The entire conversation between Jason Zweig and Nobel Laureate Daniel Kahneman is entirely fascinating.
There is one moment in particular that I’d like to transcribe for you. Kahneman is talking about financial organizations in particular but this applies across the board to most knowledge organizations as well.
(At many financial institutions) the product is decisions. They produce decisions. And there ought to be something that is equivalent to the quality control you find in manufacturing. Now you can’t control the product itself; test the product. But you can test the process by which the product was created. So there are questions you can ask about the process by which a judgment was made or a decision was made. And one of these aspects is going to be the quality and quantity of the information on which the judgment was based. And if you isolate that as one of the issues you are going to focus on, it’s not the quality of the story you can make, it’s actually ‘Where does the evidence come from?’, ‘What do we really know?’ It’s when you ask those questions that you work out that, actually, you know very little and that you told yourself a coherent story on the basis of inadequate information.
Kahneman doesn’t feel individuals can go back and objectively assess their own decisions. This is, however, something organizations can do. Most, however, will choose not to because it is too painful.
Most organizations don’t use a consistent process or framework to make important decisions. Yet we know that the process by which you come to a decision is the most important thing. It’s not about more information. Process matters more than the analysis. We also know that when you don’t use a consistent process you make it hard to improve.
If your product is decisions, you might be curious as to how we can improve our ability to make them::
- Know your circle of competence. This is how Ted Williams excelled.
- When operating within your circle of competence, use a double filter for making decisions.
- Avoid using vague and ambiguous terms.
- Keep a decision journal.
- Ignore outcome when evaluating decisions.
Kahneman’s book, Thinking, Fast and Slow, is a must-read.
Still curious? Check out the ultimate guide to making smart decisions.