I used to be a rationalist. I enjoy math and statistics and I always thought that any problem could be rationally (and quantitatively) parsed, if only we could frame it correctly. The issue, as I saw it, was not our quantitative, logical tools but rather the slippery ambiguity of our language. If we could only make our language as precise, logical, and, yes, quantitative as our tools, we could make huge strides in understanding our world and solving the problems of living together.
Although I enjoy languages, I thought numbers were better. Numbers are precise, rational, and universal. Language, other the other hand, is beautiful but also sloppy. It’s so difficult to convey certain concepts and emotions. You have to approach them elliptically, as novelists do rather than head-on as mathematicians do.
I also assumed that rational thought was superior to all other forms of thought. If only we could be rational and banish emotions from our decision making, we would be far better off.
Now I’m not so sure. The more I read about our brain and the way we make decisions, the more I’ve adopted epistemological modesty (EM). EM is one of those ideas that is fairly easy to understand but more difficult to adopt as a way of thinking and living.
Epistemology asks a simple question: how do we know what we know? I used to think that the best (perhaps the only) way to truly know something was through rational thought and logical deduction. I also thought that rationalism would ultimately – sometime in the distant future – allow us to know everything.
I was very sure of my position. Now I’m much more modest. EM (also known as epistemological humility or relativism) suggests that: 1) there are multiple paths to knowledge, and; 2) there are limits to our knowledge – even teenagers can’t know it all.
I used to think that rational thought was the best way to make decisions. It turns out that most of our decisions are made without any conscious thought whatsoever. Our subconscious does the work. Our best decisions are often based on emotions rather than logic. In fact, there’s a growing body of evidence that we don’t use logic to make decisions at all. We use logic to justify decisions. We use emotions to make them.
As I become more modest in my approach to knowledge, I also wonder whether rationalism doesn’t sometimes cause our problems rather than solve them. Our business schools teach a very rational approach to business. Just put it into a spreadsheet and you can manage it successfully. Yet, as business thinkers ranging from Peter Drucker to Paul Nutt point out, most of our business decisions are just plain wrong. Perhaps it’s because we’re too much in love with the rational, quantitative, and logical approach.
In my critical thinking classes, I teach that the first thing to do in making a decision is to step back and look around. Consider multiple alternatives rather than just one. Perhaps it’s time to do the same thing with the way we think. Let’s step back and think about our thinking. Let’s not assume that there’s one right way to think. By being epistemologically modest, we may just think our way to a better place.
The other day, Suellen and I saw Chip Heath give a presentation on the key messages of his new book, Decisive. Heath is on tour to promote the book and Denver was a well-promoted stop along the way.
I’ve written about the book in recent weeks and plan to write more in the near future. It’s a simple, clear synopsis of recent research on decision-making.
Today, however, I want to focus on Heath’s presentation style – he reminded me of many lessons I’ve learned in public speaking. Here’s a summary.
Establish rapport and credibility – a large audience turned up in Denver and Heath commented on it immediately, saying, “It’s clear that the people of Denver are intellectually curious. In fact, I’d say that they’re four times more curious than people in Austin and eight times more than people in Los Angeles.” It was funny but it was also a nice compliment. We loved him right away. Best of all, it wasn’t canned.
Slides as hooks not as script – Heath used a lot of slides. He advanced to new slides regularly; no slide stayed up for more than a minute or two. Each time he advanced, the audience “refreshed”. Most of his slides had fewer than ten words on them. Many had only an image. Heath told the story; the slides illustrated it. The text on the slides helped you remember the key points; they didn’t steal Heath’s thunder.
Tell a story, not an abstraction – Heath told a lot of good stories about decisions gone right and gone wrong. They were stories about flesh-and-blood people whose experiences illustrated key ideas about decision making. Every now and then, he would state an abstraction to summarize a point. He never said, “the moral of the story is…” but he could have.
Humor — he wasn’t rolling-in-the-aisle funny, but he had a dry, wry sense of humor that helped hold our attention. We paid attention partially because we didn’t want to miss a laugh line.
Parallel construction – Heath’s book has four major messages – the WRAP process. Heath covered all four and each section was structured in exactly the same way. We always knew exactly where we were in the narrative. We never got lost.
