decision making

Be more critical and critique what people say

To a large extent in the academic and business world things move forward by a thorough critique of the existing body of knowledge or by taking apart the position people take on a particular issue (usually in hindsight). Often very strong positions are held based on very shaky ground and expertise claimed based on little supporting evidence. I think it is always interesting when you look at a newspaper report or an article in the trade press one can always determine the authors own position vis a vis the issue being discussed as well as the position they take in the field of knowledge they are advancing.

What we need to do when we look at a report being presented to us at work, or even on the nightly television bulletin, is to learn how to evaluate what people say and weigh the truth and merit of the argument they are proposing.

When we listen to these arguments try to assess:

  • What are the assumptions being mobilised by the author from her own perspective to support the case and what approach is being taken in the construction of the argument as far as evidence is concerned.
  • What is the purpose of the review or report – what is it for and for whom is it written?
  • What is being included or excluded from the author under scrutiny in terms of the body of knowledge and alternative views?
  • How are countervailing views dealt with and what form of words is being used to describe them – dismissive, pejorative or supportive?
  • How gaps in our understanding of the issue are explained – or are they glossed over and simplified in order to trivialise opposition?
  • What is the actual or implied call to action – what is it the writer wishes you to buy or accept that forms the core of the message?

I personally also ask – so what have you brought to the party, what contribution have you added to my understanding of this topic?

The way to read a newspaper follows the same approach – it means we engage with the author and as a consequence perhaps we will learn something. Remember we should not accept any assertions, claims, or recourses to expertise from any authors of these papers or articles unless they demonstrate their expertise with erudite argument. We need to look at all of them with a skeptical eye and try to get behind the purpose of the message and how it is aimed to persuade and orient opinion in a certain way and in business to ensure the ‘right’ decision is made.


The Ten Commandments in Risk Reduction

Risk reduction in decision making comes down to two main considerations:

Increasing our knowledge of the problem by such techniques as soft systems engineering, SODA or any of the many tools that enable us to gain a foothold on the nature of the issue and dealing with the uncertainly of the risk. Here is a simple approach that puts some rigour in our thinking when it comes to breaking down a complex problem and deciding what to do next.

There are Ten Commandments in risk reduction (Morgan & Henrion 1990)

  • Do your homework
  • Problem drives the analysis
  • Make analysis simple (but not too simple)
  • Identify all relevant assumptions (and write them down)
  • Be explicit in your decision making criteria (and write them down)
  • Be explicit in the uncertainties (and the unknown unknowns thanks to rumsfelt)
  • Do sensitivity and uncertainty analysis
  • Iteratively refine the problem statement and the analysis
  • Document clearly and completely…
    … And expose your work to peer review

If analysis can be understood it becomes more acceptable and people will buy in and have more faith in the outcome – but be careful and do not make the work over complex and avoid over simplifications as well. Both stop people making an informed decision based on what evidence you have. Also as seen above document what you do during the process that way when it goes wrong (as it often does) we can learn and move forward and get it right next time – it is particularly important to set down assumptions and what you think are ‘givens’ – these are the points that we most often get wrong.

Shark week on Discovery Channel Begins on 2nd August

Apparently when the Discovery Channel broadcasts ‘Shark Week’ which this year starts on August the 2nd visits to Florida beaches decline dramatically. Presumably, the Discovery’s programming makes the waters no less safe (I hope). However, after watching a week of kicking legs seen from a shark’s eye perspective from below, the idea of shark attack is refreshed in our minds and we choose not to offer ourselves as bait. This phenomenon is known in decision-making as the availability heuristic or bias  – a heuristic is a rule-of-thumb we apply in situations of uncertainty. What is happening is we assume that events that are easily recalled due to recency (i.e. happened last week) or that are particularly dramatic (i.e. being eaten) are more likely to occur than they otherwise do in practice. Although there is always a chance I suppose as Florida is the shark attack capital of the world and overall the USA has more shark attacks than any other country in the world due to the large amount of sharks per se, as well as being the home of the worlds three most dangerous species of shark: the Bull, Tiger and Great White as well as the culture of surfing  and water sports around its shores which puts lots of opportunity their way! Although you will be glad to hear that although shark attacks are more common in the US there are fewer fatalities than in Australia – presumably the yanks can take their foot in their hand and get the hell out of the water more quickly!

The sunnier side of the availability heuristic is the lottery and the question should you invest $2 a day in the bank (pre credit crunch) or use it to buy a lottery ticket hopefully win and move down to Florida and go shark hunting? Math makes the decision obvious I am afraid.

Suppose you invest two dollars every day (roughly $62 a month) at a reasonable rate of 10% per annum then you will take almost exactly 50 years to accumulate close to $1m (actually about $920,000 but close enough)  – so start saving now!  To earn this same $1m in a big lottery like the National Lottery in the UK, you would have to match five numbers and a bonus ball; at odds of 2,330,635-to-1 in any one game I am told. So if you spend two dollars a day for 50 years you could enter 36,500 tickets and would have 1-in-63 chance of making those million dollars. This probability of 1:63 means the expected value from the investment over the 50 years is around $16,000 – against the expected vale of $1M dollars from the investment choice – no brainer isn’t it.

However the concept of availability and the recency effect image of immediate winners enjoying extreme wealth subvert this rationality. What the crafty lottery companies do is parade in front of us some Joe who has just won a fortune and the next time we call in for gas or food at the Quickie Mart we have the faint glow in our memory that someone has just won the lottery so assume it occurs much more frequently than it does and it is our turn next. Well someone has to win surely and why not me? So we buy that ticket again and again only to tear it up with the forelorn hope of winning next time.

Here is a pic for how not to go shark fishing – I think this was off South Africa during a military training exercise.