Decisive: How to Make Better Choices in Life and Work

by Chip Heath

“A remarkable aspect of your mental life is that you are rarely stumped,” said Daniel Kahneman, 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. In his fascinating book, Thinking, Fast and Slow, he describes the ease with which we draw conclusions: “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.”

Kahneman says that 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 consider the information that’s just offstage. He called this tendency “what you see is all there is.” In keeping with Kahneman’s visual metaphor, we’ll refer to this tendency as a “spotlight” effect. (Think of the way a spotlight in a theater directs our attention; what’s inside the spotlight is crisply illuminated.)

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.

When the researchers compared whether process or analysis was more important in producing good decisions—those that increased revenues, profits, and market share—they found that “process mattered more than analysis—by a factor of six.” Often a good process led to better analysis—for instance, by ferreting out faulty logic. But the reverse was not true: “Superb analysis is useless unless the decision process gives it a fair hearing.”

A better decision process substantially improves the results of the decisions, as well as the financial returns associated with them.

pedigree. In 1772, Benjamin Franklin was asked for advice by a colleague who’d been offered an unusual job opportunity. Franklin replied in a letter that, given his lack of knowledge of the situation, he couldn’t offer advice on whether or not to take the job. But he did suggest a process the colleague could use to make his own decision. Franklin said that his approach was “to divide half a sheet of paper by a line into two columns, writing over the one Pro and over the other Con.” During the next three or four days, Franklin said, he’d add factors to the two columns as they occurred to him.

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).

With his horse race, Cole ensured that he’d have multiple design alternatives for the device. He could either pick his favorite or combine the best features of several. Then, in round two of the design, he could weed out any vendors who were unresponsive or ineffective.

This "perfecting" understanding is similar to Bayesian Analysis

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.

The tricky thing about the confirmation bias is that it can look very scientific. After all, we’re collecting data. 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. People go out and they’re collecting the data, and they don’t realize they’re cooking the books.” At work and in life, we often pretend that we want truth when we’re really seeking reassurance: “Do these jeans make me look fat?” “What did you think of my poem?” These questions do not crave honest answers.

If you review the research literature on decisions, you’ll find that many decision-making models are basically glorified spreadsheets.

The future has an uncanny ability to surprise. We can’t shine a spotlight on areas when we don’t know they exist.

LET’S SUM UP WHERE we are. If you think about a normal decision process, it usually proceeds in four steps: • 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.

In the fall of 1772, a man named Joseph Priestley was struggling with a career decision, and the way he handled the decision points us toward a solution.

Excellent example of overcoming the demons

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. The four steps in the WRAP model are sequential; in general, you can follow them in order—but not rigidly so. Sometimes you’ll double back based on something you’ve learned. For example, in the course of gathering information to Reality-Test Your Assumptions, you might discover a new option you hadn’t considered before. Other times, you won’t need all of the steps. A long-awaited promotion probably won’t require much distance before you accept and pop the champagne. 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.

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.)

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. The psychologist Roy Baumeister 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.

For the answer we turn to Paul Nutt, who may know more than anyone alive about how managers make decisions. In 2010, Nutt retired from the business-school faculty of Ohio State University, having spent his 30-year career collecting decisions the way some people collect stamps. He analyzed decisions made by businesses: McDonald’s considering a new design for its stores. And nonprofits: a 250-bed rural hospital deciding whether to add a detox unit. And government agencies: Florida’s Medicaid program contemplating how to revamp its fraud-management system.

opportunity costs.

What follows is an excellent explanation of opportunity costs.

“Opportunity cost” is a term from economics that refers to what we give up when we make a decision.

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?

Lexicon has learned that the best names emerge from what we’ll call “multitracking”—considering several options simultaneously.

The other half of the designers were instructed to use a “simultaneous” process, so that each one started with three ads and received feedback on all three. Then, in successive rounds, the set was whittled down with further feedback to two ads and then one final ad.

In my experience, this is the process most designers use. The develop 4-6 concepts, then feedback determines what happens next. Usually there are tw or three rounds of design until we get the final version of a book cover or website design.

So, given the clear benefits of multitracking, what explains the failure of most organizations to embrace it? Many executives are worried that exploring multiple options will take too long. It’s a reasonable fear, but the researcher Kathleen Eisenhardt has found that the opposite is true. In a study of top leadership teams in Silicon Valley, an environment that tends to place a premium on speed, she found that executives who weigh more options actually make faster decisions.

Psychologists such as Barry Schwartz have written about the dangers of “choice overload,” our tendency to freeze in the face of too many options. Is multitracking likely to plunge people into choice overload?

