Are your decisions really
your decisions?
Mark Crowder
1
When decisions go wrong!
Overview
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What is a decision?
Models of decision-making
Some questions…
How can decision-making be influenced?
What is a ‘decision’?
• How would you define a ‘decision’?
• Decision = choice between two or more
alternatives (e.g. Drucker, 2001)
• So, in order to make a decision we need to
find a way to evaluate the different
alternatives…and we might end up with
something like this…
Rational Economic Model
Recognition and definition of a
problem or opportunity
Search for alternative courses of action
Gathering and analysis of data about
alternatives
Evaluation of alternatives
Selection and implementation of
preferred alternative
Source: Buchanan and Huczynski (2004:756)
But…
• Are all decisions rational?
• Do you really know what all the alternatives are?
• Do you really have time to analyse everything?
Some questions…
Who is this?
More questions…
• How quickly in mph does the Earth rotate?
• Which is more likely?
– HHHHHTTTTT or THHTHTTHTH
Heuristics
• Kahneman and Tversky (1971 onwards) argues that
people make decisions using cognitive heuristics
• These are shortcuts, rules of thumb, simplifying tactics
• Strategic decisions can be based on stereotypes or
generalisations (i.e. heuristics) and can be very effective:
– The Magic Kingdom in Florida does not sell alcohol but
Disneyland Paris does (stereotype of French culture where wine
with meals is commonplace)
– Do you think a brewery would be better off expanding its
business into Pakistan or the EU? Why?
Heuristics
• Many types, including:
• Anchor and adjustment
– making decisions by starting from an initial value that is then
adjusted (Tversky and Kahneman, 1982).
– How quickly does the Earth spin?
• Representative
– the degree to which A resembles B (Tversky and Kahneman, 1972)
– Heads or tails?
Cognitive heuristics questioned
Heuristics and biases school
Fast and frugal school
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Heuristics use part of the information
and so may miss out something
crucial
Heuristics are prone to influence (i.e.
bias) and so lead to error
Heuristics should be minimised in
favour of rational approaches
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Kahneman, Tversky, Sunstein,
Ariely, Slovic
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Heuristics make fast decisions
Heuristics make good use of limited
information (i.e. they are frugal)
Heuristics are just as accurate as
rational approaches
Heuristics are efficient and should
not be discouraged
Gigerenzer, Hutchinson, Hoffrage,
Todd
How is your decision-making
influenced by others?
Remus Rodham
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Remus Rodham; horse thief, sent to
Montana Territorial Prison 1885,
escaped 1887, robbed the Montana
Flyer six times. Caught by Pinkerton
detectives, convicted and hanged in
1889.
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Remus Rodham was a famous cowboy
in the Montana Territory. His business
empire grew to include acquisition of
valuable equestrian assets & intimate
dealings with Montana railroad.
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Beginning in 1883, he devoted several
years of his life to service at a
government facility, finally taking leave
to resume his dealings with the railroad.
In 1887 he was a key player in a vital
investigation run by the renowned
Pinkerton Detective Agency.
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In 1889 Remus passed away during an
important civic function held in his
honour, when the platform on which he
was standing collapsed.
Framing
• Spin!
• Not necessarily bad, but something to be aware
of…
Framing
Number of unemployed
(1,000s)
10
9
8
7
6
5
4
3
2
1
0
No. of people in employment
(1,000s)
6.2
6.1
6
5.9
5.8
5.7
5.6
5.5
1st quarter
2nd quarter
3rd quarter
4th quarter
1st quarter
2nd quarter
3rd quarter
4th quarter
Framing
• Manipulation of a CEO, who was totally unaware!
• No matter how good a report was, he would always have to
make some change to it. It was never good enough.
• He would never sign off anything controversial
• So, his staff would frame the information to disguise the
controversial item and to include something outrageous that
would never be accepted.
• The outrageous item would be taken out (so the CEO would
be happy that he’d changed something) and the controversial
item would get through.
Other influencing factors
• Perceptual
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Thorn, Thimble, Point
Pin, Eye, Sharp, Injection
Cloth, Haystack, Sewing
Syringe, Knitting, Hurt, Thread
• Prof Bruce Hood – Royal Institution Christmas Lectures 2011
Other influencing factors
• Pattern formation…
Other influencing factors
• How does pattern formation influence
decision-making?
Other influencing factors
Other influencing factors
• http://www.youtube.com/watch?v=vJG698U2Mvo
• Perceptual blindness
Other influencing factors
• Marketing can actively seek to influence decisionmaking
• Name a chocolate manufacturer…
• Most people say ‘Cadbury’…
Other influencing factors
• Cadbury is not even in top ten…
Other influencing factors
• Compare Cadbury to soap powder
• Cadbury = availability heuristic:
• making decisions on the basis of how easily something is
called to mind (Tversky and Kahneman, 1982).
• Soap powder: my product is best = representative
heuristic:
• Similarity. The degree to which A resembles B (Tversky and
Kahneman, 1972)
Promotions
Sometimes they get it wrong!
Other influencing factors
• Can be much more subtle than this…
Summary
• People do not make ‘rational’ decisions
• Heuristics commonly used by decision-makers
• Decisions can be influenced by a range of factors:
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Availability heuristic (Cadbury)
Representative heuristic (Soap Powder)
Recognition heuristic (The Queen, watches)
Framing (Remus Rodham, NEET, graphs)
Perception (needle, pattern formation, invisible gorilla!)
• So…
Are your decisions really
your decisions?