Data-Driven Decision-Making

Great By Choice by Jim Collins is a terrific book. Wonderful, timely, and very readable and accessible!

It is also very entertaining for the numerous anecdotes in it.

The idea I find the most useful for me is being "empirical." By that, the author apparently means that your decision must have data to back it up, that you must have proof, reason other than and outside of your feelings, hunches, gut feels etc for any decision you make.

He points out that great leaders can afford to be bold and to take frightfully big risks because they base their decisions on their own personal observations, not on second-hand research or heresy etc. e.g. (My examples) Steve Jobs's decision to run their own Apple stores, and (again) his decisions to enter the lacklustre tablet market with iPad. If you want to be bold, daring, decisive (and at the same time, responsible and not suicidal,) you need solid proofs, concrete data, undeniable facts, repeatable experimental results etc.

Does it mean Data-Driven Decision-making?

The author doesn't say much about this. But I would like to point out that whatever data, whatever amount and type of data, in itself, won't give you a decision. Data in whatever form or amount will not decide for you. Given the same data, two different committees can reach two diametrically opposite decisions.

If certain data does give you a decision, then you are not making a decision, but following an order, a recommendation, or some other person's decision.

Easy Decision, Part 2

I will call this technique the "ratchet." And I got it from I'll Show Them Who's Boss.

One online definition of the word goes as "mechanical device consisting of a toothed wheel or rack engaged with a pawl that permits it to move in only one direction." More here.

The method goes like:

1. What are the issues involved in your problem?
2. Deal with the bigger issues first. Only after you have finished with a main issue, you go down to the next/lower level issue.
3. And you mustn't come back up to the main issue over and over.

Easy Decisions, Part 1

James Kilts has discussed in Doing What Matters what he calls the "Quick Screen" method. I am summarizing his tips from my memory.

You can take action under the following circumstances without much further deliberation.

1. The status quo is crippling you. The situation is deteriorating too fast too soon.


2. Your research and discussion are going in a circle, or have reached a dead end.


3. You are acting in accordance with a basic principle. e.g. Satisfying your customers, promoting your brand, and like actions that can never go wrong. Something basic and fundamental.

Another way (James Kilts') to speed up decision making is to accept any proposed decision and then think about whether the resultant future scenario is possible or not, and whether you can like it or not. As an example, he discussed his decision not to disinvest parts of his Gillette company. Some consultants had advised him to sell parts of his company. He wondered what would happen, what would need to happen to accept this idea, like this, in my paraphrase:

To sell this, there must be buyers for this. Since there are no buyers, this won't work. 



To sell that, there must be buyers for that. Yes, there are some buyers. But, since they won't offer prices acceptable to us, this won't work. 

And so on.

This is reminiscent of what President Lincoln did to a newspaper editor. The editor wanted the North to offer peace to the South. Lincoln knew that peace was not palatable to the South. The editor pressed on so hard so long that Lincoln finally decided to agree, and asked the editor to lead a peace delegation to the South. The mission failed as Lincoln expected, and the editor accused him of playing a cruel joke on him.

Practice and Theory of Gambling --- Part 1 of 20

If you hate and/or despise gambling a tad too much, we need to ensure that you are not suffering from a shadow, which I'd like to define as those aspects of your own self/personality that you've estranged or disowned to please your primary caregivers and/or peers in your childhood and/or youth. Your shadow is there all the time but you just don't notice it except in your night dreams and/or daydreams and/or projections.

Do you still hate and/or despise gambling too much?

1. You can avoid gambling with E coli uncertainty by staying away from all vegs till the rage dies down or a new vaccine is discovered.
2. You can avoid gambling by preparing "perfectly" for your exams, whatever that is or in whichever way you define "perfectly."
3. You can avoid gambling by drawing up a perfect business plan, whatever that is or in whichever way you define "perfect."
4. You can avoid gambling by drawing up and executing your centralized, decentralized, free-market, laissez faire, market-oriented, market-driven, capitalist, liberal, Marxist, Leninist, socialist economic policies. I truly don't know what such an economy will look like, though.

But what about death? How are you going do postpone it, prevent it, mitigate it, defend against it?

What will happen if you disown you left hand and let it atrophy?

What will happen if you disown you gambling hand and let it atrophy? Will it serve you well when you truly need to use it?

After reading Mike Caro, David Sklansky, Alan Schoonmaker, Mason Malmuth, Dan Harrington and co., many of whom even refer to death in their discussion of bridge and/or poker, I notice that true and good gamblers (not those world champions, those tournaments winners who usually end up broke) won't really mind whatever hands are dealt to them at death.

"Variance," "randomness," arbitrary "distribution" of luck, "luck," "fluctuations," "streaks," unpredictability ...

Yes, sure, you will be given a number of cards upon your death.

Just make sure you will be feeling fine, (or at least, feeling lucky) then.


Enough clues for you, dear readers. More to come later upon this.

on June 11, 2011

Psychology of Mis-Judgement

Charlie Munger,Vice-Chairman of Berkshire Hathaway Corporation, has discussed how our mind plays tricks on our decision-making in his book "Poor Charlie's Almanac." That chapter is also available on line at Psychology of Mis-Judgement.

Uncertainty, Chaos, Complex confusing circumstances, Friction and fog of war, turbulence, unpredictability, and similar topics kept me spell-bound during past few months. And thus, when I have time, I would like to share my understandings of famous books like Judgement Under Uncertainty by Amos Tversky and Daniel Kahneman, and many such books.

Munger turned out to be sort of a kindred spirit to me. Even before I read his "Almanac," I read such books in minutes, zeroing in on what Munger calls "really big ideas." You must have noticed that here in my posts, I share such juicy, hand-picked "really big ideas."

