Fascinating anatomy of decision making

Success and failure are often driven by our decisions making.. decide better! Distinguish deciding from opting and aspiring. Psychology & mental models.

Everything changes when you decide to be a parent. You can no longer stay in your couch all day reading books. Your favourite hangout every other evening is all but gone. You probably cannot see your friends as often as you used to. You definitely cannot travel around the world like there is no tomorrow. Yet, I remember graduating from “am I even ready to be a father”, to “I want a little baby holding my hands” in a matter of months. One morning, I was ready to be a parent. Just like that!

Now compare that with 6 months of agony I went through while buying my first sedan. I started with various online forums, read a million reviews. Saw hundreds of YouTube videos. I must have taken at least 40 test drives. I still had cold feet a day before the car was due for delivery. 

Odd, right?

We make decisions under sub-optimal conditions. 

Hardly any decisions are “perfectly” informed. In fact, lack of sufficient information is what makes decisions challenging. To matters worse, our choices are fallible to various biases. For instance, we are prone to “IKEA bias”. Assume you created a piece of furniture. You tend to value it more than other furniture. Similarly, it’s hard to notice faults with business or product that you may have built. Another example of cognitive bias is “Groupthink”. We tend to conform to the group narrative in order to avoid conflict. For instance, in a meeting if a couple of peers suggest another meeting to solve a problem, you tend to say yes, even if deep down you felt it wasn’t necessary.

Our past choices constrain our future choices. For instance, just because a set of stocks gave you handsome returns doesn’t mean they will next time. However, some of us tend to prefer some biased “favourites” in our portfolio. 

Worse, we do not always have the highest-level conceptual understanding of the decision. For instance, many companies around the world are going 100% remote. Some of them are giving an option to the employees, others are not. This will presumably reduce costs and provide people with flexibility. Are we sure though? Do we have evidence that long term remote work will not disturb the social fabric of the company? do we know enough about long-term health impact of work from home? we have anecdotal evidence about increase in productivity but do we know if this is sustainable? This however is not stopping companies from “re-imagining” future of workforce. 

remote or not remote that is the question
Remote or not to remote is a long-term question

Steven Johnson lays this out beautifully in his book “Farsighted: how we make decisions that matter the most”. He explains, this is the problem of “bounded rationality”. We are limited by the information we have. It is therefore imperative that we seek out a full spectrum of possibilities, and seek diverse views before making critical decisions. 

Decision theory – All heart or All brain?

There is a ton of literature in philosophy on decision theory. There is normative decision theory that suggests a good decision is the one that achieves the most desired outcomes. Normative decision theory assumes the actors to be perfectly rational. This is hardly the case with human beings but for software and methodologies it may make sense. Descriptive decision theory on the other hand says that, in situations of uncertainty, a good decision should prefer the option with greatest expected desirability or value. In simple words, you should try to apply a practical lens and then try to optimise value of the decision. 

The difference between the two is explained well by an argument in philosophy called as Pascal’s Wager. The decision in question is whether to believe in god’s existence or not. Under normative theory people might make a list of pros and cons, look at rational evidence of god’s existence. However, in reality, this is hardly the case. People make the decision to believe in god based on their own interpretation of uncertainty, risk, expected positive impact etc. I for instance, believe in god as force for good. The existence of god in my conscious thought makes my life better. Therefore, it is certainly desirable for me. This is the basis of descriptive decision theory. It is not always scientific or rational but valuable nonetheless. 

Your values are a sophisticated navigation system 

Building on the descriptive decision theory, it is worth noting that complex choices and life altering decisions can’t always be divided into sound unsound, rational and irrational buckets. We still respond to a lot of situations intuitively. While having a rough day, we might react to snide remarks with anger. When you are extremely stressed you might respond with eating indiscriminately! Rationality does not always find a customer during such situations. However, during stressful situation if you let your values drive you, you may not be as impulsive. For instance, “being secure” is one of my core values. When I am having a rough day, I do not respond to snide remarks with anger, instead I am able to choose to ignore them and focus on what is in my control. I am not always successful at applying the values navigation system. I still need to control mid-night snacking. 

midnight snack decision making
Midnight snack anyone?

There are other times when we simply do not have enough information to decide. For instance, in 2016 when we were blessed with a child, I was a few months into my new job in London. The changes in circumstances brought back a real prospect of moving back to India. Was raising a child closer to family more important than immediate career prospects? this was an extremely challenging decision. Deepika and I sat down and made a list of values that were really important to us. One of these values was “family first”. We believed, that our professional success alone wouldn’t make us happier. That point on, it was easy to follow through. It is needless to say that British weather helped us tremendously to make this choice 😜! 

moving is permanent
Boxes, boxes!

To conclude, your values are your guide. They are your navigation system through the complex pathways of decision making. 

Deciding and opting are not the same thing!

Let us build on how we can use values to make good decisions. Sometimes decisions are not about making complex choices, but they are rather about assuming a new identity. Graduating from one set of values to a higher set of values. Resetting your values in simple words. 

For instance, when you opt to have children, you are graduating from “individual freedom” to “family”. These values do not co-exist, but you are basically saying that the value of “family” is now more important to you. You are choosing to become a different person, opting to be a parent. This is why some of the most complex and critical decisions in life do not feel all that difficult. 

Next time you face a critical life choice, consider if there is an opportunity to redefine your values and identity. You don’t always need to decide, you can opt! 

Is your next personal decision an aspiration or an ambition?

One of my mentors asked me to enrol in a yoga class last month. He suggested that improved breathing techniques served to increase his stamina and reduce stress levels. This was very exciting. Everyone holds an ideal image of themselves. I was no exception. I thought, “this is brilliant, I can finally start a healthy morning that I have been procrastinating about”. Turns out, I almost fainted during a 3-hour class and did not want to continue. It took me two attempts to do it at my own convenience. In the hindsight, I let my aspiration to be a different version of myself interfere with a more rational and suitable way of achieving my goals. 

