Nutshell: Making good bets: the art of decision-making

To become better decision makers, we first need to understand what decision-making means.

Some of us might remember a more innocent time when a work day lunch was a simple matter of choosing which sandwich to buy. Perhaps there’d be the added complication of whether we’d opt for white or brown bread or for something cheese or meat-based; but that was pretty much it.

No more. These days, a whole range of bespoke sandwiches are just the tip of the iceberg (lettuce), and our working day can be enhanced by any number of food options from any number of outlets. It’s not surprising, perhaps, that research by Cornell University academics has shown that our lunch choices contribute to more than 200 decision we make each day about the food we eat.

And that’s just the food. Psychologists estimate that we make up to 10,000 decisions every day, some unconsciously, many of them trivial. At any one time, we might be deciding whether to walk or cycle; whether this is a good time to talk to Dave from Accounts, or if anyone would notice if we dropped off that Zoom call. But we might equally be contemplating something much more momentous: a serious strategic change at work; accepting that new job offer; moving house.

Whether trivial or momentous, conscious or not, we’re making decisions all the time. At its essence, decision-making is about choosing between two or more options. That can often feel liberating: the freedom to choose is empowering, suggesting that we have agency over what we do and how. Philosopher Ruth Chang sees making choices, especially hard ones, as “precious opportunities to celebrate the human condition”, the chance to be the “authors of our own lives”.

But that doesn’t mean that even the most uneventful choice – such as what to have for lunch – is easy. Chang doesn’t suggest that choices are hard only when the stakes are high, or when we don’t feel we can make an informed decision. Instead, her thinking about hard choices reflects a tension at the heart of decision-making, of choosing: the fact that all choice means a closing down of options, of having to pick something to the exclusion of something else.

The trouble is that it’s often not clear what the best option might be. We may choose the super-grain salad over a carb-loaded baguette, but that doesn’t stop us regretting our decision all afternoon. For Chang: “Hard choices are hard not because of us or our ignorance. They’re hard because there is no best option.”

Hard choices may also be harder when there is a proliferation of options on offer. Psychologist, Barry Schwartz, author of The Paradox of Choice, challenges the orthodoxy that more choice means more freedom and wellbeing. He believes that the expansion of choice – whether that’s different brands of a supermarket staple or whether we choose to check our emails at the weekend – can lead to paralysis rather than liberation: faced with so much choice, we may not be able to decide at all.

And even if we do take the plunge, we may feel less satisfied with the choice we’ve made, even if it was a good decision at the time (that super-grain salad again). The more options we have, the greater our expectations and the greater our potential for regret, for feeling less satisfied, anxious even. It’s unsurprising that Schwartz has concluded that “Choosing is hard. Choosing well is harder. And choosing well in a world of unlimited possibilities is harder still.”

No wonder people talk about decision-fatigue. Research has shown, for example, that judges are four times more likely to grant bail in the morning than in the afternoon, when their decision-making powers are at a lower ebb. If every decision we make is so loaded, the cumulative effect of having to navigate so much choice, put aside our FOMO and reconcile ourselves to missed opportunities might well leave us all exhausted.

Yet, having to choose is simply part of life. At work, decision-making is at the core of what we do, and not just about what we have for lunch. As leaders, others will be looking to us to use our experience and judgement to make the best possible call on options and priorities. We’ll need to decide and commit, knowing and accepting that we can’t predict the future, we won’t get it right every time, and that, for every path taken, another will be missed.

So, how might we learn to do that?

Reframing decision-making

One of the reasons that making decisions can seem so hard is because we tend to focus on outcomes, on the result of our choices. That can make the stakes seem high, even when they may not be.

Author, ex-professional poker player and 'uncertainty evangelist' Annie Duke has some interesting things to say about that. She contrasts the world of chess, where both players can see the board and have the information they need to make their best moves, with the “information asymmetry” of most of the decisions we make every day. We’re more likely to be facing the uncertainty, risk (and occasional deception) more readily associated with poker.

If we treat our decisions as though we’re playing chess, then we’re in for trouble. Duke believes that we tend to evaluate our decisions based on their outcome, what poker players call “resulting”. In our minds, the result we get is the direct result of what we do.