Finish early – Heath finished about ten minutes ahead of schedule (at least, ahead of the schedule that I had in mind). Giving 500 busy people ten minutes of their life back is a nice contribution to our mental welfare. We appreciated it.
Practice, practice, practice – it was clear that Heath was a polished presenter and that he had given this presentation before. That didn’t make it boring. Rather, we concluded that he respected us enough to make good use of our time. If he respects us, we can respect him.
Let’s say that you’re arrested for a terrible crime. After a few months in jail, you’re taken to court for a trial. In the courtroom, you meet your lawyer for the first time. The judge selects a jury. You notice that all the jurors are white males and that they all went to the same business school.
As the trial begins the judge tells the jurors – very directly – that she believes you’re guilty. The prosecutor then uses Power Point to present the evidence against you. The presentation consists of over 200 slides.
Your lawyer is not allowed to present any evidence – he can only respond to the prosecutor’s slides. He raises a number of objections but the prosecutor handles each one smoothly. You notice that the prosecutor doesn’t refute the objections but merely brushes them aside. The slides are complicated and hard to follow. You notice that some of the jurors are glassy-eyed. Others are checking their BlackBerries.
When the prosecutor’s presentation concludes, the jurors don’t adjourn to a separate room to discuss the case. Rather, the judge simply asks them, “So, do you agree with me?” Most of the jurors nod their heads and you’re whisked off to jail.
Could that really happen? Let’s hope not in a court of law. But, as Chip and Dan Heath point out in their book, Decisive, that’s exactly how corporations make bazillion dollar decisions. Echoing Paul Nutt’s book, Why Decisions Fail, the Heaths point out that most business decisions really are one sided.
Here’s how it goes. An executive gets an idea that just might be brilliant – or not. Then a process begins to justify the idea and convince top management to support it. Most of the members of top management recognize that a justification process is going on. They don’t really object to it because 1) they don’t have a forum to present their ideas; and 2) they don’t have the resources to develop the other side of the story or to investigate alternatives.
The justification process grinds on. As the Heaths point out, the process usually results in a “whether or not” decision. Executives don’t consider a range of alternatives but simply vote up or down, yes or no.
The process usually includes a top management meeting with a barrage of Power Point slides. I’ve participated in dozens of them. Usually someone in the meeting says, “Well, let me play devil’s advocate for a moment ….” No matter what that person says, the objection is somehow handled and brushed aside. The devil’s advocate may have a good point but he doesn’t have the data to back it up. The result is that the group feels “better” about the decision … “after all, we did consider both sides.”
Paul Nutt writes that business “…decisions fail half of the time. Vast sums are spent without realizing any benefits for the organization.” In other words, we could flip a coin and do just as well – and save a bundle on consulting fees.
We often complain about our judicial system. But the trial by jury – with evenly matched sides presenting evidence – is probably the best system ever developed for discerning the truth when the evidence is murky. In business, the evidence is often murky; we’re trying to predict the future with incomplete data. You want the best decision? Put it on trial.
In my critical thinking class, we’ve been using Paul Nutt’s book, Why Decisions Fail. It’s an interesting look at debacles … “botched decision[s] that attract attention and get a public airing.” In the coming weeks, I’ll draw some examples from Nutt’s database of famously bad decisions.
While I like the book in many regards, I think it’s a mistake to study only failures. Hopefully, business is about more than avoiding something negative. It’s also about attaining something positive. So I’ve been looking for a counterpoint — a study of why decisions succeed. I haven’t found a comprehensive study, but I did find an intriguing article from Boston Consulting Group, “Winning Practices of Adaptive Leadership Teams.” The BCG researchers interviewed 93 executives and identified five traits of successful executive teams. Here they are:
One voice — effective leadership teams “take the time to get completely aligned about the organization’s vision, values, and vital priorities, while respecting individual differences of opinion and experience.” While this implies good communication and mutual respect, it also implies that each team member has an enterprise-wide sense of responsibility. As one executive put it, “If my division is successful, but another division is not, I would not regard that as a victory.”
