Good decision-making comes from being able to make predictions about the future and judge the value of those outcomes. How can you bolster those abilities and tip the odds of making a good decision in your favor? In an article for Harvard Business Review, Walter Frick shares three straightforward tips:
- Be less certain.
- Ask, “How often does that typically happen?”
- Think probabilistically (and understand basic probability).
On the subject of confidence, the discussion often dwells on ways to increase confidence. However, there can be a great deal of danger in overconfidence too, and as Frick says, “men, the wealthy, and even experts” are prone to it. So it might behoove you to actually be less certain about your decision-making ability. Think about the predictions you are making and the logic that follows from them. Is each of these things really as likely to happen as you have imagined?
Another important question to ask in decision-making—how often something typically happens. Frick shares this:
[Nobel-prize-winning psychologist Daniel Kahneman] tells a story of a time when he was collaborating on a textbook and asked his coauthors to estimate the date on which they’d complete their first draft. Everyone, including Kahneman, said somewhere between 18 months and two and a half years. Then he asked one of those coauthors, who had been involved in countless textbook projects, how long it typically took. In fact, the collaborator answered, 40% of groups never finished the book, and he couldn’t think of a project that had finished within seven years. This was a textbook about rationality, and the coauthor had answered without thinking about previous cases. That person’s mistake, and the point of Kahneman’s story, is that they should have thought about how long similar projects typically take.
In decision-making, the “outside view” of real-life likelihoods should outweigh the “inside view” of the specific details of your task. In practice though, people often allow the inside view to dominate, potentially at their expense.
Frick’s final tip is to train your brain to think more probabilistically, if it is not already. Developing your understanding of probabilities demands some actual reading and practicing. Frick recommends Khan Academy’s introduction about coin flipping to get you started.
For additional thoughts, you can view the original article here: https://hbr.org/2018/01/3-ways-to-improve-your-decision-making