Chip and Dan Heath, the bestselling authors of Switch and Made to Stick, tackle one of the most critical topics in our work and personal lives: how to make better decisions.
Research in psychology has revealed that our decisions are disrupted by an array of biases and irrationalities: We’re overconfident. We seek out information that supports us and downplay information that doesn’t. We get distracted by short-term emotions. When it comes to making choices, it seems, our brains are flawed instruments. Unfortunately, merely being aware of these shortcomings doesn’t fix the problem, any more than knowing that we are nearsighted helps us to see. The real question is: How can we do better?
In Decisive, the Heaths, based on an exhaustive study of the decision-making literature, introduce a four-step process designed to counteract these biases. Written in an engaging and compulsively readable style, Decisive takes readers on an unforgettable journey, from a rock star’s ingenious decision-making trick to a CEO’s disastrous acquisition, to a single question that can often resolve thorny personal decisions.
Along the way, we learn the answers to critical questions like these: How can we stop the cycle of agonizing over our decisions? How can we make group decisions without destructive politics? And how can we ensure that we don’t overlook precious opportunities to change our course?
Decisive is the Heath brothers’ most powerful—and important—book yet, offering fresh strategies and practical tools enabling us to make better choices. Because the right decision, at the right moment, can make all the difference.
|Publisher:||Crown Publishing Group|
|Sold by:||Random House|
|File size:||3 MB|
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The Four Villains of Decision Making
Steve Cole, the VP of research and development at HopeLab, a nonprofit that fights to improve kids' health using technology, said, "Any time in life you're tempted to think, 'Should I do this OR that?' instead, ask yourself, 'Is there a way I can do this AND that?' It's surprisingly frequent that it's feasible to do both things."
For one major project, Cole and his team at HopeLab wanted to find a design partner, a firm that could help them design a portable device capable of measuring the amount of exercise that kids were getting. There were at least seven or eight design firms in the Bay Area that were capable of doing the work. In a typical contracting situation, HopeLab would have solicited a proposal from each firm and then given the winner a giant contract.
But instead of choosing a winner, Cole ran a "horse race." He shrank down the scope of the work so that it covered only the first step of the project, and then he hired five different firms to work on the first step independently. (To be clear, he wasn't quintupling his budget--as a nonprofit, HopeLab didn't have unlimited resources. Cole knew that what he'd learn from the first round would make the later rounds more efficient.)
With his horse race, Cole ensured that he'd have multiple design alternatives for the device. He could either pick his favorite or combine the best features of several. Then, in round two of the design, he could weed out any vendors who were unresponsive or ineffective.
Cole is fighting the first villain of decision making, narrow framing, which is the tendency to define our choices too narrowly, to see them in binary terms. We ask, "Should I break up with my partner or not?" instead of "What are the ways I could make this relationship better?" We ask ourselves, "Should I buy a new car or not?" instead of "What's the best way I could spend some money to make my family better off?"
In the introduction, when we asked the question "Should Shannon fire Clive or not?" we were stuck in a narrow frame. We spotlighted one alternative at the expense of all the others.
Cole, with his horse race, is breaking out of that trap. It wasn't an obvious move; he had to fight for the concept internally. "At first, my colleagues thought I was insane. At the beginning, it costs some money and takes some time. But now everybody here does it. You get to meet lots of people. You get to know lots of different kinds of things about the industry. You get convergence on some issues, so you know they are right, and you also learn to appreciate what makes the firms different and special. None of this can you do if you're just talking to one person. And when all of those five firms know that there are four other shops involved, they bring their best game."
Notice the contrast with the pros-and-cons approach. Cole could have tallied up the advantages and disadvantages of working with each vendor and then used that analysis to make a decision. But that would have reflected narrow framing. Implicitly, he would have been assuming that there was one vendor that was uniquely capable of crafting the perfect solution, and that he could identify that vendor on the basis of a proposal.
There's a more subtle factor involved too--Cole, in meeting with the teams, would have inevitably developed a favorite, a team he clicked with. And though intellectually he might have realized that the people he likes personally aren't necessarily the ones who are going to build the best products, he would have been tempted to jigger the pros-and-cons list in their favor. Cole might not even have been aware he was doing it, but because pros and cons are generated in our heads, it is very, very easy for us to bias the factors. We think we are conducting a sober comparison but, in reality, our brains are following orders from our guts.
Our normal habit in life is to develop a quick belief about a situation and then seek out information that bolsters our belief. And that problematic habit, called the "confirmation bias," is the second villain of decision making.
