Better Decisions Module 1 + 2

Decision Outcome

Implementation + Decision Process + Chance

4 phases of Decision Process

Gathering Intelligence, Coming to conclusions, Learning from Experience, Framing

Decision Process

Doesn’t always occur in one complete cycle and some occur without deliberate control

Good Process

Can be developed, largely self-taught, important for managerial decision making

Good results

Come from good processes

The closest you can come to guaranteeing a good decision outcome

good decision process

Decision Making

Primary + Metaknowlegde

Primary

What you know

Meta

What you know about what you know

Confidence

The belief about the certainty of another belief

Overconfidence

a greater belief in a belief than is justified

The confidence game

people who are overconfident (incorrect experts) ultimately lose

Misprecision

How big/small your confidence interval range is

Misestimation

How accurate/inaccurate your prediction is

Misplacement

How accurate you believe you are, compared to others

More information

Overconfidence

Improving metaknowledge

accurate, timely, repeated, feedback improves metaknowledge

Thinking Frames

Borrowed, complete and coherent, have highlights and shadows (can be changed and compete)

Thinking Frames Example

Crowdfunding appeals (want = independent, need= dependent)

Analyzing Frames

Frame audit analysis: what issues, boundaries, metrics, metaphors

Analyzing Frames Example

suppliers vs. partners for Boeing

Decision Frames

Full and balanced consideration

Constructed Frame

Built to organize thinking about a topic or situation (Tailored)

Constructing a frame about the creditworthiness of a person

Based on repayment history, current income, occupation, etc…

Yardsticks/Metrics

Tell us how to measure criteria

Conflicting frames

offensive and defensive framing

Common Pitfalls in Group Decision-Making

Striving for influence, harmony, and efficiency

Striving for influence

Some members dominate discussions, affecting fairness

Striving for harmony

Avoiding conflict can lead to groupthink and poor decisions

Striving for efficiency

Rushing to a decision can prevent full exploration of options

Framing Problems in Groups

Frame conflict, too little time spent framing, single shared frame

Frame conflict

Different perspectives cause misunderstandings

Too Little Time Spent Framing

Groups rush to decisions without fully understanding the problem

Single Shared Frame

Groups may prematurely converge, missing better alternatives

Psychological Biases in Groups

Groupthink, Egocentrism bias, Overconfidence bias

Groupthink

Pressure to conform suppresses critical thinking

Egocentrism Bias

Team members overestimate their contributions

Overconfidence Bias

Groups may reinforce rather than eliminate overconfidence

Managing conflict for Better Decisions

Task conflict (focused on ideas, not people) improves decision-making, Psychological safety allows dissent without fear of retaliation, Techniques like devil’s advocacy and second-chance meetings improve group choices.

Experience vs. Learning

Experience tells us what happened; learning tells us why it happened.

Barriers to Learning

Ignored Feedback, Self-Serving Bias, Illusion of Control, Hindsight Bias

Ignored Feedback

People avoid negative feedback, missing key lessons.

Self-serving Basis

Attributing success to skill and failure to external factors.

Illusion of Control

Overestimating one's ability to influence outcomes

Hindsight Bias

Believing past outcomes were predictable when they weren’t.

Learning from Failure

Failures should be analyzed systematically, not just dismissed

Learning from Successes

Success can be misleading if misattributed to skill instead of luck (Effective leaders analyze both successes and failures to understand causality)

Techniques for Improving Learning

● Structured postmortems to reflect on past decisions.
● "Lessons Learned" meetings to analyze both failures and successes.
● Keeping a "Failure Résumé" to track and learn from mistakes.
● Unlearning outdated beliefs to adapt to changing environments.

Attribute Substitution

Using a simpler answer in place of a complex question.

Affect Heuristic

Decision-making based on emotional responses.

Availability Heuristic

Judging likelihood based on how easily examples come to mind.

Representativeness Heuristic

Assessing probabilities based on similarity to typical cases.

Regression Effect

Extreme values tend to be closer to the average in subsequent measurements.

Regression Fallacy

Misinterpreting regression effects as causal relationships.

Associative Coherence

Forming connections between ideas that fit together, regardless of accuracy.

Processing Fluency

The ease of processing information influencing perceptions.

The Conjunction Fallacy

Assuming specific conditions are more probable than a general one.

Identifiable Victim Effect

Greater empathy for specific individuals than for larger groups.

Stroop Task

A test demonstrating interference in reaction time due to conflicting information.

Mere Exposure Effect

Developing a preference for things due to familiarity.

Headwinds/Tailwinds Asymmetry

Perceiving challenges more acutely than advantages.

Reactive Devaluation

Dismissing offers because they come from an opposing side.

Fundamental Attribution Error

Over-emphasizing personal traits over situational factors in others' behaviors.

Choice Architecture

The design of how choices are presented to influence decisions.

Channel Factors

Situational circumstances that can significantly alter behavior.

Inside and Outside Perspectives

Differentiating personal versus objective viewpoints.

Answers to Key Questions

Representativeness Heuristic and Pseudoscientific Beliefs

It makes them seem plausible by relating them to stereotypes or typical cases.

Regression Effect vs. Regression Fallacy

The regression effect is statistical; the fallacy misinterprets it as evidence of causation.

Regression Effect and Ineffective Interventions

It can create the illusion of effectiveness due to natural fluctuations in conditions.

Base Rate Neglect

Ignoring statistical information in favor of specific examples.

Strength vs. Weight of Evidence

Strength refers to persuasiveness; weight refers to quantity.

Superforecasters

They predict events more accurately, exhibiting open-mindedness and probabilistic thinking.