Decision Making: An Overview

It has been said that our destiny is not shaped by how our circumstances mold us, but by the decisions that we make to mold our circumstances. This, I have some level of certainty, is the basis for “there are [insert number here] of kinds of people in this world” pearls of wisdom. Luck is when preparation meets opportunity, driven by information, and forged by the decision-making process. As Newton once postulated, every action has an opposite but equal reaction. When you exert force onto something, that object will push back with the same amount of force, per inertia, with the excess energy that you put into the system being used to propel the object onto the trajectory that you want it to move.

In a manner of speaking, you live in an open system: You are part of a community, a larger whole, following your world-line throughout a daily routine, interacting with the world based on your innermost values and behaviors. Behaviors are extensions of values, by way of self-discipline—selective training of thoughts, words, and actions. Self discipline is a deliberate set of actions that can have linear and non-linear payoffs; one’s personal investment in self-discipline, however, is much less than the price of not having self-discipline in many circumstances.

The opposite of self-discipline, by contrast, is impulse. If rational decisions are to be strived for, decisions made impulsively are the introduction of chaos into the decision making process, enough to make them an irrational behavior. Irrational behaviors often add unnecessary entropy to a system—read, your world—and thus form the other end of the continuum from disciplined decision making as a rational, intelligent and deliberate act to the other end of being impulsive, often irrational, and lacking distinct and quality information to justify the action with.

This power of choice and free will, coupled with the other assets provided by the human mind makes it the most powerful tool in the universe. The most important thing that we can do with our minds is to make calculated and rational decision with it. There was once someone who said that the secret to engineering is not asking what more you can add to something, but that there is nothing left to take away. We can draw from this that the best decisions are made deliberately with quality information, but not too much of it. I get ahead of myself, though: Let’s re-visit this point later.

Back to the continuum for a moment: Oftentimes the most calculated of decisions can take the most time, as copious amounts of information are required for it; on the other hand, we often have very little (if any) information to support the decision that we have made, making rationality a function of the amount of information involved, right? Not necessarily. The quality of the information, along with the quantity, comprise a crucial factor in the decision making process. Oftentimes make what they feel are the best decisions, based on a good amount of information…but they are basing decisions on bad information. The cause for this can range from personal biases to disinformation.

So, to the previous point: When are the best decisions made? Bayes Theorem is a mathematical powerhouse of a formula which introduces the concept into the decision making process of re-evaluation once there is a change of the amount of information in the decision-making process. The best decisions don’t rely on the quantity of information, but the quality. While it is unlikely that a single bit of intelligence…information, as it were, could offer you the necessary impetus for you to make a decision, it’s just as possible as receiving far too much information on your required decision and thus having your judgment be clouded with too much information.

How do we attain this elegance in decision making abilities? Understanding the decision making process and experience are the best guides in this: Understanding the process allows one to comprehend the proper framework for which sound decisions are made, while experience develops what is better known as instincts. Instincts are simply our visceral reaction to data that we have seen in the past. In the hands of the logical minded person, proper instincts paired with the application of the never-ending cycle of processing decisions, achieving consistent elegant decision making will only take a matter of time.

The Role of Decision in the Enterprise, Part 2

Decision-making is like any other great process: Part science, part art. The science that goes into a decision, however, is quite the feat: Including probability theory, risk assessment, and information theory, just to name a few disciplines that go into something that each of us practice each and every day.

Whereas just a generation ago information was usually consumed in discrete pockets: Morning newspapers, evening newscasts, and perhaps hourly news on the radio, for instance. Today, though, the amount of information in our everyday lives is only limited by our willingness to ingest it—or block it from our lives. The Internet, for instance, has democratized the access to information: Everyone with news facts to present or an opinion to offer has an outlet to readily remove barriers to getting this information to the widest audience possible.

Information is essential to making decisions, right? Yes. The more information, the better, right? Not necessarily.

A man that understood the science of a decision was a humble British Presbyterian Minister that also dabbled in mathematics. Thomas Bayes, known best by his theorem—aptly titled Bayes’ Theorem—is a result in probability theory whereas an event that is conditional on another happening is generally different from the second event being conditional on the first. Bayes’ Theory explores the relationship between the two: Essentially, it informs us how to update or revise beliefs in light of new evidence dependent on experience.

Can we have too little information with which to make a good decision? Yes. Is more information better when making a decision? Not necessarily. Perfect decisions are made with the perfect amount of information—that is, not too much, not too little. One of the ramifications of Bayes’ Theorem is that too much information can exist and befuddle the decision-making process native to the decision maker. My current studies into decision making are towards the end to develop a practical and reproducible process with which a decision maker can come to make the perfect decision.

