Decision Making Flashcards
programmed decisions
repetitive and well defined, procedural and routine like putting on clothes in the morning
Reliable set out outcomes
No deep thinking needed
non-programmed decisions
non repetitive, require lots of deep thinking and problem solving abilities
Unreliable set of outcomes
deductive reasoning
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
inductive reasoning
start by looking at the observations then come up with a hypothesis
intuition is trusting your gut, when is it good and bad to use? (hunch vs automated expertise)
hunch: risky and opinionated
automated expertise: can be trusted, where someone has lots of experience doing something
bounded rationality
where the current solution/item is sufficient to outweigh the additional time and resources needed to find a better one
heuristics
things that your brain does to make quick decisions / mental shortcuts
cognitive bias
influenced by the info we notice / don’t notice
- errors that lead to poor decisions
- can be info processing biases or judging others biases
availability bias
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
representative bias
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
confirmation bias
only favoring info that conforms to our existing beliefs
- less likely to remember stereotype inconsistency that exists
anchoring bias
relying too heavily on the first piece of info we receive
sunk cost / escalation of commitment fallacy
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
how to overcome sunk cost fallacy
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)
overconfidence bias
people are more confident in their own abilities than is objectively true
- we think we are better drivers than we actually are
illusion of control
people overestimate their ability to control outcomes, like a lucky jersey for a hockey team OR throwing a dice harder for a higher number
Dunning Kruger Effect
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
how does the Dunning Kruger effect apply to the survival guide example
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
fundamental attribution error
tendency to give yourself credit when something good happens, and being more likely to blame external forces when you perform poorly
process gain vs process loss
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
What was the outcome of the survival guide seminar
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
