Home » Opinion » Book review
Fight intuition to make better decisions
By Ni Tao |
December 5, 2009, Saturday
|
Print Edition
Print Edition
DECISION making is a tricky business for company executives, a craft honed over time with considerable energy.
For business writers, however, it is a field awash with opportunities, where they rake in money and fame by flaunting their uncanny ability to predict the consequences of decision makers' strategic choices, and second-guess why they are bad and what goes wrong.
Prescience seems to lie at the heart of the wizardry -- or that's what these omniscient prophets would have us believe. In fact, crystal balls seldom have a place in the business arena known for its vagaries.
As the saying goes, hindsight is 20/20. A healthy dose of skepticism therefore is necessary to cure minds hypnotized by much-touted "visionary voices" during decision making processes.
Though a slim volume (about 140 pages, excluding notes and appendix), Michael J. Mauboussin's "Think Twice" stands out in a plethora of literature on this subject.
Its subtitle says a lot about what the author argues: "harnessing the power of counter-intuition."
Mauboussin begins with the tale of Big Brown, a racehorse widely considered a favorite to clinch America's 2008 Triple Crown held in three states. The horse had already won the first two races, the Kentucky Derby and Preakness Stakes. Its superb performance beguiled many punters into feverishly betting on it. Much to their chagrin, Big Brown came in last in the final race, the Belmont Stakes.
How did a shoo-in end up as an also-ran? This is a typical "black swan" phenomenon made famous by writer Nassim Nicholas Taleb who described highly improbable events.
But was the Big Brown rout really unforeseeable? Mauboussin begs to differ. It turns out that Big Brown's figures were less convincing in terms of race times and individual track speeds, a fact most people ignored.
Here the author introduces one of his core concepts: the "outside view."
As opposed to the "inside view," which refers to judgments based solely on close-at-hand information, the "outside view" calls for a holistic approach, a panoramic view in decision making that includes comparison of choices made by others in similar circumstances -- others who buck the trend and make the right bets.
So what can be done to join these "others"? Mauboussin identifies several areas where improvements can be made in decision making. The imperative, he argues, is distancing from an intuition-driven thinking pattern.
True, there were times when instincts did work and worked well. But "intuition is losing relevance in an increasingly complex world" and human instincts are, more often than not, irrational and tend to simplify solutions to complicated problems.
CEOs who act on gut feelings are poised to arrive at disastrous conclusions about how to run their companies.
Being counter-intuitive is only the first step, albeit a big one, toward making sound decisions. Moreover, one has to be mindful of the external factors that can muddle thinking. From time to time misplaced intuition manages to creep into our reasoning in the form of blind obedience to authority.
While it is useful to read the works of authoritative management gurus, their predictions need to be taken with a pinch of salt.
And experts may be too parochial to shift their gaze onto anything other than their specific fields.
Another factor that stunts realistic decision making is the propensity to assume that what applies in one case will also apply in a seemingly similar situation.
As the author observes, "Two may not be a trend, but our brains sure think so." Thinking anew thus entails resisting the temptation to cling to a status-quo mindset.
To identify the forces that sway decisions, the author suggests keeping a "decision making journal" in which every influence -- for instance, environment, mood, external stress -- is jotted down to gauge their roles in prompting people to make the choices they do, and to improve future decision making.
For business writers, however, it is a field awash with opportunities, where they rake in money and fame by flaunting their uncanny ability to predict the consequences of decision makers' strategic choices, and second-guess why they are bad and what goes wrong.
Prescience seems to lie at the heart of the wizardry -- or that's what these omniscient prophets would have us believe. In fact, crystal balls seldom have a place in the business arena known for its vagaries.
As the saying goes, hindsight is 20/20. A healthy dose of skepticism therefore is necessary to cure minds hypnotized by much-touted "visionary voices" during decision making processes.
Though a slim volume (about 140 pages, excluding notes and appendix), Michael J. Mauboussin's "Think Twice" stands out in a plethora of literature on this subject.
Its subtitle says a lot about what the author argues: "harnessing the power of counter-intuition."
Mauboussin begins with the tale of Big Brown, a racehorse widely considered a favorite to clinch America's 2008 Triple Crown held in three states. The horse had already won the first two races, the Kentucky Derby and Preakness Stakes. Its superb performance beguiled many punters into feverishly betting on it. Much to their chagrin, Big Brown came in last in the final race, the Belmont Stakes.
How did a shoo-in end up as an also-ran? This is a typical "black swan" phenomenon made famous by writer Nassim Nicholas Taleb who described highly improbable events.
But was the Big Brown rout really unforeseeable? Mauboussin begs to differ. It turns out that Big Brown's figures were less convincing in terms of race times and individual track speeds, a fact most people ignored.
Here the author introduces one of his core concepts: the "outside view."
As opposed to the "inside view," which refers to judgments based solely on close-at-hand information, the "outside view" calls for a holistic approach, a panoramic view in decision making that includes comparison of choices made by others in similar circumstances -- others who buck the trend and make the right bets.
So what can be done to join these "others"? Mauboussin identifies several areas where improvements can be made in decision making. The imperative, he argues, is distancing from an intuition-driven thinking pattern.
True, there were times when instincts did work and worked well. But "intuition is losing relevance in an increasingly complex world" and human instincts are, more often than not, irrational and tend to simplify solutions to complicated problems.
CEOs who act on gut feelings are poised to arrive at disastrous conclusions about how to run their companies.
Being counter-intuitive is only the first step, albeit a big one, toward making sound decisions. Moreover, one has to be mindful of the external factors that can muddle thinking. From time to time misplaced intuition manages to creep into our reasoning in the form of blind obedience to authority.
While it is useful to read the works of authoritative management gurus, their predictions need to be taken with a pinch of salt.
And experts may be too parochial to shift their gaze onto anything other than their specific fields.
Another factor that stunts realistic decision making is the propensity to assume that what applies in one case will also apply in a seemingly similar situation.
As the author observes, "Two may not be a trend, but our brains sure think so." Thinking anew thus entails resisting the temptation to cling to a status-quo mindset.
To identify the forces that sway decisions, the author suggests keeping a "decision making journal" in which every influence -- for instance, environment, mood, external stress -- is jotted down to gauge their roles in prompting people to make the choices they do, and to improve future decision making.
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