But that ignores the fact that we might, in all good faith, make a good decision that fails to achieve the result we want. Or we might make a bad decision – such as running a red light – and get away with it.

For Duke, the view that outcomes are a result of decisions isn’t wrong as much as it is incomplete. Making good decisions, increases the chance of a good outcome, but it doesn’t guarantee it. The other thing we need is a good dose of is luck. Just like betting, the very nature of making decisions is about gambling: making choices about our future with limited information.

So, rather than seeing decisions as fixed things underpinned by absolute certainty – for example, a clever chess move – we need to understand that we can never be entirely certain about the choices we make.

Unfortunately, not many of us are natural poker players. We like to try to make sense of our world by looking for patterns and certainty, and can easily fall prey to self-deception and all sorts of biases to support our own world view. These can be significant barriers to making the best possible decisions.

That’s why it’s crucial that we learn to play the game: it’s how we win or lose, the process we go through to arrive at our decisions that matters. If we imagine that we put money on every decision we make, that will naturally make us stop and think, look again at what we think we know, to listen to others and focus on the process of how we arrive at those decisions. Duke again: “Offering a wager brings the risk out in the open, making explicit what is already implicit (and frequently overlooked).”

We might not get the outcome we want even when we make the best decision: to continue the poker analogy, sometimes we’ll win, sometimes we’ll lose. But we’ll have a much better chance of success if we can accept the uncertainty inherent in decision-making and focus on how we can improve the odds of making the best decision possible, in Duke’s words: “Keep making good bets.”

Types of decision

We can also improve our decision-making by understanding that not all decisions are equal.

Keep it simple

We may feel that we need to be that decisive, single-minded leader, but do we really need to be the final arbiter on everything? Or can we delegate decisions that are lower priority to others – or not make them at all. When he was US president, Barack Obama decided to have only two suits on rotation, in order to remove at least one key decision each day around what to wear.

In their book, Simple Rules, Donald Sull and Kathleen Eisenhardt argue that it’s this kind of simplicity that offers the best route to success in a complex world. They contrast the different fates of two monastic orders in sixteenth century Europe, a time when the Catholic church was trying to get a handle on what was becoming a much more complex world.

Unlike the strict rules-based Benedictines, whose written constitution ran to 73 chapters, the Jesuits followed a simpler “Formula”, comprising just five paragraphs that laid out the order’s mission.

This gave them the flexibility they needed to adapt to the changing conditions they faced and seize opportunities to extend their reach. It didn’t mean that they had no coherent core or consistent message. But not worrying too much about the arrangement of beds in a monastery dormitory or who could wear slippers outdoors gave them the leeway they needed to focus on their core mission.

Reducing the number of decisions we have to make can help us to feel more in control and gives us more space and time to focus on the things that really matter.

The trick is to know which things those are.

Thinking fast and slow

Psychologist, Daniel Kahneman, understands that making decisions, hard choices, can be mentally taxing. We couldn’t possibly compute all of the necessary information to consciously make every single decision we need to make every day. That’s why our brains have developed shortcuts (known as heuristics) to simplify our thinking and help us get through the day.

Kahneman distinguishes between what he calls System 1 and System 2 thinking. System 1 is our default thinking mode, automatic and intuitive. In contrast, System 2 thinking is more deliberate and effortful, more complex and controlled.

Unsurprisingly, given the thousands of decisions we need to make every day, System 1 thinking is in charge most of the time, protecting us from the cognitive strain of having to slow down and think something through using System 2.

But these cognitive shortcuts also come at a cost. System 1 thinking is more impulsive, more emotional, more optimistic and leads us to follow our first impressions, often despite previous experience or evidence to the contrary. Even when we think we’re in System 2 mode, believing we have a good reason for doing what we do, we still might not have slowed down enough to make the best decision possible.

Kahneman gives as an example the success of financial fraudster Bernie Madoff. If we’d properly engaged our System 2 thinking, we might have concluded that his get-rich-quick schemes really were too good to be true. But with our tendency to get stuck in System 1 thinking, it was simply easier to succumb to the combination of his charm and the fact that we wanted to believe he could make us wealthy. It’s a classic example of whether we follow our heart or our head.

