The finding in the headline could have derailed the capture of Bin Laden. Imagine that you are on the US intelligence team monitoring a suspicious compound in the outskirts of Abbottabad in Pakistan. You have to figure out if Bin Laden indeed is in the compound and how you will eventually try to take him out. According to traditional Muslim faith, dogs are considered dirty and thus unlikely to be around radical Muslims. Could this one piece of evidence lead to a conclusion that it is unlikely that Bin Laden would be in the compound?
We make many decisions every day, generally with significantly lower stakes than above. But how often do we discuss HOW we make decisions? What is the basis for a decision? What group of people within your organisation will make the decision? What constitutes success? What is the process by which you will arrive at the decision?
As an investor, one of my most important decisions is whether or not to make an investment. Another one is hiring. Within NGP Capital, we have spent years trying to hone our process for decision-making. We instituted a voting system. We appointed a sceptic to take an opposite view from the favoured one. We applied anonymity in certain instances. We controlled the sequence and order of discussions. We went from written recommendations, to PowerPoint, back to written memos supported by PowerPoint. It is a constant work in progress.
Important decisions are often about peering into the future. Decision-making is rarely black or white. Most decision-making is in grey tones. In his latest book, “Farsighted,” Steven Johnson investigates the conundrum of decision-making.
Some of his observations are:
· We tend to fast-forward to the outcome of complex decisions
· We emphasise the OUTCOME of good decisions, not the process
· We compress complex decisions into everyday heuristics
· Our minds naturally converge to narrowband decisions, which cognitive scientists call “anchoring”
Steven Johnson recommends splitting the phase of decision making into two phases: a divergent phase where you explore many avenues to the resolution of a problem, and a convergence phase where you analyse and distil the findings from the divergent phase. We probably do this to a certain extent intuitively, but as he notes, we often fall prey to the narrowband approach, which results in anchoring.
Not all decisions are important enough to require a deliberate framework, but if we practise and consciously instil the process, we should get better at making difficult decisions. Jeff Bezos distinguishes between decisions you can reverse, for instance selecting an advertising agency, versus irreversible decisions, for instance an acquisition of a team or a company. The latter is the critical one to get right, whereas the former can be changed down the road.
Have you thought about it ? How are you making decisions ? What is your framework ?
And, as you all know, the dog in the compound was not a cause to abandon the Bin Laden mission. It turned out that one of the intelligence officers knew that, in the past, Bin Laden had been seen with dogs around him.
Watch you biases when making decisions - and If you have one, walk the dog!