Here's a typical result from one of the many studies on the topic: Smokers in the 1960s, back when the medical research on the harms of smoking was less clear, were more likely to express interest in reading an article headlined "Smoking Does Not Lead to Lung Cancer" than one with the headline "Smoking Leads to Lung Cancer." (To see how this could lead to bad decisions, imagine your boss staring at two research studies headlined "Data That Supports What You Think" and "Data That Contradicts What You Think." Guess which one gets cited at the staff meeting?)
Researchers have found this result again and again. When people have the opportunity to collect information from the world, they are more likely to select information that supports their preexisting attitudes, beliefs, and actions. Political partisans seek out media outlets that support their side but will rarely challenge their beliefs by seeking out the other side's perspective. Consumers who covet new cars or computers will look for reasons to justify the purchase but won't be as diligent about finding reasons to postpone it.
The tricky thing about the confirmation bias is that it can look very scientific. After all, we're collecting data. Dan Lovallo, the professor and decision-making researcher cited in the introduction, said, "Confirmation bias is probably the single biggest problem in business, because even the most sophisticated people get it wrong. People go out and they're collecting the data, and they don't realize they're cooking the books."
At work and in life, we often pretend that we want truth when we're really seeking reassurance: "Do these jeans make me look fat?" "What did you think of my poem?" These questions do not crave honest answers.
Or pity the poor contestants who try out to sing on reality TV shows, despite having no discernible ability to carry a tune. When they get harsh feedback from the judges, they look shocked. Crushed. And you realize: This is the first time in their lives they've received honest feedback. Eager for reassurance, they'd locked their spotlights on the praise and support they received from friends and family. Given that affirmation, it's not hard to see why they'd think they had a chance to become the next American Idol. It was a reasonable conclusion drawn from a wildly distorted pool of data.
And this is what's slightly terrifying about the confirmation bias: When we want something to be true, we will spotlight the things that support it, and then, when we draw conclusions from those spotlighted scenes, we'll congratulate ourselves on a reasoned decision. Oops.
In his memoir, Only the Paranoid Survive, Andy Grove recalled a tough dilemma he faced in 1985 as the president of Intel: whether to kill the company's line of memory chips. Intel's business had been built on memory. For a time, in fact, the company was the world's only source of memory, but by the end of the 1970s, a dozen or so competitors had emerged.
Meanwhile, a small team at Intel had developed another product, the microprocessor, and in 1981 the team got a big break when IBM chose Intel's microprocessor to be the brain of its new personal computer. Intel's team scrambled to build the manufacturing capacity it would need to produce the chips.
At that point, Intel became a company with two products: memory and microprocessors. Memory was still the dominant source of the company's revenue, but in the early 1980s, the company's competitive position in the memory business came under threat from Japanese companies. "People who came back from visits to Japan told scary stories," said Grove. It was reported that one Japanese company was designing multiple generations of memory all at once--the 16K people were on one floor, the 64K people were a floor above, and the 256K team was above them.
Intel's customers began to rave about the quality of the Japanese memories. "In fact, the quality levels attributed to Japanese memories were beyond what we thought possible," said Grove. "Our first reaction was denial. This had to be wrong. As people often do in this kind of situation, we vigorously attacked the data. Only when we confirmed for ourselves that the claims were roughly right did we start to go to work on the quality of our product. We were clearly behind."
Between 1978 and 1988, the market share held by Japanese companies doubled from 30% to 60%. A debate raged inside Intel about how to respond to the Japanese competition. One camp of leaders wanted to leapfrog the Japanese in manufacturing. They proposed building a giant new factory to make memory chips. Another camp wanted to bet on an avant-garde technology that they thought the Japanese couldn't match. A third camp wanted to double down on the company's strategy of serving specialty markets.
As the debate continued with no resolution, the company began losing more and more money. The microprocessor business was growing rapidly, but Intel's failures in memory were becoming a drag on profits. Grove summarized the year 1984 by saying, "It was a grim and frustrating year. During that time, we worked hard without a clear notion of how things were ever going to get better. We had lost our bearings."
In the middle of 1985, after more months of fruitless debate, Grove was discussing the memory quandary in his office with Intel's chairman and CEO, Gordon Moore. They were both fatigued by the internal deliberations. Then Grove had an inspiration:
I looked out the window at the Ferris Wheel of the Great America amusement park revolving in the distance, then I turned back to Gordon and I asked, "If we got kicked out and the board brought in a new CEO, what do you think he would do?" Gordon answered without hesitation, "He would get us out of memories."
