Will 2015 be a year of great decision making for you? If you are a professional of any kind from a banker to a sales or HR executive, a COO or a dentist, then 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. Do you know how to make consistently good decisions? Do you have a process? 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 behaviors of professionals who make more good than bad decisions? Read on to see how many of these principles you apply to the most important decisions that you make.
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 then 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 our oldest survival techniques and a fascinating topic of decision science) but let’s be very careful when making important decisions using opinions as raw data and not the facts that those opinions interpret. Just because your boss or favorite guru said it doesn’t mean that it is a fact.
The Internet is now our main source of knowledge; easy, convenient and omnipotent. Google is the McDonald’s of information – serving up super-sized helpings of data that have been processed and flavored 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 McDonald’s 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.
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 too.
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 and 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, puts your team members all on the same page and actually speeds up the decision process. Einstein is believed 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 that knowing how to solve a problem effectively is more important, and more difficult, than actually solving it.
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 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 the effects of our mental state – whether that be tiredness, frustration, disappointment, confidence after a successful deal, or irritation at our boss. Every one of these impact how we process, frame and interpret information.
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. It’s only when we have a process behind our thinking that we can find the holes in it, the areas that already work well and those that need work.
A sound process will usually make space for: - A metadecision (deciding how you will decide first) - 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 Remember, good decision making is a science of skill and knowledge and the more you practice it, the luckier you’ll become.
