From entry level to the most senior executive, today’s employees are being forced to make complex decisions and make them faster and far more often than their 20th century predecessors. Most of all, business people have become a lot more aware of the importance of making good decisions. Yet all of us are bombarded with opinions in the form of proposals, estimates and predictions. Most of us know that we need to suspect the certainty with which these beliefs are stated.
So how can we improve our decision making?
One of the very best ways to improve our decision making is through timely, accurate, and clear feedback. The work in deliberate practice, shows that quality feedback is the most essential ingredient for developing expertise. Getting quality feedback, however, is not always very easy.
In some decision making, like long-term investing, business strategy, or even software installations, the feedback comes with a time lag and is often ambiguous. As a result, the learning is not as successful.
Much to my surprise, research shows that the best and most accurate decision makers are weather forecasters. In one study, when U.S. Weather Service forecasters predicted a 30% chance of rain, out of 15,536 predictions, it rained almost exactly 30% of the time. That superb accuracy holds along the entire range of probability, except at the highest levels. When a 100% chance of rain was predicted, it actually rained only 90% of the time. What makes weather forecasters so accurate is precise, timely feedback about repeated judgments. And, of course, they’re held very accountable by their supervisors, their colleagues and the public.
The decision-making journal.
If you’re really serious about improving your decisions and are open to feedback, there’s a simple, inexpensive technique with a great deal of value: a decision-making journal.
Whenever you make an important decision, take a few minutes to write down what you decided, how you went about making that decision, and what you expect to happen. Get your decision down in specific, concrete statements. That’ll keep you from conjuring up ways to defend your decision choices, and unduly preserving your self-image. The lesson: even good feedback is not useful if you don’t use it.
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When you first learn that weather forecasters are the best, most accurate decision makers, you may want to discredit that research. The study makes it very clear and obvious that most of our decision making is pretty inadequate. Suck it up, and deal with the truth, as painful as it really is. Then, when you make an important decision, learn from it by using the decision journal.
A well-kept journal makes it possible for you to audit your decisions. It also can illuminate your decision-making patterns. You may see, for example, relationships between your moods and your decisions. When you’re in a good mood, you may be more overconfident. I’ve noticed that when I’m in a slightly pessimistic mood, I make better decisions. Since I can’t always determine my moods, I’ve built my game on other strategies.
Useful references:
Russo and Schoemaker, Managing Overconfidence.
Michael Mauboussin, Think Twice.