Munger lists 25 factors that can skew our judgement and then urges the readers or future scholars to tidy up his list. Here is my attempt to do so:

1. Greed, Liking, Envy/jealousy, Social Proof, Over-Respect, Over Optimism, Curiosity(Seeking Fun, Variety, Adventure, Thrill etc)
   
2. Fear, Dislike, 
     Avoiding pain, doubt, inconsistency, discomfort etc
     Seeking confirmation, seeking meaning
     Loss aversion
     Over-reaction to deprival
   
3. Association, Pavlovian conditioned reflexes
     Anchoring
     Oversight of convergence of many factors 
     Availability-Misweighing
     Pride, arrogance, over-confidence
     Excessive self-regard 
   
4. Stress
   
5. ?
   

People familiar with Buddhist literature will notice that these are what Buddha calls defilements or hindrances as explained by Venerable Nyanaponika, and by Wiki teams.

Kamachanda(Sensual desire, lust, craving, grasping)

Here, you want something very badly. This is what can happen:

1. You lose sight of other relevant factors. e.g. In a Taoist tale, a thief grabbed and ran away with a gold piece in a crowded marketplace because he "saw only the gold", not other humans who would catch him.
2. Numerous Chines kings and princes who believed that soldiers from the enemy army were deserting in droves simply because they desired such an outcome whereas in truth, those soldiers just went into hiding to lay ambush.

Vyapada (Ill-will, hatred, anger, fear)

Here, you hate someting so much that you refuse to believe it.
e.g. Hitler would not accept that Soviet factories were producing more tanks etc than his own factories.

Thina-middha (Sloth and torpor)

Here. you are not awake.

Uddhacca-kukkucca (Restlessness,worry, agitation)

This is what we today call stress and anxiety.

Vicikiccha (Doubts or hesitation)

This is plain confusion, contradiction, paradoxes, and lack of faith.

How To Make Decisions Quickly - Part 2

Direct, straight into the heart of the matter!

1. By Joseph S. Nye
   "But deciding how to decide is as important as making the final decision. What should be the composition of the group the leader turns to? What is the context of the decision? How will information be communicated and how much control does the leader maintain over the decision? A leader who gets any of these factors wrong may be decisive, but also decisively wrong." 
   
   
2. It's Possible to Be Quick
   
   "It's not hard to make decisions when you know what your values are." -Roy Disney
   
   Know Your Desired Result
   
   Steve Yates said again in the Fortune Magazine interview, “Successful traders don't spend much time regretting decisions or going back over things. If a decision turned out to be wrong, so what? Move on. So when you have to make a quick decision and you know that there's a good chance it will be wrong--the worst thing you can possibly do is sit there and panic and hope. You have to be decisive--go on and do it.”
   
   Soccer/football strikers are trained that way too. 
   
   
3. Gut and Body
   
   1: Trust Your Gut
   
   2: Use Your Body’s Energy Field 
   
   
4. Traps To Avoid
   
   Analysis paralysis
   
   Getting Overwhelmed br Fear of change br Fear of commitment
   
     Fear of regret
   
   Decision-making fatigue
   
   Procrastination 
   
   
5. Colin Powell
   
   " Once the information is in the 40 to 70 range, go with your gut. Don't wait until you have enough facts to be 100% sure, because by then it is almost always too late.... " 
   
   
6. Andrew Carnegie's Master Minds?
   
   What decision would your hero make in these circumstances? Is there a consensus among your heroes on what to do? 
   
   
7. Set a Deadline
   
   An easy way to solve this problem is to put a time limit or deadline on your decisions. 
   
   
8. US Marine Corps
   
     Our leaders must be able to "feel" the battlefield tempo, discern patterns among the chaos, and make decisions in seconds ... much like a Wall Street investment trader, but with life threatening consequences.
   
   ... two primary models for human decision making -- the analytical model and the intuitive, or recognitional, model.
   
   ... While analytical decision making is based on a comparison of quantitative options, recognitional decision making depends on a qualitative assessment of the situation based on the decider’s judgement and experience. It does not look for the ideal solution; instead, it seeks the first solution that will work. Research by noted psychologist Dr. Gary Klein indicates that most people use the recognitional, or intuitive, model of decision making over 90 percent of the time...
   
   ... the longer the decision is delayed, the more opportunities are missed. Initiative can be forfeited to the enemy. ....
   
     .... Napoleon may be correct if he meant that intuition cannot be taught in the traditional sense, but both the Germans and the Japanese were successful in assuming that -- through repetition -- it could be learned. ....
   
   Advances in information technology will never clear Clausewitz’s "fog of war" to the point where the analytical model is timely enough to guarantee victory. br Foundation blocks: character, experience
   
       
   
   
   
   
9. What does US Navy Have to Say?
   
   " analytical or intuitive ... ... ... which is better depends on the nature of the situation, particularly on the time and information available.
   

Book Review "How We Decide"

The late Peter Drucker spent a large chunk of his book "Effective Executive" to discuss how to make good decisions in a corporate setting.

Behavioral economists, military historians, psychonomists, former heavy weight champions(Ali and Foreman in particular), CEO's, marketers, PR gurus, software project managers, physicians/surgeons, F15 pilots, tank commanders and so on, are also keenly interested in decision-making.

Now, let's review the book : How We Decide by Jonah Lehrer 2009.

Length : About 260 pages. Excluding content, introduction, preface, index etc.

My Summary:

1. Use Reason for Simple & New Problem ---> Then , use Intuition: take time, sleep on the problem.
2. Automate skills for individual/constituent steps ---> Then, focus on 'holistic cues' i.e. overall effect/result.
3. Encourage debate and cognitive dissonance.
4. Be mindful of what you don't know.

The smaller the content in the original, the smaller the summary. Excuse me if I am stating a very obvious fact.