A New Take on Decision-making

 “It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent” – Charlie Munger (quoted in Lowe, 2003)

In a previous article we unpacked three surprising truths about decision-making. The first was that substantial psychological research shows that even if you’re smart, you’re irrational and make dumb decisions all the time (Duke, 2018, 2020; Kahneman, 2011). The reason? Cognitive biases.

Knowing when NOT to make a decision

Accepting that we all make stupid decisions at times, the next obvious question becomes, “How can we make smart decisions more often?”. One counterintuitive way to answer this is to apply an inversion technique and ask, “How can we make dumb decisions?”, and then avoid doing those things.

Adam Robinson, chess master and hedge fund advisor, has identified seven factors that lead to what he calls “stupid decisions”:

1. being outside our normal environment or changing routines
2. being in a group
3. being in the presence of an expert or being an expert ourselves
4. simultaneously doing any task that requires intense focus
5. information overload
6. physical or emotional stress, or fatigue, and
7. rushing or a sense of urgency (Farnam Street, n.d.).

This list yields seven strategies for improving the quality of our decision-making by identifying when not to make a decision because it will invariably be bad.  Robinson says that any one of these factors can lead to stupid decisions, but when combined the impact is additive.

Consider being stuck in traffic on the way to an important meeting. How many factors are at play? Now imagine the vehicle is a hire car and you’re driving in an unfamiliar city. Let’s up the ante further; you’ve just stepped off a long-haul flight and that meeting you’re headed to is actually a job interview for a once-in-a-career opportunity. What are the chances you’ll make a wrong turn or two? Or worse still, get into a fender bender? This is how decision-making errors can play out.

Practical tool: reminding yourself when NOT to decide

1. Prepare a list titled “Don’t make decisions when….” that includes a summary of the seven factors in your own words.
2. Place this list somewhere prominent in your workplace or home as a reminder.
3. The list will be more meaningful if you can identify examples from your own life when you made poor decisions due to one or more of these factors. Brainstorm as many examples as possible, aiming for at least one per factor. Give particular attention to any factors you disagree with.
4. If you can’t think of any examples, you’ve potentially fallen victim to another thinking error called bias blind spot (APA Dictionary of Psychology, 2020). This cognitive bias is especially problematic because it leads to the belief you don’t have cognitive biases! Engage a trusted friend to help with Step 3; those who know you well are more likely to see what is obscured from your view.

The root cause: cognitive overload

It’s easy to imagine our less-than-optimal mental state during the driving scenario above. What exactly is going on? It all boils down to how our brains process input. Cognitive Load Theory (CLT), developed by educational psychologist John Sweller, offers a helpful explanation (Sweller, 2019).

We have two major memory systems: working (short-term) memory and long-term memory. We use our working memory to hold and manipulate information for short periods. The problem is that we can only process a few pieces of information at once. Scientists debate the exact number, but it’s generally believed to be two to three items. And, we can only retain these pieces of information for about 20 seconds (Sweller, 2019).

Cognitive Load Theory tells us that when we receive too much input, or attempt too many tasks simultaneously, we’ll hit a point called cognitive overload. In this state we don’t have the mental resources to sort information. We are temporarily impaired and can’t make even mundane decisions well, let alone complex ones.

In the first part of this article, we learned a number of warning signs that cognitive overload is present. The next set of tools will help you avoid cognitive overload in the first place and know how to respond when it happens.

Practical Exercise: avoiding and working with cognitive overload

Reflection questions

1. Rethinking multitasking. Based on what you’ve learned about cognitive overload as well as factor 4 in the list above, how effective do you think multitasking really is?
2. Rethinking interruptions. Considering what you know about cognitive overload, what impact do interruptions have on your thinking and thus the quality of your decision-making?
3. Rethinking meetings for group decision-making. How might being in a group (factor 2), and being in the presence of an expert, or being an expert yourself, (factor 3) contribute to cognitive overload? Consider what other input you might need to process during a meeting beside information relevant to decision-making. Are there better alternatives for groups that allow all parties to bring more cognitive capacity to the deliberations?

Strategies

1. Avoiding cognitive overload at work. If you began to think of your working memory as a finite resource, what would you do differently at work to avoid cognitive overload? Here are a few ideas to get you started:
   1. Turn it off. What inputs can you remove, especially noise and visual distractions? Warren Buffet works in an office without a computer or cell phone (Altucher, 2011). While you may have less control over your professional environment, what small changes could you make? Do you really have to be contactable via multiple channels for the entire day?
   2. Chunk your time. Can you organize your work day so you’re only doing one thing at a time and interruptions are minimized e.g., by allocating blocks of time to particular tasks like email?
   3. When you need to undertake a complex, cognitively demanding task, can you break it down into a series of smaller activities that can be done one at a time?
2. Managing cognitive overload at work. Make a list of tasks you perform regularly that you can do without much conscious thought. These activities relieve cognitive load because your brain can perform them automatically. Add a title to your list: ‘To help me avoid bad decisions, do these tasks when my brain needs a break. Only one at a time!’.
3. Managing cognitive overload at home. Repeat steps 1 and 2 focusing on your personal life. You may like to add calming strategies such as yoga, meditation and mindfulness practices to the step 2 list. Many activities of daily living can be completed mindfully by bringing all of your attention to the present moment and avoiding the temptation to multitask. For further tips on how to be more mindful in everyday life, click here.

Key takeaways

• Psychological research shows that we all make poor decisions and that we make them frequently.
• One of the reasons we make poor decisions is due to cogntive biases. Another is we make decisions when cognitively overloaded.
• A quick way to improve the quality of our decision-making is to become aware of the circumstances that lead to cognitive overload. By keeping a visual reminder in our environment, we can begin to identify when these factors are at play in real time and choose not to make a decision.
• A better long-term strategy is to implement changes that make cognitive overload less likely. Remember that working memory is a finite resource; it should be guarded.

References:

• Altucher, J. (2011). 8 Unusual Things I Learned from Warren Buffett. Forbes. Retrieved from https://www.forbes.com/sites/jamesaltucher/2011/03/28/8-unusual-things-i-learned-from-warren-buffett/
• APA Dictionary of Psychology. (2020). Bias, blind spot. American Psychological Association. https://dictionary.apa.org/bias-blind-spot
• Duke, A. (2018). Thinking in bets: making smarter decisions when you don’t have all the facts. Portfolio/Penguin.
• Duke, A. (2020). How to Decide: Simple Tools for Making Better Choices. Random House USA Inc.
• Farnam Street. (n.d.). How Not to Be Stupid. Retrieved from https://fs.blog/how-not-to-be-stupid/
• Kahneman, D. (2011). Thinking, fast and slow. Farrar, Straus and Giroux.
• Lowe, J. (2003). Damn Right!: Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger. Wiley.
• Sweller, J. (2019). I had an idea in the 1980s and to my surprise, it changed education around the world. The Conversation. Retrieved from https://theconversation.com/i-had-an-idea-in-the-1980s-and-to-my-surprise-it-changed-education-around-the-world-126519