Yoga is life but not for me I guess
I am still a Yoga wannabe! Not quite there though 😁

Take another scenario, at the beginning of the year, I started a weight loss regime. I knew exactly what I wanted. I persevered, and I lost 7.5 kgs. in 3 months. This is called ambition. 

Notice the subtle but really important difference. Ambitions know exactly what they want, aspirations only have a vague sense of value, they hope a future version of yourself will appreciate. We are always hatching plans to do new things. Try to analyse if it’s an aspiration or an ambition. There is nothing wrong with being aspirational but you are likely to be disappointed when things don’t go as planned. 

Have you noticed how unfulfilled choices haunt us?

When Deepika and I were travelling through South America, we were stuck in Manaus, Brazil for a couple of days as our flights to Argentina got cancelled. We missed a couple of places on our planned itinerary. Although we had the time of our lives in the Amazon rainforest, it was hard to get over the missed spots on our itinerary. 

The Amazonas
The Amazonas was fascinating!

It’s strange how unfulfilled choices haunt us. That country we did not move to, the job we didn’t accept. While the outcome is not always in our hands, being aware of this phenomenon while making life altering decisions is helpful. I use the “no regrets” principle. If the decision is once in a lifetime opportunity and I have thought it through, I usually am biased towards acting on it. As I wouldn’t like regrets later. Perhaps another trip to South America when the pandemic passes. 

Are you differentiating between means and ends? 

Before we get all hung up on “no regrets” it is crucial to understand if a decision is a means or an end. For instance, if you are deciding on whether to take up intermittent fasting, what is your end goal? If it’s weight loss, then it’s a means decision not an end decision. This means you could weigh alternatives. On the other hand, if you were deciding on saving up to buy a house, there are usually no alternatives. You should make such decisions more carefully and with intention. 

As per HBR, this is really critical for executives. Executives should try to figure out what is strategic vs. what is problem solving. Senior leaders lay a lot more stress on strategic decisions than problem solving. Good leaders also lay more stress on impact than speed of decision making. Also, decisions need to be actionable – otherwise they are just good intentions! 

Mental models & Lessons from Jeff Bezos

Mental models are a powerful technique to quickly weigh important decisions. These encompass values, expertise in a domain, extensive experience and great leaders have a wealth of these mental models. 

For instance, Jeff Bezos attributes a lot of his company’s success to effective decision making. In a letter to his shareholders in 2015, Jeff suggests that most decisions should be made with around 70% information you wish you had, if you wait until you are at 90% you are probably too late. He also says that some decisions are like a one-way door and they cannot be reversed. Bezos calls them Type 1 decisions. 

Amazon is a behemoth and why?
Amazon’s secret

Other decisions are like a two-way door, they are fully reversible. Bezos says such Type 2 decisions should be made fast, as you can always walk back through the door. Bezos also uses disagree & commit technique. When you are in charge of a situation, sometimes you may not have a consensus, but as a leader you will have the responsibility to find a way forward. In such scenarios its helpful to say, “I know we don’t have an agreement, but I would like you to move on and commit to this decision”. 

Beyond anatomy of decisions

Now that we have learnt about the anatomy of decision making, let’s understand briefly, the psychology of decision making. 

Decisions are basically influenced by perception of risk. Our risk perception is shaped by our knowledge and sometimes other people’s opinion. It is therefore important to gain the highest conceptual understanding of subject matter before making critical decisions. In the age of information overload, it is also crucial to be choosy about what and whom to listen. Be wary of what you consume on social media. Don’t trust everything. 

Another fascinating aspect of decision psychology is decision fatigue. Human brains are designed to ration decision making. When we are faced with a decision, we almost always choose the shortest path first. Don’t believe me? Try looking at difference between opt-in percentages, and opt-out percentages on customer experience choices such as paperless billing. 

In addition, whenever we make too many decisions, we simply shut down decision making part of our brain and go with whatever is default. This has profound impact on life around us. For instance, Prisoner’s fate in parole hearings fairly correlates with the time of day their case is heard by the judge. Early hearings and hearings after a break tend to be more favourable. Think about that for a minute. 

My hack to deal with this is being mindful about decision fatigue. Schedule rest just before an important decision-making situation. Schedule important decisions after a break or in the morning, if you are looking for highest chances of a favourable outcome. 

happiness is not conditional
Happiness is ahead of both good and bad decisions as you will learn and get better!

Finally, if you aspire to learn more about topics like this, please subscribe to my fortnightly newsletter. Happy decisions!! 😊

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  1. Mindset – Carol Dweck
  2. Steven Johnson – Farsighted: how we make decisions that matter the most
  3. New Yorker – Art of Decision Making
  4. Scientific American – Article
  5. HBR – link here

By Abhi Shah

Hi, I’m Abhi. After living many years in London, me and my family re-located back to India in the summer of 2017. I spend most of my time working with a high performing team at Barclays in Pune, India and the rest with my son Anik! I have spent half of my career in commercial product roles and half in technology. I have also spent over 9 years living outside India, and have traveled to over 27 countries. Visit the Bio section of this website to learn more about me.

4 replies on “Fascinating anatomy of decision making”

[…] Purpose can arise from unlikeliest of places. Many years ago, one of my friends recommended a book called, “If god was a banker“. The main plot of the book revolves around lives of two professionals and their journey with different set of values. Even though it was fiction, the book left a lasting impression on me. It taught me early lessons about the value of integrity and slow but steady growth. Pursuit of “long-term” has been a major value for me since then. Slowly it has become part of how I make decisions. […]

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