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by
Chip Heath
Read between
July 15, 2020 - May 6, 2021
“A remarkable aspect of your mental life is that you are rarely stumped,”
Thinking, Fast and Slow,
“The normal state of your mind is that you have intuitive feelings and opinions about almost everything that comes your way. You like or dislike people long before you know much about them; you trust or distrust strangers without knowing why; you feel that an enterprise is bound to succeed without analyzing it.”
we are quick to jump to conclusions because we give too much weight to the information that’s right in front of us, while failing to conside...
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A better decision process substantially improves the results of the decisions, as well as the financial returns associated with them.
first villain of decision making, narrow framing, which is the tendency to define our choices too narrowly, to see them in binary terms. We ask, “Should I break up with my partner or not?” instead of “What are the ways I could make this relationship better?”
Our normal habit in life is to develop a quick belief about a situation and then seek out information that bolsters our belief. And that problematic habit, called the “confirmation bias11,”
When people have the opportunity to collect information from the world, they are more likely to select information that supports their preexisting attitudes, beliefs, and actions.
Dan Lovallo, the professor and decision-making researcher cited in the introduction, said, “Confirmation bias is probably the single biggest problem in business, because even the most sophisticated people get it wrong.
When we want something to be true, we will spotlight the things that support it, and then, when we draw conclusions from those spotlighted scenes, we’ll congratulate ourselves on a reasoned decision.
The microprocessor business was growing rapidly, but Intel’s failures in memory were becoming a drag on profits.
“If we got kicked out and the board brought in a new CEO, what do you think he would do?” Gordon answered without hesitation, “He would get us out of memories.”
“Why shouldn’t you and I walk out the door, come back in, and do it ourselves?”
the political infighting, shutting down the memory business was the obvious thing to do.
The switch in perspectives—“What would our successors do?”—helped Moore and Grove see the big picture clearly.
Since that decision in 1985, Intel has dominated the microprocessor market. If, on the day of Grove’s insight, you had invested $1,000 in Intel, by 2012 your investment would have been worth $47,000
GROVE’S STORY REVEALS A flaw in the way many experts think about decisions. If you review the research literature on decisions, you’ll find that many decision-making models are basically glorified spreadsheets13. If you are shopping for an apartment, for instance, you might be advised to list the eight apartments you found, rank them on a number of key factors (cost, location, size, etc.), assign a weighting that reflects the importance of each factor (cost is more important than size, for instance), and then do the math to find the answer (um, move back in with Mom and Dad). There’s one
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This brings us to the third villain of decision making: short-term emotion.
If our decision was represented on a spreadsheet, none of the numbers would be changing—there’s no new information being added—but it doesn’t feel that way in our heads. We have kicked up so much dust that we can’t see the way forward. In those moments, what we need most is perspective.
No doubt Andy Grove had been compiling his pros-and-cons list about whether to exit the memory business for many years. But the analysis left him paralyzed, and it took a quick dose of detachment—seeing things from the perspective of his successor—to break the paralysis.
the fourth villain of decision making is overconfidence. People think they know more than they do about how the future will unfold.
A study showed that when doctors reckoned themselves “completely certain” about a diagnosis, they were wrong 40% of the time. When a group of students made estimates that they believed had only a 1% chance of being wrong, they were actually wrong 27% of the time.
We have too much confidence in our own predictions. When we make guesses about the future, we shine our spotlights on information that’s close at hand, and then we draw conclusions from that information.
If you think about a normal decision process, it usually proceeds in four steps18: You encounter a choice. You analyze your options. You make a choice. Then you live with it. And what we’ve seen is that there is a villain that afflicts each of these stages: You encounter a choice. But narrow framing makes you miss options. You analyze your options. But the confirmation bias leads you to gather self-serving information. You make a choice. But short-term emotion will often tempt you to make the wrong one.
Then you live with it. But you’ll often be overconfident about how the future will unfold.
An accomplished scientist, Priestley is credited with the discovery of 10 gases, including ammonia and carbon monoxide. He is best known for discovering the most important gas of them all: oxygen.fn1
Priestley was a theologian, a chemist, an educator, a political theorist, a husband, and a father. He published more than 150 works, ranging from a history of electricity to a seminal work on English grammar. He even invented soda water, so every time you enjoy your Diet Coke, you can thank Priestley.
Priestley use the process of pros and cons to guide his decision.
Priestley would have used the moral-algebra process.
From the perspective of the pros-and-cons list, accepting the offer looks like a pretty bad decision.
Steve Cole at HopeLab beat narrow framing by thinking “AND not OR.” Andy Grove overcame short-term emotions by asking, “What would my successor do?”
We can’t deactivate our biases, but these people show us that we can counteract them with the right discipline.
1. You encounter a choice. But narrow framing makes you miss options. So … → Widen Your Options.
2. You analyze your options. But the confirmation bias leads you to gather self-serving info. So … → Reality-Test Your Assumptions.
3. You make a choice. But short-term emotion will often tempt you to make the wrong one. So … → Attain Distance Before Deciding.
4. Then you live with it. But you’ll often be overconfident about how the future will unfold. So … → Prepare to Be Wrong.
The four steps in the WRAP model are sequential; in general, you can follow them in order—but not rigidly so.
At its core, the WRAP model urges you to switch from “auto spotlight” to manual spotlight.
Rather than make choices based on what naturally comes to your attention—visceral emotions, self-serving information, overconfident predictions, and so on—you deliberately illuminate more strategic spots. You sweep your light over a broader landscape and point it into hidden corners.
The value of the WRAP process is that it reliably focuses our attention on things we otherwise might have missed: options we might have overlooked, information we might have resisted, and preparations we might have neglected.
In life, we spend most of our days on autopilot, going through our usual routines. We may make only a handful of conscious, considered choices every day. But while these decisions don’t occupy much of our time, they have a disproportionate influence on our lives.
To make better decisions, use the WRAP process: Widen Your Options. Reality-Test Your Assumptions. Attain Distance Before Deciding. Prepare to Be Wrong.
most common type was one that lacked any choice at all.
“statement of resolve.” An example would be “I’m going to stop blaming others.”
a good rule of thumb for business leaders: If you’ve spent weeks or months analyzing a potential target, and what you’ve learned has convinced you to make an offer, don’t. Five times out of six you’ll be right!
A 1993 study by Nutt, which analyzed 168 decisions26 in this laborious way, came to a stunning conclusion: Of the teams he studied, only 29% considered more than one alternative.fn2 By way of comparison, 30% of the teens in the Fischhoff study considered more than one alternative. According to Paul Nutt’s research, then, most organizations seem to be using the same decision process as a hormone-crazed teenager.
Organizations, like teenagers, are blind to their choices. And the consequences are serious: Nutt found that “whether or not” decisions failed 52% of the time over the long term, versus only 32% of the decisions with two or more alternatives.
The first step toward that goal is to learn to distrust “whether or not” decisions.
You won’t think up additional alternatives if you aren’t aware you’re neglecting them. Often you simply won’t recognize you’re stuck in a narrow frame.
Focusing is great for analyzing alternatives but terrible for spotting them.
