Decision Making

Question 1

programmed decisions

Answer 1

repetitive and well defined, procedural and routine like putting on clothes in the morning

Reliable set out outcomes

No deep thinking needed

Question 2

non-programmed decisions

Answer 2

non repetitive, require lots of deep thinking and problem solving abilities

Unreliable set of outcomes

Question 3

deductive reasoning

Answer 3

start with a hypothesis and evaluate possibilities to reach a conclusion

• example is looking for a girlfriend, where you already know what you’re looking for at the outset

Question 4

inductive reasoning

Answer 4

start by looking at the observations then come up with a hypothesis

Question 5

intuition is trusting your gut, when is it good and bad to use? (hunch vs automated expertise)

Answer 5

hunch: risky and opinionated

automated expertise: can be trusted, where someone has lots of experience doing something

Question 6

bounded rationality

Answer 6

where the current solution/item is sufficient to outweigh the additional time and resources needed to find a better one

Question 7

heuristics

Answer 7

things that your brain does to make quick decisions / mental shortcuts

Question 8

cognitive bias

Answer 8

influenced by the info we notice / don’t notice

• errors that lead to poor decisions
• can be info processing biases or judging others biases

Question 9

availability bias

Answer 9

when we favor info that comes to mind quick and easy

• like New York police officers seem to have a more dangerous job, even though loggers have way more dangerous jobs based on death rates

Question 10

representative bias

Answer 10

when we wrongly believe that similarity between two things increases their probability

• like people think a quiet introverted man is more likely to be a librarian than a salesman, despite there being way more male salesmen than librarians

Question 11

confirmation bias

Answer 11

only favoring info that conforms to our existing beliefs

• less likely to remember stereotype inconsistency that exists

Question 12

anchoring bias

Answer 12

relying too heavily on the first piece of info we receive

Question 13

sunk cost / escalation of commitment fallacy

Answer 13

when we CONTINUE a behavior based on the time and energy you put into it, RATHER than the expected benefit of each marginal minute you put into it

• We don’t like to admit that we’ve been wasteful / loss aversion

Question 14

how to overcome sunk cost fallacy

Answer 14

thinking of the bigger picture

not looking back

setting your walk-away point from the start

find value in losses (focus on the lessons learned)

Question 15

overconfidence bias

Answer 15

people are more confident in their own abilities than is objectively true

• we think we are better drivers than we actually are

Question 16

illusion of control

Answer 16

people overestimate their ability to control outcomes, like a lucky jersey for a hockey team OR throwing a dice harder for a higher number

Question 17

Dunning Kruger Effect

Answer 17

people believe they’re smarter than they are in certain situations

• like people with a LIL bit of knowledge think they’re experts
• but people who have learned all the complexities that exist think they don’t know much about the topic overall

Question 18

how does the Dunning Kruger effect apply to the survival guide example

Answer 18

a guy who watched Bear Grylls on TV prob thinks he’s an expert and will speak out

while someone who’s been on actual survival backpacking trips doesn’t think they know everything, and refrains from speaking up

Question 19

fundamental attribution error

Answer 19

tendency to give yourself credit when something good happens, and being more likely to blame external forces when you perform poorly

Question 20

process gain vs process loss

Answer 20

Process Gain: when there is a more optimal outcome when working with a group

Process Loss: when there is a less optimal outcome when working with a group

Question 21

What was the outcome of the survival guide seminar

Answer 21

quantitative decisions are better solved in a group

but final yes/no decisions are better solved individually

separate group discussion and final verdict / like leaving it to the manager