From theory to practice: psychologist on decision-making techniques

The psychology of decision making includes a fairly wide range of issues. Some of the most complete and relevant research in this area to date was conducted by Israeli-American psychologist Daniel Kahneman. In 2011, he wrote the book “Think Slow... Decide Fast.” He was awarded the Nobel Prize for “the application of psychological techniques to economics, particularly in the study of judgment and decision making under conditions of uncertainty.”

Central to all of Kahneman's research is human irrationality. Actually, the entire outline of the scientist’s research can be conditionally divided into three stages, at each of which “irrational man” is revealed from a new side,

At the first stage, Kahneman, together with his partner and colleague, psychologist Amos Tversky, conducted several experiments that revealed about two dozen cognitive distortions - unconscious errors during reasoning that distort a person’s judgment about the world.

At the second stage, researchers were able to prove that people who have to make decisions under conditions of uncertainty behave in the opposite way to what economic models prescribe, i.e. they do not maximize utility. Next, an alternative concept of decision-making developed, called prospect theory, which turned out to be closer to the real behavior of people (for which Kahneman received a prize).

And at the third stage, after the death of Amos Tversky, Kahneman plunged into the study of hedonistic psychology - the science of happiness, its nature and prerequisites. The scientist made several very unusual discoveries.

The work “Think Slowly... Decide Fast” includes the results of all three stages. The leitmotif of the book is human self-confidence. All people, and especially specialists, often exaggerate the importance of their vision of the world. However, despite everything that has been discovered and established over decades of scientific work, the author does not seek to convince readers that the irrationality of people’s perception and behavior is absolute.

Kahneman argues that most of the time people are healthy, and their conclusions and actions are mostly consistent with the state of affairs. But this does not mean that their behavior is rational, because there are systematic errors in their thinking. They arise from the influence of established cognitive mechanisms.

Two systems of thinking

Human thinking, according to Kahneman, can be fast (System 1) and slow (System 2). Fast thinking is responsible for solving the simplest problems, is automatic and requires almost no effort from a person. Slow thinking allows you to solve complex problems and is much less likely to make mistakes when processing information provided by fast thinking. But slow thinking is lazy and requires a lot of energy, and its use is unpleasant for a person. For this reason, people find it easier to operate System 1.

Fast thinking is subject to a host of distortions. Because of this, solutions are found quickly, but always turn out to be effective. An excellent example of this is the Muller-Lyer illusion: a person looks at lines, and their length seems different to him, depending on where the arrow is directed, although it is the same everywhere:

Kahneman is inclined to believe that slow thinking represents the first version of intelligence, which is still at the stage of development. If you trust Darwin's theory and bet that System 2 will give people advantages in procreation, then after hundreds or perhaps thousands of generations, there will be people living on Earth for whom thinking and making difficult decisions will be just as easy, how to breathe. Modern man still has access to what he has, and his task is to learn to make the most of his potential.

The emphasis in any technique of getting things done is on the economy of slow thinking. Its ability to think is limited, and whenever it answers a question, it spends a unit of its capabilities, and people are given very few such units per day. Based on this, it is not recommended to waste System 2 on trivial questions, and especially on the same questions.

As it functions, rapid thinking uses metaphors and associations to quickly realize its superficial understanding of the world. Slow thinking, meanwhile, will rely on clear beliefs and informed choices.

At the same time, one can quite reasonably ask whether all these arguments about two systems of thought should be seriously trusted. Kahneman says that they are best regarded as useful functions, because they contribute significantly to explaining the features of the human mind.

Step 10: Performance Assessment and Reporting

After the decision is executed, the manager needs to evaluate the accuracy of its execution and the quality of the decision itself. To what extent did it help eliminate the existing problem with which the decision-making process began? To evaluate, the manager applies the criteria set at stage 3. After the final analysis of the decision and the effectiveness of its implementation has been made, the manager usually draws up a report in which he records the positive and negative results of the process of making and executing the decision.

A striking example

To illustrate and confirm Kahneman’s theory, you can take one of the most sensational experiments that they conducted together with Tversky. It was called "Linda's Problem." Participants were told that there was a certain woman named Linda - lonely, outspoken and very interesting. During her student years, she was deeply concerned about issues of social justice and discrimination.

Participants were asked which is more likely: that Linda works as a bank teller or that she works as a bank teller and is involved in a feminist movement? The overwhelming majority of respondents indicated a greater likelihood of the second option. This was a blatant violation of the laws of probability, and adding details would only make the probability lower.

However, even 85% of Stanford Business graduate students who study probability more seriously scored "poor" on Linda's Problem. One of the graduate students said that she made a trivial logical error because... I thought they just wanted to know her opinion. What's the catch?

A very simple question (How coherent is the narrative in "Linda's Problem"?) is replaced by a more complex one (What is the likelihood that Linda is a feminist?). According to Kahneman, this is the source of most of the biases that confuse human thinking.

Fast thinking begins to operate with intuitive reasoning based on heuristics - a simple but imperfect method for answering complex questions. Slow thinking picks up the arguments that appear if they look logical, and does not even think about working extra hard.

In his work, Kahneman talks about many similar experiments. They all demonstrate failures of rationality. Even the famous biologist Stephen Jay Gould, knowing the correct answer to the question “Linda’s Problem,” wrote that he was constantly led astray by various thoughts like “Linda cannot be a simple cashier, you need to rely on the description,” etc.

Kahneman was convinced that it is fast thinking that pushes people to incorrect answers to questions and decisions. Although, there is a possibility that things will be a little different. People's daily internal dialogue is driven by unstated expectations. Given expectations that improve communication, it would probably be more reasonable for participants who decided that Linda was just a bank teller to assume that she was not a feminist. If this is true, the respondents' answers cannot be called incorrect.

