Thomas came to see the new flat, climbing to the fifth floor in the cramped hallway – and no elevator. Ugh. What a trek. But as the estate agent showed him around the place, he was engulfed by light and the smell of fresh baked bread came from the kitchen. No matter that this was 20 minutes further from work. Thomas was sold.
Hell, I'd get this kitchen, too!
What’s wrong with this decision case? Well, it looks like Thomas is making his decision to buy an apartment based on criteria that only seem noteworthy at the apartment, not beforehand. Even worse, he ends up being carried away by the fresh smells – surely a trick from the estate agent’s sleeve. I’d venture to say that Thomas hasn’t made an exemplar decision here. What could he have done better?
An old adage works also in decision analysis: Think before you act. In the context of decisions, it refers to thinking about the problem itself first. In decisions, two key parameters largely define your success: the criteria, and the alternatives.
The criteria mean dimensions along which you compare and evaluate the alternatives. For example, for the apartment common ones are size, price, location, and so on. What’s the key is defining those criteria yourself. You don’t have to be constrained by what other people think. Your criteria are anything you care about. For example, one of Thomas’ criteria could be the amount of ambient light in the apartment, if he had thought about it beforehand. Thinking about the criteria before the decision helps to stay on the premeditated path, and not be drawn away by other enticing things. If you’ve given thought to criteria in advance of seeing the alternatives, you’re less likely to focus on salient, but ultimately irrelevant ones (like the fresh smell above). It’s like when you’re going to work: you decide to walk straight there, and don’t go into shops even when you see that shiny new guitar in the window (also, your boss might not value your musical enthusiasm to make it a good idea).
Another thing about criteria: they don’t necessary have to be numeric. Sure, there are benefits to using numerical values, especially when they are objective, like size. But inherently there’s nothing wrong with subjective criteria like a “feel” of an apartment, the comfort of a chair or the taste of a wine. After all, it’s your decision we’re talking about. The only thing that matters is that you can be consistent with the criteria, ie. you can rate equally tasty wines as equal on the taste. This is crucial, because otherwise you might be tempted to reevaluate some criteria to end up with the “best alternative”. The point of evaluation is to determine the best option, not to “prove” the choice ex post facto.
An old adage works also in decision analysis: Think before you act. In the context of decisions, it refers to thinking about the problem itself first. In decisions, two key parameters largely define your success: the criteria, and the alternatives.
The criteria mean dimensions along which you compare and evaluate the alternatives. For example, for the apartment common ones are size, price, location, and so on. What’s the key is defining those criteria yourself. You don’t have to be constrained by what other people think. Your criteria are anything you care about. For example, one of Thomas’ criteria could be the amount of ambient light in the apartment, if he had thought about it beforehand. Thinking about the criteria before the decision helps to stay on the premeditated path, and not be drawn away by other enticing things. If you’ve given thought to criteria in advance of seeing the alternatives, you’re less likely to focus on salient, but ultimately irrelevant ones (like the fresh smell above). It’s like when you’re going to work: you decide to walk straight there, and don’t go into shops even when you see that shiny new guitar in the window (also, your boss might not value your musical enthusiasm to make it a good idea).
Another thing about criteria: they don’t necessary have to be numeric. Sure, there are benefits to using numerical values, especially when they are objective, like size. But inherently there’s nothing wrong with subjective criteria like a “feel” of an apartment, the comfort of a chair or the taste of a wine. After all, it’s your decision we’re talking about. The only thing that matters is that you can be consistent with the criteria, ie. you can rate equally tasty wines as equal on the taste. This is crucial, because otherwise you might be tempted to reevaluate some criteria to end up with the “best alternative”. The point of evaluation is to determine the best option, not to “prove” the choice ex post facto.
An example of a consistent evaluation - with two hands, no less!
There’s one other trick that’s useful to remember: thinking about the alternatives. This might sound like an obvious thing, and often it is, too. For example, when buying a flat, most of us tend to spend countless hours on websites and with estate agents, looking at alternatives. However, that’s not exactly what I’m referring to. What’s important as well is conceptual alternative-generating before actual data gathering phase. In concrete terms: thinking about conceptually possible alternatives that you would like. In my case, as we’re thinking about apartments just now, it means the following. I enjoy living with a bike distance to the center, so I’ll mentally think of all neighborhoods that fill that criterion.
The point with this is that your decision quality is driven by the alternatives you’ve come up with. If you don’t find good alternatives, you might consider them nonexistent and fall for the status quo bias. Enlarging the conceptual alternative space will help to see what’s possible. An alternative you didn’t think of won’t get picked.
The major point being: you can improve decisions heavily by structured, reflective thinking. This is an idea that Ralph Keeney, an emeritus professor from Duke University, has championed for decades now (for example, in this paper, or this book). Most decisions are not important enough to require a huge decision analysis trade-off analysis. But thinking is almost free, and has the potential to help a lot.
The point with this is that your decision quality is driven by the alternatives you’ve come up with. If you don’t find good alternatives, you might consider them nonexistent and fall for the status quo bias. Enlarging the conceptual alternative space will help to see what’s possible. An alternative you didn’t think of won’t get picked.
The major point being: you can improve decisions heavily by structured, reflective thinking. This is an idea that Ralph Keeney, an emeritus professor from Duke University, has championed for decades now (for example, in this paper, or this book). Most decisions are not important enough to require a huge decision analysis trade-off analysis. But thinking is almost free, and has the potential to help a lot.
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