Three Steps to Better Decisions

I just finished reading Dance with Chance, by a trio of professors who themselves consider their collaboration to be a stroke of luck. I found it to be entertaining, if a little derivative (there was the “usual suspects” quoting people like Kahnemann, Gilbert, Franklin).

One refreshing aspect of the entire book, though, was that it did not promise any absolutes. In fact, my second-favorite takeaway from the research was what they called the Harry Potter rule: we are all muggles, and therefore should be very suspicious of “magical” solutions (such as “the One Minute” anything, the “Four Hour” whatever, the “Secret” of etc.). They held true to their title, emphasizing the fact that many, many people fall victim to “the illusion of control” — from high-paid stock forecasters to well-meaning helicopter parents.

My second favorite takeaway was one of their methods for embracing what they call “the paradox of control” — namely that by acknowledging your lack of control over circumstances, you gain a greater measure of control. Part of that is the “Three A’s” — a method for making decisions that helps avoid the trap of magical thinking as well as the hobbling of blind pessimism. Here’s how they lay it out, along with my own interpretation:

1. “Accept that you are operating in an uncertain world.” You can’t predict the future with any guarantee, and neither can anyone else. See “black swan”, “outliers”, or most of the current high-paying jobs in our culture (which weren’t even dreamed of when I was in high school learning typing and shorthand).
2. “Assess the level of uncertainty you are facing using all available inputs, models, and data, even if you’re dealing with an event that seems regular as clockwork.” This is probably the hardest, and the one that gets better with practice. One way is to role-play: if I were a consultant paid to evaluate this decision, what advice would I give? Or: This thing I’m about to decide. If my best friend decided it, how would that make me feel? My child? My worst enemy? Other tools for improving your perspective are journaling, meditating, or finding supportive critique partners.
3. “Augment the range of uncertainty just estimated.” If assessment is the hardest, then this is the one most likely to be forgotten, disregarded, or simply implemented badly. When you get the results of your assessment and see where you’ve estimated things like “cost” or “time”, double it. That’s right, double. Even then (studies show) that you’ll likely underestimate it. “Optimism Bias” affects us all, and I believe it’s the biggest reason why I personally have not created as much slack in my life as I needed.

With all of those in place, you can improve your chances of making the right decision, especially in situations where it feels like you’re in crisis. There was a particular quote in the book that almost had me screaming NOW you tell me!:

When uncertainty becomes too threatening, there’s often an unwillingness to consider its consequences. Instead, people adopt optimistic attitudes that make light of potential downsides.

In my case, when faced with crises, I used to pride myself on finding creative solutions. But they usually depended on a series of things all going my way…and that just ain’t how statistics work. When some part of plan didn’t go quite right, I would end up coming up with another plan to fix the problem, which also depended on a series of things all going right…and so on. In the end I would usually find my way to a successful resolution to the crisis — but with a feeling of scrambling madly and escaping disaster by the skin of my teeth.

Guess what? That does pretty bad things to your blood pressure. And your bank account, and your family, and probably a whole lot of other things.

Accepting uncertainty is uncomfortable. Assessing a crisis situation surrounding a decision is difficult. And augmenting the margins feels foolish. But Dance with Chance makes a compelling argument that it’s a strategy that’s at least worth trying.

What do you think? Go ahead, let me know; what’s the harm?