The Decision Strategist

Let’s take a minute to think about how we typically make a decision. First we eliminate all the options that possess a severe negative quality. With the remaining list of options, we evaluate the positives and then choose. This is a pretty reasonable way of approaching a decision, except that our consideration of positives and negatives can fluctuate wildly, and are affected by a whole slew of factors that we probably don’t want to base our decisions on.

I’ve previously written about two explicit methods for listing out the positives and negatives when trying to make a decision: Pros-Cons-Fixes (discussed in What Am I Doing With My Life?) and Plus-Minus-Interesting (discussed inPMI (Plus-Minus-Interesting)). The benefit of these methods is that they force you to explicitly consider why you are eliminating options (which negatives really matter) and why you prefer one of the remaining options (which positives really matter).

Example: Which corolla should I buy?

Here’s an example of how the reasoning process can mess you up. Four years ago I bought a 1999 Toyota Corolla automatic transmission with 65k miles on it for $6,500 (car 1). I chose it over the same car with a manual transmission and 75k miles for $7,000 (car 2). Car 1 has served me well for the past four years, and so I definitely have some of the endowment effect (discussed on the Decision Making Errors page) going on. I want to say that I chose the right car, but looking at it as objectively as possible, I don’t understand why, if I love manual cars, I would have chosen an automatic. I think the reason is that I mixed up my negatives. I should have prioritized them correctly. Car 1’s major negative was that it was an automatic. Car 2 was a gross beige color and was slightly more expensive with 10k more miles on it.

I think if I had done a PCF or PMI exercise on the decision, I would have realized that, though car 2 had some minor negatives, car 1 had a negative that was essentially a deal-breaker. At the time I failed to consider that I would be stuck with an automatic transmission for the entire lifetime of the car. I wonder also if it had something to do with the fact that the salesperson for car 1 was an attractive young woman.

Anyway, the point of all this is that if we make decisions by excluding options with major negatives and then picking the remaining option with the most positives, we can be led astray pretty easily by factors that we ultimately don’t consider important but that the world around us can push to the forefront.

The flip side of this is the nefarious use of this tendency to influence someone else’s decision. If you know the key negative things that will get an option rejected, or the key positive things that will make a difference in the option getting selected, you can really present information in such a way as to encourage the the decision that you want.

-zot

PS - I think stores like Wal-Mart use this tactic to their advantage. They make the store huge and never staff enough checkout people. You spend a while wandering around looking for something you need. By the time you’ve found something that is close, you don’t care how useful it really is, because all you want to do is get out of that store and back to your life. Being in the store becomes the primary negative, and so we are willing to overlook the negatives of whatever item we are considering buying, even if it doesn’t work for what we want it for. We just moved into the new place we’re renting, and bought a lot of housing supplies that weren’t quite what we needed, and don’t do nearly a good enough job. Of course, then you end up heading back to try and get the right thing, and the whole process happens again.

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This entry was posted on Wednesday, August 15th, 2007 at 1:48 pm and is filed under Human Error, Strategy.