Protection from Extreme Decision Making
Extreme decision making is common and natural. We often see bad events as worse than they are and good as better.
At its root, extreme decision making is about how we assess possibilities in events. The adage, “Things are never as good nor as bad as they seem,” is a common remedy for it. It is very common in decision making unless we protect ourselves. It is not limited to pessimists and optimists.
Extreme Decision Making Outcomes
“Safe at Any Speed” (Harvard Business Review, September 2014 edition) tells of Mary Riddel’s (University of Las Vegas) and Sonja Kolstoe’s (University of Oregon) research into this “possibility bias” as it is called. They found “amateur auto racers are actually more rational about risk than most of us.”
Outcomes of extreme decision making tend to be of two types. Our fears will encourage over investing in protection and our expectations over investing in opportunities. Experience can help but it could also make it worse.
Negative stories in our lives will deter change and innovation. They make us less open to new ideas and ways. Positive stories, our successes, are less likely to have taught us much. They raise testosterone levels though. This means bigger bets.
Protection Through Reflection and Diversity
To protect ourselves from extreme decision making, at some point we need to remove ourselves from more influence and information. This means taking time to reflect quietly and refer to prior plans. They help us revisit prior views.
This means putting an end to more review of research and data. We tend to see what we want to see anyway. Too much information only increases indecision. Data restricts creativity.
Moods greatly impact our decisions. We should avoid pressure and fear. We need to look for times when we feel good about ourselves. Overconfidence though hinders reflection.
When we work with our teams, focus them on the costs and risks. This prevents rosy forecasts. We ensure teams are diverse. This creates options especially in tough times. We must not be afraid to manage the team through conflicts that will arise. Playing out scenarios in gaming exercises helps to test ideas.
A body grows best with balanced nutrition. Our decision making does too with balanced views. Reviewing plans and reflecting quietly upon the views of diverse people are the best protection from extreme decision making.
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Quote: “Data restricts creativity.” What a great discussion – this and earlier posts of yours, Mike. As you note, all too frequently, data leads to no action (fear of mistakes usually) or overconfidence (data and previous decisions ruling).
Data’s prime purpose is enabling understanding, NOT searching for solutions!!! With all of the characteristics, criteria, and constraints (3 C’s ???) associated with any situation faced, I’d argue that no situation will align with previously considered ones sufficiently to choose previous solutions – unless, maybe, we are seeking to continue immediately a previously useful effort.
So, we seek to understand previously useful outcomes and our current situation. We then apply our problem solving skills (with attention to new learning as appropriate as well as regular assessment with regard to how things are going) to develop and implement the optimum, useful, and timely outcome – with particular attention to estimating our confidence in that outcome AS WELL AS, of course, our willingness to reflect and refine as warranted.
I like that John: “Data’s prime purpose is enabling understanding, not search for solutions.” I chuckled because so often we look at coming up with the right number as THE solution. I also agree that “no situation will align with previously considered ones sufficiently to choose previous solutions.” I believe that is often why the second time we apply a successful solution we do not see the results we expect. I have read some articles indicating this is a problem in scientific research when they try to replicate some previous studies with outstanding results.
In order to find a preference for innovation we use several methodologies and one is to find the level two factors. On the horizontal axis we have creativity and on the vertical axis we find risk taken. A person with high in creativity and high in risk taken levels is considered an Innovator, on the opposite of that will be reproducer. Other profiles include challenger, dreamer, planner, synthesizer and pragmatist.
For any Formula 1 racing car driver to set a world record for the fastest-ever pit stop a team including all these profile would be needed. What I find very interesting is that research showed that amateur auto racers are more rational about risk than most of us. The question that comes to mind is what level of risk taking do they have experienced Formula 1 racing car drivers as such as Fernando Alonso or Hamilton. More about this in http://www.businessinnovationobservations.com/product-process-organizational-businessinnovation-observations-formula-1/
Thank you, Francisco, for stopping by, visiting, commenting and leaving some good thoughts with a link to more. From whose perspective is the risk seen? The objective observer or the person? For example, I’ve seen studies where business owners tend to be more conservative with risk than the general public assumes. The reason for this is that what we might consider risky the business owner does not.
Again, thank you for the visit and insights. I appreciate it. Enjoy your day. ~Mike