Not all intuitive decisions are wrong, and sometimes making decisions instinctively works well. But we’ll improve our chances of success if we acknowledge that those impulses are not always right first time. They may need to be interrogated and sense-checked if we are to make a good bet. We need to learn when to slow down and put the effort into a bit of System 2 thinking “so that the intuition is as informed as it can be”.

Understanding complexity

So, understanding when to act then think or think then act is a fundamental of decision-making.

It’s a conundrum at the heart of Dave J Snowden’s Cynefin® Framework ('ku-nev-in', the Welsh word for 'place' or 'habitat'). His model helps us take different approaches to decision-making based on the situation we find ourselves in, and how complex or predictable that situation is.

By looking at the decisions we need to make through the lens of Snowden’s five domains, we can flex our approach through a process of what he calls “sense-making”. The framework helps us to know when we can just get on with (more routine) things; when we might need to slow down and explore and analyse in more detail – and when we simply need to act then think, for example, in a crisis or emergency.

The Cynefin Framework helps us to tackle some of the thorniest aspects of making decisions: dealing with Annie Duke-style ambiguity and understanding how this might affect the type of decision we might need to take as a result.

Decision-making styles

Our decision-making might also depend on our own personal style. Writing in Harvard Business Review, Kenneth R Brousseau and his co-authors report on their research into how our decision-making styles can affect outcomes.

Brousseau et al identify four decision-making styles, based on two key factors:

• How information is used.

• How options are created.

They contrast people who want to gather and analyse as much data as possible before acting – known as “maximisers” – with “satisficers” who are happy to go with information that’s good enough and test it as they go along.

When it comes to creating options, “single focus” decision-makers strongly believe in taking one course of action, focusing on making things happen as they believe they should. “Multifocused” people generate lists of possible options and often pursue multiple courses as they adapt to changing circumstances.

This leads to their four decision-making styles:

• Decisive

• Hierarchical

• Flexible

• Integrative

Like all style diagnostics, the authors are keen to point out that we do (and should) adopt different styles depending on the situation we’re facing. But their research is also clear that our decision-making style tends to evolve as our careers progress and the types of decision we’re called upon to make become more complex.

We might be more action-oriented or direct when our roles mostly call for us to make clearer-cut choices (perhaps in Cynefin-style clear contexts). But, as our responsibilities grow and decision-making becomes more complex, we’re likely to do best when we’re more flexible or integrative, able to adapt and bring diverse voices and more options into the picture, which allows us to assess and take decisions in a more nuanced way.

Heart vs head?

Economist Noreena Hertz believes that the first step towards making better decisions is to think about them more systematically, to become “empowered thinkers” about the choices we make.

This doesn’t mean that we can or should adopt a one-size-fits-all approach or strategy, but we do need what she calls a “toolkit” to help us interrogate the decisions we make; to prioritise the ones that really matter and to be more intentional about those head vs heart conundrums.

To do this, we need to focus on the process we go through to make the best possible choices rather than falling foul of poker-playing “resulting”. As Annie Duke reminds us, “Improving decision quality is about increasing our chances of good outcomes, not guaranteeing them.”

Once we have this process in place, we can mobilise a range of tools, techniques and resources to help speed up or slow down as our situation demands. Instinct and experience will always have a role to play. We can develop our decision-making expertise through practice. We can look for patterns and trends. We can stay curious and use what we learn to take some shortcuts – such as checklists - along the way.

But we will never be able completely to take away the ambiguity, uncertainty – and luck - from the decisions we have to make at work. To reconcile ourselves to that, we’re going to have to put aside our tendency to focus on outcomes, to simplify where we can and to master creative and collaborative decision-making processes. In poker, a bet is a decision about an uncertain future. Our job as decision-making leaders is to do what we can to improve the odds of success, to keep making good bets.

Test your understanding

• Outline what Annie Duke means by the term “resulting”.

• Explain the difference between Daniel Kahneman’s System 1 and System 2 thinking.

What does it mean for you?

• Reflect on your own decision-making style using Brousseau et al’s four-type model. How well does it equip you to make more complex decisions? What three things might you do to become a more integrative decision-maker?