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Posted October 23, 2009
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Risking or Thinking Well
Mauboussin's gives us sharp tools to make headway in relaying on our blunted ability to be rational. If you take him seriously the only question is how long will it take to learn to Think Twice?
We all get into the habit of understanding decision making from our own perspective. I am Michael Mauboussin's fan and his mother-in-law so take what I say as you will. I have also spent the 34 years of my professional life working as a family therapist and in so doing have learned about the many emotional challenges of thinking rationally
Poor decisions can provide clues about significant hidden biases or hidden emotional pressures, either of which can overpower our more rational side. Most of us know that stress contributes to poor decision-making. Of course if the people you love die, or if you get divorced, you might not be at the top of your rational game.
We also know that it is just not stress or mental illness that creates the conditions for poor decision-making, it is also the way the brain has evolved which contributes to the way we make decisions.
By pausing to Think Twice, it becomes possible for us to avoid many irrational "slippery slope." Becoming rational is a challenge as we don't value introspection, flexibility or the ability to properly calculate evidence.
After reading the book once, I read it twice. My goal: make this information work in my life. Chart the appearance of these mental traps with examples from my life and the news media.
If rational thinking is to increase we have to notice how our brain immediately responds to clues. By looking carefully at these clues and wondering about their impact on us we can often re-think any problem.
The brain works its short-cut thinking magic, unless one can:
(1) Seek the statistical outside viewpoints.
(2) See how we respond to complexity with tunnel vision.
(3) See the inconsistent performance of experts in predicting the future.
(4) See the errors in cause and effect thinking in complex systems.
(5) See the difference between cause and correlations.
(6) See the difference between skill and luck.
(7) Consider probability in what goes up will come down, or revision to the mean.
(7) Consider "the grand Ah-Whooms" or the tipping point in non-linear systems.
(8) Understand: "Our brains are not wired for the process of moving from preparation to recognition. Indeed typical decision makers allocate only 25% of their time to thinking about the problem properly and learning from experience."
Therfore: 1) Keep a decision journal, 2) Make a checklist.
My take away is to understand the ancient roots of irrationality as they surface in my day-to-day life. Perhaps this will help retool my brain, reducing my deep need to feel good and to be right at the expense of long-term solutions to complex problems.
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Posted November 30, 2009
Helpful guide to better decision making
Research indicates that people buy more German wine when a store's sound system plays German music in the background and more French wine when it plays French music. However, shoppers claim that the background music has no effect on their wine choices. Most people think that they make rational decisions, even if they do not. In this example, irrelevant, low-level sensory input determines people's choices. Michael J. Mauboussin, a finance professor and investment strategist, wants to help people make better decisions. In his book, he details the most common decision-making mistakes and suggests practical techniques you can use to avoid them. getAbstract recommends this book to people who want to increase their awareness of their own irrationality and, especially, to managers in decision-making positions, whose mistakes may have ripple effects throughout their organizations and even beyond.
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