Practically speaking, the perfect amount of information may not be easily achievable, for the attainment of information is something that can change from moment to moment. Take my Battlemaster experience, for example. Battlemaster is a lightweight, text-based online game which is set in the period of the middle ages; the game is part roleplaying, part strategy. I began playing mostly for the strategy elements, but have participated quite a bit in the roleplaying elements as well. Each group consists of characters, created by players, in realms. Each realm has knights, lords, dukes, and four members that are commonly called the realm council: The ruler, general, judge, and banker. Each performs duties that are commensurate with what you might think they might be—the banker is in charge of the economics of the realm, for example. When my first character became the general of the realm of the realm of Eston, he co-developed a battle doctrine with his aide de camp. The Kane-McKay Battle Doctrine was the culmination of experience in combat, producing a construct for waging wars and winning battles that created more undefeated military commanders than any other doctrine that I have ever come across in the entire game, in all my years there. The first thing that the Doctrine emphasized was:

“Combat is a fluid situation.

Strategy dictates tactics only loosely: Tactics are how strategy is adapted to the battlefield under the circumstances of the moment. As such, strong tactics drive good strategy, and vice versa.”

In other words: While staying true to your principles—don’t budge on your ethics or morals—be certain you can adapt your tactics to suit the environment of the moment. Every element of warfare may be able to be predicted down to the minutest detail; however, the entrance of the human component into any military plan renders it fluid, possibly chaotic, and definitely entropic.

So, when making decisions: Be sure to make them with the understanding that they are rarely made in a vacuum. Decisions are most often made as part of a larger context that changes with each passing moment.

The Role of Decision in the Enterprise, Part 1

“Be willing to make decisions. That's the most important quality in a good leader.”
—General George S. Patton

What separates a rank-and-file member of an organization from a leader in the same? While most of the production and support staff have duties that fall within the category of drills—sequences of discrete actions which comprise a larger task. While these are typically things that can be learned and easily repeated instinctually, they differ from the decisions that leaders make by their very nature of not being what drills are: Something that can be repeated on a mechanical basis.

Not surprisingly, the power of the decision has historically been important in combat, just as it is in the enterprise. Think about the great decisions throughout the history of business:

· The decision of John D. Rockefeller to combine the multitude of Standard Oil companies into one “trust.” Not only did this revolutionize the oil industry in that day and age, it produced the world’s first billionaire, one of the world’s first multi-national corporations, caused the United States government to form “anti-trust” laws, and re-define the ways of philanthropy by a single man and his family. According to Wikipedia: “Standard paid out in dividends during 1882 to 1906 in the amount of $548,436,000, at 65.4% payout ratio. A large part of the profits was not distributed to stockholders, but was put back into the business. The total net earnings from 1882-1906 amounted to $838,783,800, exceeding the dividends by $290,347,800. The latter amount was used for plant expansion.”

· The decision of AT&T on January 8, 1982 to settle a lawsuit and agree to divest its local exchange service operating companies in return for an opportunity to enter the burgeoning Internet services business: “Effective January 1, 1984, AT&T's local operations were split into seven independent Regional Bell Operating Companies known as "Baby Bells." RBOCs were originally known as Regional Holding Companies, or RHCs.” The ramifications? The telecommunications giant additionally became an Internet Service Provider and most of the companies that were divested eventually merged back into a couple companies—in fact, one of the divested companies acquired the parent company AT&T to become, once again, AT&T. The current AT&T has a market capitalization of $1.18 Billion USD.

· The decision of a small Seattle company to start selling cappuccino and espresso drinks instead of just purchasing coffee beans from growers and selling them as a premium product revolutionized the coffee house industry. The name “Starbucks” is synonymous with the word “coffee” and its variations (i.e. very high Top of Mind Awareness, what marketers like to call TOMA). In addition, the cash flows of Starbucks are so high that they can open a store in Great Britain once every two weeks!

· The decision of Jay Van Andel and Richard DeVos to expand from such business ventures as a hamburger stand, air charter service, and a sailing business into a company simply called “Ja-Ri” in 1959 that would later change its name to a concoction of the two words “American Way.” Millions of people would become “downline” distributors, and thus their own bosses, and work towards being part of the “American dream.” The company was Amway and has thoroughly become seated in the American culture as something with a good and bad image.

· The decision of individuals working for energy trading giant Enron towards impropriety, especially of the financial variety would revolutionize the United States business environment by wiping out one of the five major accounting firms of the country and influencing Congress to enact laws on corporate governance.

And, lastly:

· In September of 1995 a computer programmer with a personal website put his broken laser pointer up for sale. When he astonishingly sold it for $14.83, Pierre Omidyar contacted the winning bidder and reminded him of the state of disrepair of the laser pointer. To his amazement, the buyer stated that he collected the unique item. eBay is now the holding company for eBay.com, online banking company Paypal.com and Voip service Skype and had 2006 revenues of $5.969 Billion USD.

The importance of the decision is truly an astounding one; one that we will certainly pursue further. To close, a quote from Napoleon on the nature of decisions in warfare:

“There are times when a battle decides everything, and there are times when the most insignificant thing can decide the outcome of a battle.”
—Napoleon Bonaparte

Quote: Tenacity and Decisions

“The most difficult thing is the decision to act, the rest is merely tenacity. The fears are paper tigers. You can do anything you decide to do. You can act to change and control your life; and the procedure , the process is its own reward.”

—Amelia Earhart