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“A remarkable aspect of your mental life is that you are rarely stumped,” said Daniel Kahneman1, a psychologist who won the Nobel Prize in economics for his research on the way that people’s decisions depart from the strict rationality assumed by economists.
And that, in essence, is the core difficulty of decision making: What’s in the spotlight will rarely be everything we need to make a good decision, but we won’t always remember to shift the light. Sometimes, in fact, we’ll forget there’s a spotlight at all, dwelling so long in the tiny circle of light that we forget there’s a broader landscape beyond it.
Career choices2, for instance, are often abandoned or regretted. An American Bar Association survey found that 44% of lawyers would recommend that a young person not pursue a career in law. A study of 20,000 executive searches found that 40% of senior-level hires “are pushed out, fail or quit within 18 months.” More than half of teachers quit their jobs within four years. In fact, one study in Philadelphia schools found that a teacher was almost two times more likely to drop out than a student.
Had the team explicitly discussed what was still uncertain about the decision? Did they include perspectives that contradicted the senior executive’s point of view? Did they elicit participation from a range of people who had different views of the decision?
found that “process mattered more than
Imagine walking into a courtroom where the trial consists of a prosecutor presenting PowerPoint slides. In 20 pretty compelling charts, he demonstrates why the defendant is guilty. The judge then challenges some of the facts of the presentation, but the prosecutor has a good answer to every objection. So the judge decides, and the accused man is sentenced. That wouldn’t be due process, right? So if you would find this process shocking in a courtroom, why is it acceptable when you make an investment decision? Now of course, this is an oversimplification, but this process is essentially the one
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Most of us rarely use a “process” for thinking through important decisions, like whether to fire Clive, or whether to relocate for a new job, or how to handle our frail, elderly parents. The only decision-making process in wide circulation is the pros-and-cons list. The advantage of this approach is that it’s deliberative. Rather than jump to conclusions about Clive, for example, we’d hunt for both positive and negative factors—pushing the spotlight around—until we felt ready to make a decision.
Research in psychology over the last 40 years has identified a set of biases in our thinking that doom the pros-and-cons model of decision making. If we aspire to make better choices, then we must learn how these biases work and how to fight them (with something more potent than a list of pros and cons). Prepare to encounter the four most pernicious villains of decision making—and a process that we can use to counteract their influence.
Cole is fighting the 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?” We ask ourselves, “Should I buy a new car or not?” instead of “What’s the best way I could spend some money to make my family better off?” In the introduction, when we asked the question “Should Shannon fire Clive or not?” we were stuck in a narrow frame. We spotlighted one alternative at the expense of all the others.
Implicitly, he would have been assuming that there was one vendor that was uniquely capable10 of crafting the perfect solution, and that he could identify that vendor on the basis of a proposal.
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,” is the second villain of decision making.
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.
“Confirmation bias is probably the single biggest problem in business, because even the most sophisticated people get it wrong. People go out and they’re collecting the data, and they don’t realize they’re cooking the books.
And this is what’s slightly terrifying about the confirmation bias: 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. Oops.
Meanwhile, a small team at Intel12 had developed another product, the microprocessor, and in 1981 the team got a big break when IBM chose Intel’s microprocessor to be the brain of its new personal computer. Intel’s team scrambled to build the manufacturing capacity it would need to produce the chips.
As people often do in this kind of situation, we vigorously attacked the data.
This was the moment of clarity. From the perspective of an outsider, someone not encumbered by the historical legacy and 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.
There’s one critical ingredient missing from this kind of analysis: emotion. Grove’s decision wasn’t difficult because he lacked options or information; it was difficult because he felt conflicted. The short-term pressures and political wrangling clouded his mind and obscured the long-term need to exit the memory business.
As Dick Rowe would soon learn, the fourth villain of decision making is overconfidence. People think they know more than they do about how the future will unfold.
LET’S SUM UP WHERE we
FRANKLIN REPLIED WITH THE moral-algebra letter cited in our introduction, suggesting that Priestley use the process of pros and cons to guide his decision.
Fortunately, though, Priestley largely ignored Franklin’s advice and found ways to circumvent the four villains of decision making.
First, he rejected the narrow frame: Should I take this offer or not?
