The art and science of making better decisions: Lesson 4

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

Last week we explored some of the most typical biases and cognitive blind spots that can hamper our decision-making if left unchecked.

This week, we will focus on improving our understanding on what makes decisions difficult and what can we do to better come to terms with different types of problems that we are faced with.

Required

Read an introduction to this week’s topic (5 mins)

As we’ve seen throughout this boot camp, choices come in different flavors that range from the mindlessly mundane to the excruciatingly difficult.

Simply identifying a decision as easy or difficult is a trivial task, but understanding what makes them so is quite a bit more involved.

Thankfully, we need not worry about why a particular choice is difficult to make in most cases. However, if we wish to improve our decision-making skills, we first need to have a solid understanding of why decisions differ from one another.

One instinctively effortless way of categorizing problems is by their impact.

We are all familiar with high-stakes decisions, which quite literally toe the line between riches or ruin and life or death.

Perhaps surprisingly, most high-stakes decisions are not difficult per se. For example, deciding whether to fight an invading regime or to stand up for human rights is not intellectually challenging even though it might entail a heroic effort operationally.

And while no-stakes and low-stakes decisions are typically no-brainers that can be easily automated, outsourced or pre-determined, they too can be exceedingly difficult to make under certain conditions.

When we dig deeper into why certain decisions feel more difficult than others, we are sure to encounter either the twin-threats of uncertainty and ambiguity.

Uncertainty can emerge from numerous sources. Gaps in our knowledge, imperfections in our data, and poorly tuned models are examples of commonplace wellsprings of uncertainty. In certain areas like finance and politics, the markets and participants themselves act as additional sources of uncertainty.

Luckily for us, probability theory (a topic which our bootcampers with economics backgrounds will be most familiar with) has given us a treasure trove of tools to deal with uncertainty e.g. the prevailing mortgage rates, betting spreads etc.

It’s only when we deal with ambiguity that we can find ourselves truly out of luck.

Watch a video on why hard choices are so hard (15 mins)

In this video, Professor Ruth Chang talks about how hard choices are not hard simply because we lack the knowledge, time or capacity to make them. Instead, hard choices are hard because there is no best option.

As Professor Chang shows, in order to fully understand decisions we need to be aware of the fact that choices can at times be ‘on par’ with each other without any particular option being clearly the best alternative.

Reflect on what factors make decisions difficult, and how to overcome them (10 mins)

For this week’s activity we ask you to spend a few moments reflecting on the following two hypothetical problems that may be all too familiar for you.

1. You have just been offered your dream job, but taking it up would mean moving to a new country and uprooting your family in doing so. Do you take the job or not?
2. You’re a senior politician and a new vaccine has been developed for a deadly and ravaging disease that afflicts your constituents. The tests about its safety were inconclusive. Do you approve its release to the public?

Use the terms, tools and insights you’ve learned thus far to come up with answers to the following:

• What factors make this decision difficult, if anything?
• What biases am I likely to encounter when making this decision?
• Do people typically succeed in making the right choice?
• Have I succeeded in making the optimal choice in similar situations?

Submit your answers by using this link, or write them down on a piece of paper.

Bonus video (11 min)

As a special treat for coming this far with us, we’ve sharing an exclusive one-on-one interview with Professor Dan Ariely on the topic of decisions and biases, prepared specifically for this course.

Take your learning further

1. Week 4 Book Club

In her book Complexity: A guided tour, Melania Mitchell offers a 360 view on complexity and its origins

2. Read an article (6 mins)

In their fascinating Case Study: Pull the Plug on a Project with an Uncertain Future?, Cody Evans and Chris Mahowald discuss how to make tough choices when it comes to assessing the future of projects.

3. Watch a video (17 mins)

In the following video, Empathy: The Core of Complex Decisions, Lorien Pratt showcases why certain decisions are more complex than others.

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