Thursday, April 13, 2017

Real-World Decision-Making

I saw a brief article about whether multi-tasking works or not. There are some personal attributes that are needed to really make it effective: focus on the relevant at the time, ability to switch when new relevant information occurs and memory management at retrieving quickly the information needed to accomplish the task in front of you. Fits with what I’ve been reading in the Undoing Project by Michael Lewis (Moneyball, Big Short) what Israeli psychologists discovered 50 years ago along the same lines. …And that we make decisions in context and not logically. For example, a lot of psychology experiments are based on studies with college students (because they’re available) with little or no risk and often the decision doesn’t have long-lasting effect.

For example, participants can more often than not express the probability that a certain box contains a greater portion of red beads than white beads after taking 4 samples. But what if they had to bet their house on the outcome? How confident are they going to be in the decision that the box absolutely contains more red than white if their sample contains 3 reds and 1 white? Is the confidence high enough to wager $1, $100, $100+K in terms of career? 

In real life, it’s deciding if the sales opportunity is really a good deal for the company...or the new job is really a good one to take for long-lasting career based on limited info from a few interviews and other gleaned bits of information. Or the new hire is going to work out based on the same info but from the other perspective. We all know how costly wrong hires can be and how discouraging landing the wrong job can be...ask the Uber president who resigned after 6 months on the job.

The Israeli psychologists looked at multi-tasking aspects like focus on relevant information and switching to other background information when it became relevant because their nation depended on the outcome; they had to know what made the best squad leaders, tank commanders, fighter pilots who could ignore irrelevant info but stay tuned to the ‘noise’ in case something changed in the background…like when you’re talking to someone in a crowd focusing on the conversation but you hear your name spoken by someone else.

Take any psychology studies about decision-making with a grain of salt if it's not dealing with someone risking something of value on the outcome. We make decisions differently based on the circumstances. I was a little more risky at a younger age when I wasn't jeopardizing the ability of a family to eat and have shelter. Later on, the decisions made had to have more certainty to the outcome.

The book is good but I give you this warning. In typical Michael Lewis style you get a lot of background information and story and occasionally you're prone to miss the nuggets of applicable information.

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