Sense-and-respond capacity — the most effective teams spend a lot of time surveying the environment, identifying trends, and synthesizing information. Among other things, they make heavy investments in information technology and pattern seeking software. The goal is to successfully “… monitor the external forces that drive change in their business environment.”
Information processing — the investment in IT often generates a large volume of data. The adaptive team then has to process it to create useful information. The team needs to share the data effectively and debate it transparently. Several teams developed “…highly disciplined meeting designs and agenda formats to ensure that they routinely exchange key information through a streamlined process that breaks down silos of communication.” Many teams also emphasize “overcommunication”.
Freedom within a framework — several teams spoke of “guardrails”. Within those guardrails, executives have a lot of room to maneuver; they can make their own decisions on how to get things done. As they prove themselves, the team widens the guardrails. Within the guardrails, “…failure [is] seen as a possible and an acceptable outcome. Failure is debilitating only if the lessons learned are not disseminated and applied quickly.”
Boundary fluidity — executives move both horizontally and vertically. There’s a sense that successful executives are “utility players” — any executive could fill in for any other executive if need be. There’s also a sense that silos are self-defeating. As one executive put it: “We always try to move people around so that their perspectives evolve and things don’t get stale.”
So does it work? BCG has developed an Adaptive Advantage Index and applied it to over 2,200 public companies in the U.S. The index is strongly correlated to growth in market capitalization.
Why Decisions Fail can tell you what not to do. That’s an important perspective. On the other hand, the BCG study (and others like it) can tell you how to succeed. In my opinion, that’s more important. I’d rather focus on succeeding than not failing.
In his book, Thinking Fast and Slow, Daniel Kahneman has an interesting example of a heuristic bias. Read the description, then answer the question.
Steve is very shy and withdrawn, invariably helpful but with little interest in people or in the world of reality. A meek and tidy soul, he has a need for order and structure, and a passion for detail.
Is Steve more likely to be a librarian or a farmer?
I used this example in my critical thinking class the other night. About two-thirds of the students guessed that Steve is a librarian; one-third said he’s a farmer. As we debated Steve’s profession, the class focused exclusively on the information in the simple description.
Kahneman’s example illustrates two problems with the rules of thumb (heuristics) that are often associated with our System 1 thinking. The first is simply stereotyping. The description fits our widely held stereotype of male librarians. It’s easy to conclude that Steve fits the stereotype. Therefore, he must be a librarian.
The second problem is more subtle — what evidence do we use to draw a conclusion? In the class, no one asked for additional information. (This is partially because I encouraged them to reach a decision quickly. They did what their teacher asked them to do. Not always a good idea.) Rather they used the information that was available. This is often known as the availability bias — we make a decision based on the information that’s readily available to us. As it happens, male farmers in the United States outnumber male librarians by a ratio of about 20 to 1. If my students had asked about this, they might have concluded that Steve is probably a farmer — statistically at least.
The availability bias can get you into big trouble in business. To illustrate, I’ll draw on an example (somewhat paraphrased) from Paul Nutt’s book, Why Decisions Fail.
Peca Products is locked in a fierce competitive battle with its archrival, Frangro Enterprises. Peca has lost 4% market share over the past three quarters. Frangro has added 4% in the same period. A board member at Peca — a seasoned and respected business veteran — grows alarmed and concludes that Peca has a quality problem. She sends memos to the executive team saying, “We have to solve our quality problem and we have to do it now!” The executive team starts chasing down the quality issues.
The Peca Products executive team is falling into the availability trap. Because someone who is known to be smart and savvy and experienced says the company has a quality problem, the executives believe that the company has a quality problem. But what if it’s a customer service problem? Or a logistics problem? Peca’s executives may well be solving exactly the wrong problem. No one stopped to ask for additional information. Rather, they relied on the available information. After all, it came from a trusted source.
So, what to do? The first thing to remember in making any significant decision is to ask questions. It’s not enough to ask questions about the information you have. You also need to seek out additional information. Questioning also allows you to challenge a superior in a politically acceptable manner. Rather than saying “you’re wrong!” (and maybe getting fired), you can ask, “Why do you think that? What leads you to believe that we have a quality problem?” Proverbs says that “a gentle answer turneth away wrath”. So does an insightful question.