How Decisions Are Made Matters

Organizations tend to focus on outcomes rather than processes. The incentives are usually designed to reward or punish in that way and our natural inclination is to emphasize ends over means.

But the psychological and social determinants of decision-making may have a profound influence on consequences. Which means that successful enterprises, and those who lead them, recognize that understanding and framing how decisions are made is necessary to obtain optimal results. JL

David Brooks comments in the New York Times:

While most economics models assumed people were basically rational, human decision-making is biased in systematic, predictable ways. The advice world is built on the premise that we are chess masters who make decisions. But when it comes to the really major things we mostly follow our noses. If we want to understand and shape behavior, we should look less at decision-making and more at curiosity. “The way the creative process works is that you first say something and later, sometimes years later, you understand what you said.”

Danny Kahneman grew up Jewish in occupied France during World War II. Once in Paris, after curfew, he was nearly captured by an SS officer. His family traveled from town to town through rural France, hiding and hoping people wouldn’t recognize them as Jews. As Michael Lewis writes in his forthcoming book, “The Undoing Project,” Kahneman survived the Holocaust by keeping himself apart.

The family moved to Jerusalem. The army assigned him to a psychological evaluation unit and Kahneman became a psychologist.

Amos Tversky was born in Israel, to a mother who ignored him for long periods so she could serve the nation. He became a paratrooper in the war of 1956, and received one of the nation’s highest awards for bravery after he rescued a man who’d fainted on a torpedo just before it exploded.

Tversky was idiosyncratic. “Amos thought people paid an enormous price to avoid mild embarrassment, and he himself decided early on it was not worth it,” a friend told Lewis.

If he felt like going for a run, he stripped off his pants and went in his underpants. If a social situation bored him, he left. Tversky wasn’t sure how he drifted into psychology. “It’s hard to know how people select a course in life,” he once said. “The big choices we make are practically random.”

Kahneman and Tversky began to work together. They would lock themselves together and talk and laugh, year after year. If they were at a party, they would go off and talk to each other. “When they sat down to write, they nearly merged, physically, into a single form,” Lewis writes, hunched over a single typewriter.

“Their relationship was more intense than a marriage,” Tversky’s wife recalled. When they wrote a paper together they lost all track of who had contributed what. They scrambled for research topics that gave them an excuse to be together, and completed each other’s sentences.

“The way the creative process works is that you first say something and later, sometimes years later, you understand what you said,” Kahneman recalled. “And in our case it was foreshortened. I would say something and Amos understood it. It still gives me goose bumps.”

It was a mystical alchemy that revolutionized how we think about ourselves. Kahneman and Tversky are like a lot of the characters who appear in Michael Lewis’s books, like “Moneyball” and “The Big Short.” They are intellectual renegades who are fervently, almost obsessively, determined to see reality clearly, no matter how ferocious the resistance from everybody else.

While most economics models assumed people were basically rational, Kahneman and Tversky demonstrated that human decision-making is biased in systematic, predictable ways. Many of the biases they described have now become famous — loss aversion, endowment effect, hindsight bias, the anchoring effect, and were described in Kahneman’s brilliant book, “Thinking, Fast and Slow.” They are true giants who have revolutionized how we think about decision-making. Lewis makes academic life seem gripping, which believe it or not, is not easy to do.

My big question is: How is the world they describe reflected in their own lives? Kahneman and Tversky write about the kind of decisions that you might call casino decisions — in which people confront various probabilities and try to calculate which course will be best.

But over the course of their lives Kahneman and Tversky don’t seem to have actually made many big decisions. The major trajectories of their lives were determined by historical events, random coincidences, their own psychological needs and irresistible impulsions. In the course of the book there’s only one big formal decision point — when Tversky decides to move to the U.S.

Their lives weren’t so much shaped by decisions as by rapture. They were held rapt by each other’s minds. They were fervently engaged by the puzzles before them. They succeeded not because they were master decision-makers but because of their capacity for zealous engagement. They followed their interests step by step.

And this is my problem with the cognitive sciences and the advice world generally. It’s built on the premise that we are chess masters who make decisions, for good or ill. But when it comes to the really major things we mostly follow our noses. What seems interesting, beautiful, curious and addicting?

Have you ever known anybody to turn away from anything they found compulsively engaging?

We don’t decide about life; we’re captured by life. In the major spheres, decision-making, when it happens at all, is downstream from curiosity and engagement. If we really want to understand and shape behavior, maybe we should look less at decision-making and more at curiosity. Why are you interested in the things you are interested in? Why are some people zealously seized, manically attentive and compulsively engaged?

Now that we know a bit more about decision-making, maybe the next frontier is desire.