Decision making under uncertainty is a well studied field. Decision making under certainty is less well studied.
Hubris means excessive pride or self-confidence. In Greek tragedy, its result is nemesis – the inescapable cause of downfall. Yesterday we talked about ideology and its dogmatic approach to many problems. That is clearly hubris. Nemesis will follow, but it may not stick to the perpetrators of the frauds. Pity.
Individually, we can reach better decisions if we are less confident in their rightness.
There are two rules of life that seem near universal.
Rule 1. Everyone has a good idea that will not work. Good ideas are near useless. Being able to implement them is where the value lies.
Everyone who has ever taken a shower has had an idea. Its the person who gets out of the shower, dries off, and does something about it that makes a difference. Nolan Bushnell, Atari
Rule 2. No one has ever lost much money with a bad idea. You cannot get a lot of money to lose with bad ideas. It is like poker. Poor hands cost near nothing. Only the second best hand costs a lot.
There are questions that should defend important decisions.
- What if I am wrong? How will I know? What can I do about it then? The message is a) be careful of decisions that cannot be reversed. They are inherently far riskier than ones that can be reversed, and b) check later.
- What if I am right? What then? The world does not stop when you are right. Every decision has consequences that relate to more than the original issue. The unintended consequences may be more important than the thing you fixed.
The site was identified by Soviet engineers in 1971. It was originally thought to be a substantial oil field. The engineers set up a drilling rig and camp nearby, and started drilling operations to assess the quantity of oil available at the site. When they instead found gas, the ground beneath the drilling rig and camp collapsed into a wide crater and disappeared.
Expecting dangerous releases of poisonous gases from the cavern into nearby towns, the engineers thought it best to burn the gas off. It was estimated that the gas would burn out within a few weeks, but it has instead continued to burn for more than four decades.
“What if” may not have been fully considered when “the gas will burn out” decision was taken.
Over confidence is a risk even though it feels like it is not. There are few sure things in the world and one is wise to examine the conditional questions when the decision matters. Not to create decision paralysis, but to examine more than one option and to build in a review process.
Be very careful of the “intuitively obvious” answers whenever they cannot later be repaired inexpensively.
In my experience, “intuitively obvious” is almost always a synonym for wrong. Nemesis to follow.
Don Shaughnessy is a retired partner in an international public accounting firm and is now with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario.