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20 Apr 2015

Key Trait in Good Decision Makers

Knowledge and though process are less important than temperament in good decision makers.

Knowledge and thought process are less important than temperament in good decision makers. That is because it affects how we see knowledge and how we think about it.

Once I asked an executive and his management team five questions about a plan. After a half hour, they had pretty much hashed over the first four. The one no one touched was, “Who should make the decision?”

It takes courage to make decisions. We put ourselves at risk. Consensus decision making is often a remedy for this. We spread the risk.

Investment Decisions Give Insights To Traits

I like to look at decisions about investments. The statistical nature of markets allow us to quantify the impact our emotions have on decision making. The Wall Street Journal’s Lian Pleven summarized a few.

One of the classics he cited was Benjamin Graham’s The Intelligent Investor: A Book of Practical Counsel:

We have seen much more money made and kept by ‘ordinary people’ who were temperamentally well suited for the investment process than by those who lacked this quality, even though they had extensive knowledge of finance, accounting, and stock-market lore.

Good Decision Makers

In other words, good decision makers have the right temperament for making decisions. Knowledge and process are less important. Why is that? It is because our emotions impact how we see and do both.

How many times has a child asked a parent, “Are you in a good mood?” Why is that? It is because even a child knows that our moods affect our decisions. Employees too know not to ask for things from bosses when they are in bad moods.

Courage Is Not Enough

Even though many are afraid of making decisions, courage is not enough. We need to know when we:

  • Need to make a decision
  • Are in the right mood to make the decision

People try to influence us in both. Sales people will push us to make decisions now. Others will flatter us when they need something. These encourage us to make more extreme decisions.

Events influence both too. Too much information will cause indecisiveness. Over thinking causes bad decisions. Fear and pressure reduces creative problem solving and promotes spur of the moment decisions.

Yes, temperament is the key trait in good decision makers. There is much though to ensuring that it is a good one.

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