Decision making-Is there a formula?

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Before joining LIBA (a reputed B-school in Chennai), I’m sure almost all of us would have done a lot of thinking on whether to join or not. What if I join/continue with my job? What if I have a one more go at CAT/XAT the next year?

What do we do when there are series of trade-offs and combinations of ‘what ifs’? So what actually goes on in our head when we are spoilt for choices and how do we arrive at a decision?

Well, what usually happens is that we try to do the best we can with our choices.

Step 1: We gather all facts and figures

Step 2: We engage in rationalisation and mental calculations

Step 3: We argue and debate within ourselves over the potential impacts of each individual decision on our happiness

Step 4: Rank each of the possibility into an order of preference subject to both time and resource constraint

Step 5: Choose the best

Sounds easy?

If we always chose the best possible option then the way we led our lives would be disappointment free. So, is it? The contrasting reality is that our lives are too often filled with disappointing and regrettable decisions, whether big or small.

The main reason as to why we aren’t most of the times able to choose the best options is that:

  • Our rationality is bounded by amount of information it possesses, the cognitive limitations of our brains
  • The finite time we have to make a decision

There are two distinct sides to our brain; rational- controlled, slow, deliberate and deductive; and one that is emotional – automatic, rapid, associative and affective. We human beings are only partly rational and downright irrational in the remaining parts of our action when making decisions under pressure or where information is incomplete or overly complex.

During these times we rely on our gut feelings rather than the extensive algorithmic processing of our rational side. These gut feelings are far from perfect and it is precisely why we get them wrong the most of the times.

So, an author of a reputed book had prescribed the following solution:

  • In situations where you have had a lot of experiences, it’s better to trust your instincts as the brain would have adapted and learnt from past experiences
  • In situations of little or no prior experience, let’s do the rational thinking.

Sounds perfectly reasonable. Right? Wait, there are still 2 questions that lingers:

  • When do we know that we are experienced enough to let our rational brain take a back seat and the emotional brain to do all the work?
  • How can we be sure that rationality will never fail us in novel situations?

So, we have again come back to square one. Well, it seems that the more apt suggestion is that instead of relying on the process we look for 2 ingredients for our problem. The first is time. Decision making done instantaneously usually are wrong. The second is right information. There are usually 2 ways of getting information during novel situations. First, do some research about the experience. Second, if everything fails, use your imagination to conjure up the information we need to undertake a decision.

Well, here is where another problem creeps up. Our very own imagination is not much better but it’s affected by impact bias. We tend to overestimate the length or the intensity of our feelings – both pleasant and unpleasant whenever we try making a prediction about our future. This is exactly what happened with me. When faced with numerous difficulties during my initial college days, I thought this would continue forever without taking into consideration other factors which would actually bring me happiness.

So, our quest for the perfect decision making system continues. Sometimes we learn from our past mistakes sometimes we don’t. Sometimes we make the right decision just by asking other people about their experiences; sometimes we don’t. Sometimes we make a spot on prediction; sometimes we don’t. It doesn’t matter how hard we try; there just doesn’t seem to be a formula? Or is there?

 

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7 thoughts on “Decision making-Is there a formula?

  1. benjaminsolak

    Excellent thoughts, I greatly enjoyed reading. Your ideas are well presented and flow nicely, and the content is engaging; determining how we make decisions involves, ironically, several important decisions. Thank you again!

    Like

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