Decisicion Traps 6Making The Choices

Febri Andika 29011018

Based on the book Decision Traps, J Edward Russo and Paul J. H. Shoemaker

Ten Most Dangerous Decision Traps •1)   Plunging In –

•2)   Frame Blindness –

•3)   Lack of Frame Control –  •4)   Overconfidence in Your Judgment –  •5)   Shortsighted Shortcuts –

•6)   Shooting From The Hip –  •7)   Group Failure –  •8)   Fooling Yourself About Feedback –  •9)   Not Keeping Track –  10) Failure to Audit Your Decision Process –

  

Decision Traps # 6

Decision Trap no. 6: shooting from the hip: believing you cap keep straight in your head all the info you've discovered, and therefore winging it rather than following a systematic procedure when making the final choice

Outline “Making A Choice

• Simple Approach• Systematic Approach• Conclusion

Simple Approach

Intuition

• Definition: mind process of part or all information automatically, quickly, & without awareness of any details

• affected by evidence, fatigue, boredom, distraction, & recollection of a fight

The limits of intuition• less consistency• suffer from information overloadEx: Consulting to A doctor in Clinic

Some simple but limited alternatives to intuition

1. Pure intuition

2. Simple screening & ranking rules

3. Occupation-specific rules of thumb

Some simple but limited alternatives to intuition

People use to make choices by simple approaches:1. Pure intuition2. Simple screening & ranking rules Threshold rule: useful in quickly eliminating numerous unsuitable

alternative and random inconsistency of purely intuitive approaches Exp : Decide for Credit card approval

Criteria: 1. has no payment default 2. one years at present address 3. one years at current job 4. Salary minimum 300 us $/ month

Simple screening & ranking rules

Criteria Ms Smith Ms Jones1.has no payment default yes yes

2. one years at present address

1 years 20 years

3. one years at current job 1 years 15 years

4. Salary minimum 300 us $/ month

400 US $ 250 US $

Limitation: because of not make use of all available info & are non compensatory, screening rules are appropriate only for rough sorting or ranking task

Some simple but limited alternatives to intuition

3.Occupation-specific rules of thumb• Ex Of Thumb: In restaurant , often price meals by

taking the cost of the raw food and multiplying by three.

Systematic Approach or Linear Model

Background

In making final choices, the biggest problems are overcoming: 1. own random inconsistency 2. own inability to effectively process the large quantity of

available information

Linear Model Solution

Linear Model

Linear model solution: 1.maximize chances of making the best choice if we find a

systematic way to evaluate all the evidence favorable or unfavorable to each possible choice

2.compare the strength of evidence on each side rigorously 3.pick the choice that our system indicates the evidence favors

Linear Model

Subjective Linear Model

Objective Linear Model

Subjective Linear Model

Procedure :

1. list each factor that provides evidence for or against various alternative

2. assign weights to each factor to reflect their relative importance

3. make a numerical rating of the extent to which the evidence about each factor favors (or argues against) each alternative

4. multiply the score each alternative receives on each factor by the weight assigned to that factor, then add up all the results to get an overall score for each alternative

Subjective Linear Model

Option:1. Genting 2. Paris3. Boston4. Bandung

Example: How To choose the destination for yours first International conference?

Subjective Linear Modeltive Linear Model

Country Difficulties Fun Experience Cost Overall Score

1 Genting 60 60 60 80 66

2 Paris 80 100 80 30 69

3 Boston 100 80 80 30 56

4 Bandung 50 50 50 100 65

WeightUsed

30% 20% 20% 30 %

Weight system based on my percetion

BootstrappingBootstrapping As Solution

T o choose weights is through a procedure called bootstrapping

infer statistically through a " regression analysis" what weights implicitly using to arrive at the particular ranking

seek to build a model of an expert using his/her own intuitive predictions, and then use that model to outperform the expert on new cases

eliminate the random noise/inconsistencies and retain the core wisdom of the human expert, thus it produces a standard procedure for judgment

Objective Linear ModelConditions for building an objective linear

model 1. if the same decision is made repeatedly 2. if data on the outcomes of past decisions

are available 3. if you have good reason to expect that

the future will resemble the pastStep• Construct an objective linear model in

the same way as a subjective linear model

• The difference is the weight infer by statistic from actual past result rather than subjectivity of expert

Choosing the right techniques for your decision

• Multiattribute utililty Analysis 1. For simple decisions, where little is at stake, intuitively or with simple

decision rules 2. Use statistical decision rules based on an objective linear model to make any important decisions or judgments that are faced repeatedly if data exist to create an objective linear model

3. Subjective linear model when making important decision that cannot be addressed with an objective linear model

Conclusion

Conclusion

1. Avoid Shooting from the Hip2. Intuition achieve much less consistency than generally

suspected so we must using linear model3. The future of decision making is using Formal decision rules and systematic models

Thank You