About practice

Method of semantic search for alternatives

Client P came to me: 55 years old, owner of a company. He had a request: who to make his successor. There are no suitable candidates within the company, there is a long wait from the department, but there is a nephew who graduated from university.

What we worked with:

• Successor criteria. The client highlighted: experience, loyalty to the director (him), knowledge of the specifics of the industry, balance, authority among subordinates, honesty.
• Meta-level: what meanings are included in each criterion?
• Scaling selection criteria from 1 to 10 according to importance.
• A look at the “raw” criteria from the perspective of meaning - new alternatives and criteria have been added. This place contains insights and insights.
• How much do you like the selection principle now?
• Each of the applicants was assessed based on new criteria.

Solution: It’s better to wait and create a competition for the position with key criteria.

Shutterstock/Mary Long

Methodology for modifying alternatives

Client V. contacted me: 31 years old. He makes a decision: to quit his job and start his own business or to stay because there are prospects for growth.

The options he had before the technique:

1. Stay at work and wait for a promotion.
2. Quit and start your own project.

What we did:

1. The client brainstormed new possible options.
2. I rated each option on a 10-point scale.
3. I highlighted the reasons why the options are not satisfactory.
4. Modified the options based on the objections from the third point.
5. I rated the resulting modified options on a 10-point scale.

V. decided to talk to his superiors, ask for a reduction in salary and working hours in order to start his own business, and argue for this with additional education.

Are the right decisions possible?

If the conditions for making decisions are more natural (a person understands that he has been deceived; a person talks about specific things; a person evaluates dry numbers, etc.), there is a much greater chance that people will not make mistakes like the one discussed above. Many subsequent experiments indicate this, which suggests that people are not hopeless in their irrationality.

Of course, there are also cognitive biases that exist in natural settings. For example, erroneous planning noted by Kahneman, when benefits are overestimated and costs are underestimated. But this is only one manifestation of the so-called total optimistic bias. An excessive bias towards optimism is the cause of other false beliefs, including confidence in control over the situation.

Despite this, Kahneman argues that optimists are much more psychologically resilient than realists, and even live longer, and exaggerated optimism plays the role of a defense mechanism against another cognitive bias - loss anxiety, when a person is more afraid of losing than appreciating the opportunity to gain something.

Exploring possible scenarios

Considering best- and worst-case scenarios is a common way to make a difficult decision. What's the best future you can imagine? And the worst? How would you feel if this catastrophic scenario became a reality? To expand on this technique, psychologist Gary Klein uses a trick he calls "pre-mortem analysis." Klein explains that a presumptive estimate of cause of death is the hypothetical opposite of a "post-autopsy" determination of the actual cause of death. As they say: “the autopsy will show” and this can be good for everyone except the one who received the autopsy. Sometimes it’s better not to wait until the whole project burns down, and you are left wondering over its ruins “what was the mistake?”

Klein advises considering possible future causes of "project failure" at the very beginning, so that you don't have to deal with pathologists at the end. Imagine if the decision you made was terrible. The project you decide to take on is a fatal disaster. Now think about all the possible reasons for this failure. By knowing the hypothetical reasons that led to the worst-case scenario, you can take steps to prevent it, go back to the beginning and avoid making that catastrophic choice.

In science, this method is called “prospective-retrospective viewing”, mastering it will help increase your ability to predict future outcomes of events by 30%. On the other hand, just try to imagine both future scenarios and evaluate how you will feel? If you feel unhappy or anxious, think about why? For example, Amazon must create a hypothetical program press release and a list of frequently asked questions before they even write any code. Working backwards, the team faces its most difficult challenges early on in its journey. As reporter Gillian D'Nonro , "If the team can't come up with a compelling press release, then the product probably isn't worth making at all."

What is rationality?

Even if a person could overcome prejudices and illusions, there is no guarantee that his life would become better. This is where the question of what rationality is arises. A person's everyday reasoning abilities help him cope with a dynamic and complex environment. This means that, most likely, abilities can adapt to this environment.

Kahneman never struggled with the nature of rationality. But he assumed that her goal was happiness. When he first began asking what happiness was in the 1990s, much of his research was based on surveys of people's overall satisfaction with life. Results and scores depended on memory, and memory is an unreliable variable. Therefore, Kahneman decided to apply a selection of pleasant and painful experiences in different situations and add them together.

Kahneman called this experiential well-being, and contrasted it with remembering well-being, which many scientists relied on. As a result, he was able to discover that these two indicators go in different directions. The Remembering Self does not think about the duration of a pleasant or painful experience. It rates an experience by its maximum degree of pleasure or pain. But the “Experiencing Self,” on the contrary, can and does do this. But what is the result?

Avoid double selection

We often get caught up in choosing one or the other: “Should I continue studying or start a business”? “Should I move to San Francisco or stay in Houston”? It's easy to see the world in black and white, but it's actually gray, or rather, it has several shades of gray. Perhaps you could spend the summer in San Francisco and the winter in Houston. Or you could live in Houston for a couple more years and move to the San Francisco area a little later. Sometimes the right choice is not one of two opposites. This may be a more creative, subtle or flexible solution.

Consult with others

Finding the right option is easier if you share the dilemma with others. Most importantly, it is an additional way to collect valuable information. We suggest that you not only discuss the decision with your household, but also talk with those who have already taken the same step that you are about to take. Ask them how they feel now? For professional or business decisions, companies often hire consultants. Find people who have deep knowledge and experience in the field you are interested in and learn as much as you can from them. The additional information you collect will definitely help you make a better choice and will come in handy in the future.