This week in membership: Decision making

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🤔Here’s Why

 1️⃣ Forecasting is a critical part of good decision making. 2️⃣ Companies don’t take forecasting seriously enough. 3️⃣ We can work on overcoming our biases to become better decision makers… 4️⃣ …and reframe our approaches to intuition and regret. 5️⃣ A structured approach to decision making can make all the difference.

📝 The Details

1️⃣ Forecasting is a critical part of good decision making.

Decision making is about formulating alternative plans of action, considering their consequences, and choosing between them. That middle step is all about forecasting. “Almost every decision we make depends on a prediction,” says Jenn Logg, an assistant professor of management at Georgetown University.

Our field guide tells the story of FOCUS, a research project sponsored by IARPA, the research branch of the US intelligence community, which uses video game simulations to try better understand the science of forecasting and decision making. The lessons from IARPA-funded research on forecasting have informed the work of countless professionals—from intelligence analysts to software engineers to philanthropists—but they remain stubbornly underutilized in most organizations.

2️⃣ Companies don’t take forecasting seriously enough.

The most common way that most teams make decisions is by coming together, talking informally for a bit, and then letting the person in charge decide. Many of those discussions are a complete waste of time and could be improved using structured group discussion.

While most organizations haven’t adopted the lessons from forecasting research, some corners of the economy are starting to take an interest. “There’s a lot of receptivity in finance,” says Philip Tetlock, a psychologist at the University of Pennsylvania who studies forecasting. “The big actors in Wall Street are under no illusions. They know they’re in the forecasting business.” Silicon Valley has been receptive as well, he said. The intelligence community has long been interested, as evidenced by its decades-long funding of research. But Covid-19 has led other government agencies to take an urgent interest, too.

3️⃣ We can work on overcoming our biases to become better decision makers

In practice few, if any, of our choices conform perfectly to the most rational models of decision making. Instead, we’re limited by biases like overconfidence, motivated reasoning, and what experts call “short-termism.” We often don’t have the information, or the time we’d need, to make decisions anywhere close to rationally. In organizations and teams, decision making is also limited by misaligned incentives, culture, skill gaps, and more.

Putting the rational model of decision making into practice might be impossible—and might not even be desirable—but its steps are still a useful framework for thinking about how to make decisions well. We outline those steps here, and have insight from Google’s chief decision scientist on the one question she suggests teams ask themselves when thinking a decision through. We’ve also created a tool to help you practice overcoming what psychologists Don Moore, of the University of California, Berkeley, and Max Bazerman of Harvard, call “the mother of all biases”: overconfidence.

4️⃣ …and reframe our approaches to intuition and regret.

Our biggest regrets in life tend to center around education and career decisions. The road not taken—so-called “regrets of inaction”—often has a long-lasting impact on our mental health. But this doesn’t mean that those of us who feel we’ve made professional mistakes are doomed to keep ruminating about lost opportunities forever. Rather, we can find ways to take back control of our own narrative.

Intuition is also a somewhat ineffable concept; part of its nature is that we can’t quite track the origins of a piece of knowledge. In a world of information overload, when any small question can easily give way to a flood of answers—some more reliable than others—the idea of quick, direct access to the correct one is particularly powerful. The concept has seduced countless philosophers, scientists, researchers, and many consumers who want to understand how intuition works, and how we can use it more effectively. They don’t agree on everything, but they do offer some valuable insight for those of us hoping to tap into our own.

5️⃣ A structured approach to decision making can make all the difference.

Perhaps one of the biggest lessons of the FOCUS project is that it pays to follow a more formal process when making predictions or important decisions.

Superforecasters, who outperformed intelligence analysts in the research project, have lots of other things going for them—smarts, statistical fluency, open-mindedness—but most of all they are deliberate. Whether working alone or in groups, they follow a step-by-step process designed to help them be as accurate as possible. Most organizations could do much better simply by finding a version of that process that works for them.

📚Read the field guide

What a study of video games can tell us about making better decisions
Use this tool to overcome the biggest decision-making mistake
A members-only tool to practice overcoming the biggest hurdle to making good decisions
How to improve your decision-making process
The “career-making” question that will help you make better decisions
Why regret hurts so much—and why it’s good for us
Train your intuition to make better decisions

📣 Sound off

What do you rely on most to make important decisions?

Research and data

A structured forecasting process

Past experience

Intuition and gut feelings