Two Yardsticks for Measuring Risky Decisions

How Women Decide: What’s True, What’s Not, and What Strategies Spark the Best Choices by Therese Huston is a fascinating book. How do you make decisions? Do you know the risk in making your decision? Below is an excerpt from the book:

Two Yardsticks for Measuring Risky DecisionsHow women decide.jpg

Are there strategies for figuring out when to take a risk? I was torn on whether to include this advice because I don’t want to send the message that women are, underneath it all, fearful of risk. The data doesn’t support that. But whether you’re a man or a woman, someone who takes too many risks or too few, you need strategies for evaluating new opportunities. There are any number of risky decisions you might be considering. Maybe you’re thinking about taking a new job or quitting your current one. Maybe you’re trying to decide whether to invest your time in a project that your friends think is a dead end but that you believe is just beginning. I’m going to offer two tools, two yardsticks you can use to measure a daring move and whether it’s headed in the right direction.

The first tool is the 10-10-10 rule, developed by the journalist and author Suzy Welch. The purpose of this strategy is to help you look at a decision from three angles, with the hope that one of those vantage points will provide a pop of clarity. In her book 10-10-10, Welch offers three easy-to-remember questions: “What are the consequences of this decision in 10 minutes? In 10 months? In 10 years?” Simple, yes, but potentially quite powerful. The goal isn’t to constrain you to those exact numbers – you could think about two days, six months, and seven years from now. The goal is for you to think about the immediate consequences, the impact your decision will have in the foreseeable and imaginable future and in a distant part of your life, a time far enough in the future that you can’t predict the intervening details or events but you still have clear hopes for yourself. Imagining forty years out is probably too far. The idea is that all too often when we’re trying to make a decision, we’re focused on one, maybe two of these time frames, but wisdom might lie in considering all three.

The second tool for sizing up a risk is something called a premortem, a strategy discussed in the bestseller Thinking, Fast and Slow, by Daniel Kahneman, a Princeton University professor and Nobel Prize- winning economist who has been studying reasoning and decision- making for over forty-five years. You may be familiar with a postmortem, which is what you do when a project or event is over, but a premortem is just what its name suggests – a step you take before the project launches, before you’ve committed to a plan of action and the risks that come with it. The concept is simple. Once you have a concrete plan on the table, bring together the key people who know about the decision you’re making and say, “Imagine that it’s a year into the future and we’ve gone ahead with our current plan. The result was a disaster. Take five to ten minutes and write down a brief play-by-play of that disaster

You might not be immediately impressed with this strategy. You’re thinking, But I’ve already asked “What could go wrong?” a dozen times. But that question involves looking forward, to possible events in the future, whereas the premortem involves looking back. (A premortem is similar to the look-back we discussed in chapter 1.) Looking back may not seem like much of a shift, especially since it’s all in your imagination, but this small shift in perspective can be profound.

Consider these two questions: “How likely is it that an Asian American will be elected president of the United States in 2024? Why might this happen? List all the reasons that come to mind:’

Before you read on, take a moment to think about this future possibility and generate some ideas.

That was looking forward. Now consider these two questions: “It’s 2024 and an Asian American has just been elected president of the United States. Why did this happen? What events might have preceded this one? List everything that comes to mind.”

If you’re like most people who’ve been asked these questions, a wider variety of vivid details come to mind in the second, hindsight scenario. It’s not just that you’re getting a second chance to think about the same event – people generate better answers to the hindsight questions even if they never heard the first ones. Deborah Mitchell at the University of Pennsylvania, J. Edward Russo at Cornell University, and Nancy Pennington at the University of Colorado collaborated on a project and found that people who are given the second, hindsight scenario generate 25 percent more reasons than people given the first, foresight scenario.” Perhaps even more important, people generated more specific and concrete reasons in the hindsight scenario. When we think about future events, we’re content to think in broad generalities, but when we think about something that has already happened, we feel a need to provide more convincing explanations. This is why the premortem is so effective- it’s looking back at a fictional event as though it’s happened. You’ve always heard that hindsight is better than foresight, and that, remarkably, includes imaginary hindsight.

 

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