Second, he dodged the confirmation bias.
Third, Priestley got some distance from his short-term emotions.
Finally, he avoided overconfidence. He expected the relationship to fare well, but he knew that he might be wrong.
We can’t deactivate our biases, but these people show us that we can counteract them with the right discipline. The nature of each villain suggests a strategy for defeating it:
Our goal in this book is to teach this four-step process for making better choices. Note the mnemonic WRAP, which captures the four verbs. We like the notion of a process that “wraps” around your usual way of making decisions, helping to protect you from some of the biases we’ve identified.
At its core, the WRAP model urges you to switch from “auto spotlight” to manual spotlight.
NOW YOU’VE REACHED THE part of the book where we are supposed to assure you that, if you follow these four steps religiously, your life will be a picture of human contentment.
Here is our goal: We want to make you a bit better at making good decisions, and we want to help you make your good decisions a bit more decisively (with appropriate confidence, as opposed to overconfidence). We also want to make you a better adviser to your colleagues and loved ones who are making decisions, because it’s usually easier to see other people’s biases than your own.
But—and this is a critical “but”—intuition is only accurate in domains where it has been carefully
To train intuition requires a predictable environment where you get lots of repetition and quick feedback on your choices. (For a longer discussion of this issue, see the endnotes section.)
If you’re a manager making a hiring decision, you shouldn’t. (You’ve probably hired only a small number of people over the years, and the feedback from those hires is delayed and often confounded by other factors.)
Because we wanted the WRAP process to be useful and memorable, we have done our best to keep it simple. That was a challenge, because the decision-making literature is voluminous and complex. As a result, we’ve had to omit some very interesting work to let the most useful research shine through. (If you’re hungry for more, see the end of the book for reading recommendations.)
More commonly, it will yield small but consistent improvements in the way you make decisions—and that’s critical too.
The band’s “M&M clause” was written into its contract to serve a very specific purpose. It was called Article 126, and it read as follows: “There will be no brown M&M’s in the backstage area, upon pain of forfeiture of the show, with full compensation.” The article was buried in the middle of countless technical specifications.
COULDN’T WE ALL USE a few tripwires in our lives? We’d have a “trigger weight” that signaled the need to exercise more, or a trigger date on the calendar that reminded us to ask whether we’re investing enough in our relationships. Sometimes the hardest part of making a good decision is knowing there’s one to be made.
The psychologist Roy Baumeister22 draws an analogy to driving—in our cars, we may spend 95% of our time going straight, but it’s the turns that determine where we end up. This is a book about those turns. In the chapters to come, we’ll show you how a four-part process can boost your chances of getting where you want to go.
These two categories—statements of resolve and “whether or not” decisions—composed about 65% of teenagers’ decisions. In other words, if a teenager is making a “decision,” chances are there’s no real choice being made at all!
This suggests 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.
“Opportunity cost” is a term from economics that refers to what we give up when we make a decision.
This study presents very good news for all of us. It suggests that being exposed to even a weak hint of another alternative—you could buy something else with this money if you want—is sufficient to improve our purchasing decisions.
What if we started every decision by asking some simple questions: What are we giving up by making this choice? What else could we do with the same time and money?
You cannot choose any of the current options you’re considering. What else could you do?
As it turned out, process mattered a great deal: The simultaneous designers’ ads were judged superior by the magazine’s editors and by independent ad execs, and they earned higher click-through rates on a real-world test of the banners on the Web site. Why?
The study’s authors, trying to explain the better performance of the simultaneous designers, said, “Since [simultaneous] participants received feedback on multiple ideas simultaneously, they were more likely to read and analyze critique statements side-by-side. Direct comparison perhaps helped them better understand key design principles and led to more principled choices for subsequent prototypes.
After the banner-ad study concluded, both sets of designers were interviewed. Asked to rate the usefulness of the feedback they received during the design process, over 80% of the simultaneous designers said the feedback was helpful. Only 35% of the one-at-a-time designers agreed, and in fact, over half of them believed the feedback they’d received was critical of them. (None of the simultaneous designers felt criticized.) The simultaneous designers also reported that, as a result of the experience, they felt more confident in their design abilities. The one-at-a-time designers didn’t agree.