I stared at him, numb, then said, "Why shouldn't you and I walk out the door, come back in, and do it ourselves?"
This was the moment of clarity. From the perspective of an outsider, someone not encumbered by the historical legacy and the political infighting, shutting down the memory business was the obvious thing to do. The switch in perspectives--"What would our successors do?"--helped Moore and Grove see the big picture clearly.
Of course, abandoning memory was not easy. Many of Grove's colleagues were furiously opposed to the idea. Some held that memory was the seedbed of Intel's technology expertise and that without it, other areas of research were likely to wither. Others insisted that Intel's sales force could not get customers' attention without selling a full range of products--memories as well as microprocessors.
After much "gnashing of teeth," Grove insisted that the sales force tell their customers that Intel would no longer be carrying memory products. The customers' reaction was, essentially, a big yawn. One said, "It sure took you a long time."
Since that decision in 1985, Intel has dominated the microprocessor market. If, on the day of Grove's insight, you had invested $1,000 in Intel, by 2012 your investment would have been worth $47,000 (compared with $7,600 for the S&P 500, a composite of other big companies). It seems safe to say that he made the right decision.
Grove's story reveals a flaw in the way many experts think about decisions. If you review the research literature on decisions, you'll find that many decision-making models are basically glorified spreadsheets. If you are shopping for an apartment, for instance, you might be advised to list the eight apartments you found, rank them on a number of key factors (cost, location, size, etc.), assign a weighting that reflects the importance of each factor (cost is more important than size, for instance), and then do the math to find the answer (um, move back in with Mom and Dad).
There's one critical ingredient missing from this kind of analysis: emotion. Grove's decision wasn't difficult because he lacked options or information; it was difficult because he felt conflicted. The short-term pressures and political wrangling clouded his mind and obscured the long-term need to exit the memory business.
This brings us to the third villain of decision making: short-term emotion. When we've got a difficult decision to make, our feelings churn. We replay the same arguments in our head. We agonize about our circumstances. We change our minds from day to day. If our decision was represented on a spreadsheet, none of the numbers would be changing--there's no new information being added--but it doesn't feel that way in our heads. We have kicked up so much dust that we can't see the way forward. In those moments, what we need most is perspective.
Ben Franklin was aware of the effects of temporary emotion. His moral algebra wisely suggests that people add to their pros-and-cons list over several days, giving them a chance to add factors as they grow more or less excited about a particular idea. Still, though, to compare options rigorously is not the same as seeing the bigger picture. No doubt Andy Grove had been compiling his pros-and-cons list about whether to exit the memory business for many years. But the analysis left him paralyzed, and it took a quick dose of detachment--seeing things from the perspective of his successor--to break the paralysis.
The odds of a meltdown are one in 10,000 years.
--Vitali Sklyarov, minister of power and electrification in the Ukraine, two months before the Chernobyl accident
Who the hell wants to hear actors talk?
--Harry Warner, Warner Bros. Studios, 1927
What use could this company make of an electrical toy?
--William Orton, president of the Western Union Telegraph Company, in 1876, rejecting an opportunity to purchase Alexander Graham Bell's patent on the telephone
Our search for the final villain of decision making takes us back to January 1, 1962, when a young four-man rock-and-roll group named the Beatles was invited to audition in London for one of the two major British record labels, Decca Records. "We were all excited," recalled John Lennon. "It was Decca." During an hourlong audition, they played fifteen different songs, mostly covers. The Beatles and their manager, Brian Epstein, were hopeful they'd get a contract, and they waited anxiously for a response.
Eventually they received the verdict: Decca had decided to pass. In a letter to Epstein, Dick Rowe, a prominent talent scout at Decca Records, wrote, "We don't like your boys' sound. Groups are out; four-piece groups with guitars, particularly, are finished."
As Dick Rowe would soon learn, the fourth villain of decision making is overconfidence. People think they know more than they do about how the future will unfold.
Table of Contents
1 The Four Villains of Decision Making 9
Widen Your Options
2 Avoid a Narrow Frame 32
3 Multitrack 50
4 Find Someone Who's Solved Your Problem 68
Reality-Test Your Assumptions
5 Consider the Opposite 92
6 Zoom Out, Zoom In 115
7 Ooch 135
Attain Distance Before Deciding
8 Overcome Short-Term Emotion 156
9 Honor Your Core Priorities 175
Prepare to be Wrong
10 Bookend the Future 194
11 Set a Tripwire 218
12 Trusting the Process 239
Next Steps 254
Recommendations for Further Reading 255
Overcoming Obstacles 267