been put in writing even if we have found reasons to do so.

Now that we’ve gone through some of the most typical blind spots all of us have as decision-makers, below are some simple tricks to overcome them:

When it comes to the ego depletion problem, awareness of the issue itself is half of the solution. Acknowledging that we are not inexhaustible decision-making-machines is the first step in timing and pacing your decisions appropriately. The old idiom of eating your frogs in the morning is also helpful given how we deplete our mental stamina across the day.

While there is no silver bullet for the remainder of the biases there is a lot we can do to combat them. The first step is to become aware of how and when the biases strike, and to learn how to recognize their effects on our thinking when it's happening.

For inertia, try to be mindful of the fact that no two problems are the same and that while the default options can be tempting they are rarely tailored to your specific needs. The easiest way to overcome inertia is to jump out of your subject matter and talk with a colleague or expert from another field entirely. Cross-cutting discussions often bring about novel solutions and show how differently the same issues can be tackled.

Peer conformity can be a much trickier problem because it most often arises in a social situation where you need to make decisions and choices on the fly. Here, your best tool is a deep breath and your awareness of the fact that people tend to go with the flow and find ways of conforming to what seems to be the leading way of thought. Practicing the ‘No, but…’ approach to making interventions and suggestions is a good way to make sure that you don’t lose your own voice in the sea of discussants!

As with the previous biases, half of the fight against loss aversion is actively recalling that you are likely to fall victim to it. Announcing your decision rules (e.g. I will accept any job offer that comes with a salary above $80,000) in advance will help deal with situations where real and potential losses might drive you to reject an otherwise ideal choice.

Combatting compelling consistency is a life-long assignment and a daunting one at that. Knowing that we all strive to maintain a positive public image which sometimes leads us to upholding poor decisions might not feel helpful, but acknowledging the fact is the first step towards recovery. A bit of roleplay might be all that is needed from there. As Professor Leon Festinger showed in his research concerning cognitive dissonance, we can bypass and disarm many of our biases by taking on the role of a neutral (and well-fed) judge who is asked to report on both the negative and positive sides of the issue at hand. This is one reason why SWOT matrices and other tools that we will discuss in week 5 work so well in practice.

To help you with this task we’ve included some of the best books around in our digging 'deeper section' for this week.

2. Watch a video on who is in control of decision making (17 mins)

For this week’s activity we will tune in to Professor Dan Ariely’s TED Talk where he asks whether we are in control of our own decisions. The talk builds on decades of research on cognitive biases and what economists would call irrational behaviour when it comes to failing to maximize economic outcomes.

3. Reflect on how biases impact your decision making (5 mins)

After watching the video, we ask that you submit a one-paragraph mini-essay reflecting on how one of the biases discussed in this week’s materials has negatively affected a decision you have made in the past.

Take your learning further

1. Week 3 book club

In his book Predictably Irrational: The Hidden Forces That Shape Our Decisions, Dan Ariely (the catalyst of more than a decade of popular writing on behavioral economics) showcases the various subconscious drivers of our behavior.

In their insightful book Nudge, Richard Thaler and Cass Sunstein discuss how to nudge people out of their default settings.

In Thinking Fast and Slow, Daniel Kahneman gives a tour on cognitive biases, prospect theory and happiness.

2. Read the background articles referenced in today's readings (6 mins each)

To Get Parole, Have Your Case Heard Right After Lunch, WIRED

Extraneous factors in judicial decisions, Shai Danziger, Jonathan Levav, and Liora Avnaim-Pesso

Cognitive Dissonance, Leon Festinger

3. Watch a video (17 mins)

In the video Solving social problems with a nudge, Sendhil Mullainathan discussed how nudges can be applied to even the most seemingly intractable social problems.

4. Join the UN Innovation Network's Behavioural Science Group (for UN employees)

The UN Innovation Network has set up a Behavioural Science Group, which comprises more than 200 members from across 40+ UN Entities and 60 countries.

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