What Can You Learn From Intel About Decision-making?
And what makes a decision hard even when you know everything!
I grew up seeing Intel as the major microprocessor manufacturer and for a long time, I did not even know any other manufacturers for the same.
Microprocessors have been Intel’s specialized products for a long time but it was not always the case.
Intel made memory chips!
Before microprocessors, Intel was known for its memory chips. In the early 1970s, Intel dominated the memory market with its DRAM but the dominance did not last for long.
By the end of the 70s, many other companies came into the memory business and the company started losing its market share, especially to Japanese manufacturers.
In 1985, Andy Grove as the president of Intel had a tough decision to make. As he recalled in his memoir, Only the Paranoid Survive, he had to decide whether to keep Intel’s memory business or not.
Even though Intel had been making microprocessors also for a long time, it was not a major commercial success. The first breakthrough for them came in 1981 when IBM decided to use Intel’s chip in their latest personal computer.
After that Intel had both memory chips and microprocessors in the market. Thereafter, the market share for microprocessors was increasing but Intel’s major revenue still came through memory chips.
For many customers and outsiders, the problem was clearly visible and they knew Intel would not survive in the memory business. But Andy Grove and the Chairman and CEO Gordon Moore had a hard time making this decision.
One day Andy Grove asked Gordon Moore, “If we got kicked out and the board brought in a new CEO, what do you think he would do?”. And Gordon answered, “He would get us out of memories.”
I stared at him, numb, then said, “Why shouldn't you and I walk out the door, come back in, and do it ourselves?”
In the coming months, that’s what they did. They faced a lot of backlash from the other board members but it was clear to them what the right decision was.
Today we all can vouch and say it was a right decision indeed!
Even though Intel lost a major market share by 1985, they were heavily involved with the memory business as it was their primary product so far. That’s what made it a difficult choice as they were facing loss aversion.
According to the research by Daniel Kahneman and Amos Tversky, we, as humans, are more inclined to avoid a loss compared to a gain of similar magnitude.
The impact of emotions on decisions
Often times, even though we know the numbers and statistics, it is still hard to make the right decision. Such decisions are not hard because we lack knowledge but are so because of the “temporary emotions.”
In the book, “Decisive”, authors Chip Heath and Dan Heath advice that you can overcome such a situation by attaining some distance (mental or physical) from the place before making the decision.
The way Andy Grove asked Gordon Moore, what their successor would do, you can ask, what would your friend do in this situation or what advice you would give to your friend, had he been in this situation.
Emotions and loss aversion are hard-wired into us and even after knowing, it is always difficult to make such decisions.
Such questions will allow you to get a different perspective and help you to leave the emotions behind for sometime while you make the decision.
Let me know in the comments how you overcome the emotions in the face of a difficult decision.
Stay-tuned for more.
References:
- Decisive by Chip Heath and Dan Heath
- Only the Paranoid Survive: How to Exploit the Crisis Points That Challenge Every Company by Andrew S. Grove
- Prospect Theory: An Analysis of Decision under Risk, Econometrica Vol. 47, №2 (Mar., 1979), pp. 263–292 (29 pages) Published By: The Econometric Society
