For the fun of it, answer the following two quizzes in turn before reading on:
You are at a fair and there is a coin game. There are two coins: “A” and “B” and after a long time observing the outcomes and comparing notes with others, you conclude that “A” is weighted to turn a “head” 70% of the time and “B” is weighted to turn a head 40% of the time. $1 allows you to choose one coin and toss it. If it returns a “Head”, you get $2; if not, you lose your bet.
You decide to play the game, and like all rational people, you choose coin A. You toss it and it returns a “Tail”. You lose your bet. Coincidentally, the next person after you chose coin B and got a “Head”. He won $2.
On a scale of 1 to 10, where “1” is “the absolute worst decision to have had made in choosing coin A”, and “10” is “the absolute best decision to have had made in choosing coin A”, rate how well you made the decision in choosing coin A. (Note, we are NOT rating your decision to play the game, just your choice in choosing coin A)
You have two business opportunities in front of you. After all the market research, it is concluded that opportunity “P” has a 70% chance of a success. Opportunity “Q” has a 40% chance of success. The cost is the same for both opportunities: $100,000. The expected return for each of them is $200,000. You need to invest and have the means, and, like all rational people, you choose opportunity P. Unfortunately, after you have implemented the decision, it bombed out and you lost your investment. As luck would have it, your rival, who had Hobson’s choice, implemented opportunity Q and struck gold and enjoyed his $200,000 return.
On a scale of 1 to 10, where “1” is “the absolute worst decision to have had made in choosing opportunity P”, and “10” is “the absolute best decision to have had made in choosing opportunity P”, rate how well you made the decision in choosing opportunity P. (Here again, we are NOT rating your decision to invest your money, which was a given.)
So, how did you rate your decision-making for both quizzes? For most people, they would rate Quiz One between 7 to 9; and Quiz Two would be lower. Was that the same for you?
Let’s talk first about the alignment of your two scores. These two scenarios are exactly the same with the exception of the quantum, which is irrelevant because you had both the means and the desire to spend. Hence, your answer to both Quiz One and Quiz Two must be the same. That it was not was due to contextual influence, which will be the subject of separate article.
Second, the scores themselves. If you had scored “10” for both, congratulations! You are spot on! The fact of the matter is, there were only two choices and coin A and opportunity P were both superior choices. With Coin B and opportunity Q vastly inferior, choosing them would be highly irrational and absolutely wrong. Hence, coin A and opportunity P must be absolutely right – a perfect “10”! There can actually be no other score.
Why do people do poorly in this game?
We have played this game for the past 5 years with thousands of people, and we pretty much got the same responses. Most people do not choose 10 because they assessed the quality of their decision based on its outcome. Not only did they lose out on the bet for both scenarios, the other guy did great by taking the other option! Hence, it must have been the wrong decision!
Assessing the rightness of your decision based on its outcome is ridiculous! It is akin to saying on your wedding day, “Darling, I’ll only know you’re the right person for me when I die!” Even you can see the idiocy of that statement!
But the prevalence of having “less than 10” responses means that many people think that way. And this is why some people either take a long time to make a decision; or flatly refuse to make one! They don’t know how the decision will turn out and since they don’t want to make the “wrong” decision, they don’t make any!
It is impossible to assess the rightness of a current decision based on a future outcome, and we must kill this notion once and for all!
What makes for the right decision?
So, we now need a new assessment standard. If we cannot assess rightness based on outcome, what do we assess it with? And also, does that mean that outcome is unimportant?
Let’s answer the second one first. Of course outcome is important! It is the very reason why we make decisions. No one goes out to make a decision to fail. But what comes after the decision is the implementation; and we all know that the road to success is never smooth. The changes in circumstances as we implement the decision will obviously impact the success of the decision. Many of these changes would never have been foreseen; hence cannot be used against the quality of the decision.
So in identifying the constituents of the right decision, let us look at a simple process. In any process, there will be the inputs, the process itself, and the output. Since we have already agreed that the output cannot be used to determine if a decision is right, then it must be the other two.
In other words, to make the right decision, you must have the right inputs, and you must have the right process. Both of these are likely to trip up your decision making process long before the decision outcome does. If you get these two wrong, only luck would be able to bring out the right outcome.