We want to suggest that adding even one jar of jam to the table—that is, adding one more alternative to your decision—will substantially improve your decisions, and it stops well short of triggering decision paralysis. (Note for motivated readers: The endnotes contain a wonkish discussion that has more detail about why we don’t think multitracking is likely to produce decision paralysis.)

Over one particular 18-month period, the archives revealed that the executive board had debated and resolved 83 major decisions. Decisions never involved more than three alternatives, and 95% were either a “whether or not” decision (40%) or a two-alternative choice (55%). (Thus these decision makers were noticeably savvier about escaping narrow framing than the typical firm in Nutt’s study on this page.)

Generating distinct options is even more difficult when our minds settle into certain well-worn grooves. Two of those grooves are common states of mind, studied widely by researchers, that play a role in almost every decision we make. One is triggered when we think about avoiding bad things, and one is triggered when we think about pursuing good things. When we’re in one state, we tend to ignore the other.

Yet the wisest decisions may combine the caution of the prevention mindset with the enthusiasm of the promotion mindset. Consider a study of the way 4,700 public companies navigated three global recessions (1980 to 1982, 1990 to 1991, and 2000 to 2002). Three Harvard researchers—Ranjay Gulati, Nitin Nohria, and Franz Wohlgezogen—pored over the companies’ financial statements, analyzing the way they’d responded to the tough market conditions. The top-level findings were sobering: 17% of the companies didn’t survive the relevant recession, and another 40% of them, three years after the recession ended, hadn’t returned to their prerecession levels of sales and profits.

WHEN LIFE OFFERS US a “this or that” choice, we should have the gall to ask whether the right answer might be “both.”

Throughout Walton’s career, he kept his eyes out for good ideas. He once said that “most everything I’ve done I’ve copied from someone else.” In the early days of discount store chains, he crisscrossed the country in search of insights, visiting discounters ranging from Spartan and Mammoth Mart in the Northeast to FedMart in California. Through conversations with one of FedMart’s leaders, Walton clarified his thinking on distribution, which would eventually become a defining strength of Walmart. And he admired the merchandise mix and displays in Kmart, founded in Garden City, Michigan, by S. S. Kresge. “I’ll bet I’ve been in more Kmarts than anybody,” Walton said. Again and again in his career, Walton found clever solutions by asking himself, “Who else is struggling with a similar problem, and what can I learn from them?”

THE LEADERS OF KAISER make it a priority to study their own internal “bright spots”—the most positive points in a distribution of data.*

Both bright spots and best practices, then, act as sources of inspiration. If you’ve got a dilemma and you need new options, you can look for new ideas externally, like Sam Walton, or internally, like Kaiser’s leaders. Notice that in both situations the process is reactive: Your dilemma sparks the search. But there’s a lot to be gained by taking the results of your search and recording them for future use—to turn a reactive search into a proactive set of guidelines.

The search for options might lead the manager to search first for best practices. In a world with thousands of other organizations, someone has surely faced this problem before. Next, she might look for bright spots within her own organization, interviewing a couple of longtime managers to fish for their insights. What if she took things a step further and actually encoded what she learned so that the next manager in a similar situation—whether a month or a year down the line—could consult her ready-made list of suggestions? Her list might include thoughts like these: Is there a way you can delegate some of your own higher-level work to the employee? Can you carve out a project that they can lead? Try to find ways to ensure that the employee is recognized publicly for their work. By encoding the advice, she’d be creating a kind of “playlist” of managerial greatest hits: questions to ask, principles to consult, ideas to consider. This playlist idea turns a reactive search—Who has solved my problem?—into a proactive step: We’ve already found the people who have solved this problem, and here’s what they said.

What Dunbar discovered, after countless hours of eavesdropping and interviewing and synthesizing, was that one of the reliable but unrecognized pillars of scientific thinking is the analogy.

What we’re seeing here is that, when you’re stuck, you can use a process of “laddering up” to get inspiration. The lower rungs on the ladder offer a view of situations very similar to yours; any visible solutions will offer a high probability of success, since the conditions are so similar. As you scale the ladder, you’ll see more and more options from other domains, but those options will require leaps of imagination.

IN THIS SECTION, WE’VE been looking for ways to evade a narrow frame, the tendency to unduly restrict our own options. It’s not just teenagers and business executives who fall into this trap; it’s all of us.

Yet what makes narrow framing remarkable, among the four villains of decision making, is how easy it is to correct.

