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05.03.13

How to Make Better Decisions

How to Make Better Decisions

"Why do we have such a hard time making good choices?" ask Chip and Dan Heath in Decisive.

"A remarkable aspect of your mental life," says Daniel Kahneman, "is that you are rarely stumped." We have opinions about nearly everything and are quick to jump to conclusions based only on the information that is right in front of us. We often just go with our gut. And that hasn't always served us well.

• An estimated 61,535 tattoos were reversed in the United States in 2009.

• Forty-one percent of first marriages end in divorce.

• Forty-four percent of lawyers would not recommend a career in law to young people.

• Eighty-three percent of corporate mergers and acquisitions fail to create any value for shareholders.

The Heath brothers have identified “four villains” when it comes to making decisions:
  1. Narrow Framing. We tend to define our choices too narrowly and see them in binary terms. We miss other options.

  2. Confirmation Bias. We develop a quick belief about a situation and then seek out information that confirms our belief. When we want something to be true, we look for reasons to justify it.

  3. Short-Term Emotion. Our emotions paralyze our decisions. We think we're working it out, when all we have really done is kick up "so much dust that we can't see the way forward."

  4. Overconfidence. We think we know more than we actually do. The problem is that we don't know what we don't know. "The future has an uncanny ability to surprise. We can't shine a spotlight on areas when we don't know they exist."

What can we do? We can counteract our tendencies with these four strategies the authors call the WRAP Process from the first letter of each step:
  1. Widen Our Options. As it turns out, most of the "decisions" we make do not involve any real choice. They are whether-or-not, yes-no decisions. We do not even consider other choices. Like a teenager, we "get stuck thinking about questions like 'Should I go to the party or not?' The party is in their mental spotlight, assessed in isolation, while the other options go unexplored. A more enlightened teen might let the spotlight roam: 'Should I go to the party all night, or go to the movies with a few friends, or attend the basketball game and then drop by the party for a few minutes?'"

    We would benefit by even adding one more option to our "decision." Consider opportunity costs. ("If I do this, then I can't do that?") Or the Vanishing Options Test: If you cannot choose any of the current options you're considering, what else could you do? And consider asking others who have "been there done that."

  2. Reality-Test Our Assumptions. Encourage constructive disagreement. Consider the opposite. Consider the "outside view"—the averages. If possible, run small experiments to test our theories.

  3. Attain Distance Before Deciding. Try the 10/10/10 analysis: How will you feel about your decision 10 minutes from now? How about 10 months? How about 10 years? Also, identify and stick to your core priorities. Perhaps the most powerful question for resolving a personal decisions is, "What would I tell my best friend to do in this situation?"

  4. Prepare to Be Wrong. We have to stretch our sense of what the future will bring—both good and bad. Think about the extremes. The future is not a "point"—a single scenario that we must predict. It's a range. Set a tripwire: "We will act when…" a predetermined set point occurs.
Making better decisions is a choice. This process will help us to make better choices.

Quote 
Leadership
As you might expect from the Heath brothers, Decisive is both informative and fun and well worth the investment. It would be a great book to get your teens to read as well. There will always be bad decisions, but with the four-step process we can improve our odds and have greater peace of mind. "You can quit asking, 'What am I missing?' You can stop the cycle of agonizing."

(By the way, if you ever get a chance to see Chip (and Dan) Heath live, do it. The presentation is very well done.)


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Posted by Michael McKinney at 12:09 AM
| Comments (0) | Management , Personal Development , Thinking



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