Hayward and Hambrick speculated that executives’ hubris—their confidence that they could work magic with their acquisitions—would lead them to overpay for their targets. The researchers tested this theory by analyzing every large acquisition ($100 million or more) conducted in the public markets during a two-year period, a sample that contained 106 transactions. What they wanted to see was whether the price paid in the acquisition was influenced by three particular factors, all of which would tend to inflate the ego of the acquiring CEO: 1. Praise by the media 2. Strong recent corporate performance (which the CEO could interpret as evidence of his/her genius) 3. A sense of self-importance (which was measured, cleverly, by looking at the gap between the CEO’s compensation package and the next-highest-paid officer—a CEO must think a lot of himself if he’s paid quadruple the salary of anyone else) Hayward and Hambrick were right on all counts. As each of these three factors increased, so did the tendency of a CEO to pay a higher premium for an acquisition. As one example, they found that for every favorable article written in a major publication about the CEO, the acquisition premium paid went up by 4.8%. That’s a $4.8 million boost on a $100 million acquisition! Because of one flattering article! And a second article would inflate it by another $4.8 million. The authors wrote, “It seems some CEOs who pay extremely large acquisition premiums … come to believe thei...

Almost certainly, you’d read more of the positive reviews. You really want this restaurant to be great. A recent meta-analysis of the psychology literature illustrated how dramatic this effect is. In reviewing more than 91 studies of over 8,000 participants, the researchers concluded that we are more than twice as likely to favor confirming information than disconfirming information. (So, scientifically speaking, you’d probably read twice as many four-star reviews as two-star reviews.) The meta-study found that the confirmation bias was stronger in emotion-laden domains such as religion or politics and also when people had a strong underlying motive to believe one way or the other (as in Upton Sinclair’s observation, “It is difficult to get a man to understand something when his salary depends on his not understanding it!”). The confirmation bias also increased when people had previously invested a lot of time or effort in a given issue.

The most important lesson to learn about devil’s advocacy isn’t the need for a formal contrarian position; it’s the need to interpret criticism as a noble function. An effective promotor fidei is not a token argumentative smarty-pants; it’s someone who deeply respects the Catholic Church and is trying to defend the faith by surfacing contrary arguments in situations where skepticism is unlikely to surface naturally. (Who wants to argue against someone who’s lived a life so admirable that they merit consideration as a saint?)

He issued the group a challenge: Let’s stop arguing about who is right, he said. Instead, let’s take each option, one at a time, and ask ourselves: What would have to be true for this option to be the right answer?

Sometimes we think we’re gathering information when we’re actually fishing for support.

For example, Ray Rothrock, a venture capitalist with Venrock, says that one of the best diagnostic questions he’s discovered in assessing entrepreneurs is “How many secretaries has this entrepreneur had in the past few years?” If the answer is five, chances are you’ve got someone with some issues.

This same strategy of fishing for specific information was endorsed in a brilliant article called “On Being a Happy, Healthy, and Ethical Member of an Unhappy, Unhealthy, and Unethical Profession,” published in 1999 by U.S. District Court judge Patrick J. Schiltz. In the piece, Schiltz urges law students to ask tough, disconfirming questions before taking a job with a big corporate law firm:

Asking tough, disconfirming questions like these can dramatically improve the quality of information we collect, as illustrated in a study titled “There Is Such a Thing as a Stupid Question,” authored by three Wharton researchers, Julie A. Minson, Nicole E. Ruedy, and Maurice E. Schweitzer.

How do you know whether to ask probing questions or open-ended ones? A good rule of thumb is to ask yourself, “What’s the most likely way I could fail to get the right information in this situation?” Generally, it will be obvious what the answer is: If you’re buying a used car, you’re most likely to fail by not discovering a flaw of the vehicle, or if you’re a vice president seeking feedback from factory workers, you’re most likely to fail by not uncovering what they really think. You can tailor your questions accordingly—more aggressive in the used-car negotiations and more open-ended with the factory worker.

ASSUMING POSITIVE INTENT AND keeping a marriage diary are two examples of what psychologists call “considering the opposite.” I

From the perspective of our brains, we are unique. Our challenges and opportunities feel particular to us. From the perspective of the universe, though, we are utterly typical.

A tripwire specifies the circumstances when the team would reconsider a decision. So if you’re skeptical of a decision but lack the power to change it, encourage your colleagues to set a tripwire. (“If X happens, we’ll take another look at this.”) This will be easy for them to accept, since most people are overconfident and will underestimate the chances of hitting the tripwire. Meanwhile, you’ve made it possible to reconsider the decision at a later date without seeming like the person who said, “I told you so.”