Toastmaster Speech on Decision Making

Good Morning, Fellow Toastmasters!

I would like to talk to you about decision making and decision analysis, which is a vast scientific field, believe-it-or-not, in which I have spent some time researching. I do not profess to be a good decision maker, only an aspiring decision analyst. I will talk about individual rather than group decision making. I will discuss the nature of decisions, followed by different approaches to decision making, and finally some analytical tools that can be used - so-called decision aids.

I shall begin by quoting Shakespeare:

To be or not to be,

that is the question,

whether tis nobler in the mind to suffer

the slings and arrows of outrageous fortune....

As Hamlet ponders the most important decision in his life, we face the same set of questions in choosing our careers, our partners, and other so-called meta-decisions. These are life decisions which do not occur frequently, but have huge consequences. Often, they determine the path we take for many years. And often they are irreversible.

But we also make other types of decisions so routinely, almost without thinking, such as grocery shopping, what to do in the next half hour, whether or not to say hello to someone. These decisions are simple to execute and have little impact compared to meta-decisions. We can often "undo" these decisions, such as return the item you purchased. Or have another opportunity to make them, such as say hello in the next hour rather than just now.

Then there are decisions in between the two extremes: occurring somewhat infrequently, with some degree of complexity, and with irreversible consequences.

Thus we can characterise a decision by the frequency of occurrence, complexity of involvement, and consequence - be it monetary, emotional, reversible-irreversible. We can also categorise types of decisions by the degree of uncertainty. These simple decisions we make are decisions under certainty. Decisions under risk are those that traders make. Although we don’t know how the future will turn out, we have some history of the object of our decision to estimate what will happen. Or we have indicators to help us. Finally, decisions under uncertainty are the hardest of all, for example, investment decisions in a new market and personal meta-decisions.

As a decision scientist, I am interested in how people make decisions and how to make them better. This is a subject which has always fascinated me, for two reasons.

1- I view the world as full of opportunities and I like to create new opportunities. Often I’m innundated with choices.

2- I’m a sentimental person. I like to reflect upon the past. Therefore I’d like to minimise regret after making a decision.

This situation sometimes leads me to analysis paralysis or indecision. There is a Taoist saying, that a piece of clay has infinite potential. But the minute you mold it into a tea cup or any functional form, it loses its potential to be anything else. Likewise, I think, by not making a decision, I would have infinite possibilities.

This strategy of postponing making a decision is one way of increasing the value of flexibility. By postponing making a decision, we get more information about what we want, what is out there, and what may happen. We can also increase flexibility by actively searching for more choices, split the decision at hand into a series of decisions and execute them one at a time. I studied the concept of flexibility for quite some time - with respect to decisions that companies in a new market or new environment has to face in light of great uncertainty.

In the field of decision science, there are three approaches or general models to the study of decision making: descriptive, prescriptive, and normative. Descriptive is about how we actually make decisions. This is the domain of psychologists and behavioural scientists. Normative is about what is the ideal way we should make decisions. This is the domain of operations research and management science, my area. In between we have the prescriptive approach, which is about how to get from the actual to the ideal. Here we have many useful rules of thumb to improve our decision making.

There are many decision tools that help us make better decisions. Good decisions are those whose outcomes meet our expectations. In the simplest case, we can use cost benefit analysis to weigh the pros and cons of each choice. However, this often leads to trade-off analysis as we only want the benefits not the costs of the choices available and yet often we can only choose one, not both. When there are many choices with many characteristics, we can use multi-attribute utility analysis. We first set out the criteria or characteristics called attributes to which we attach weights according to importance to us. Then weigh each choice against each attribute. Then we do a weighted average calculation. For decisions that lead to other decisions or whose impact appear some time in the future, we can use decision trees to analyse our interaction with the unknown.

I have given you a taste of what decision scientists are concerned with. Every decision is an opportunity for me to improve my understanding of decision making. However, a good decision analyst is not necessarily a good decision maker. That is another subject altogether.

I would like to close by observing that the decision aids require us to explicitly define our preferences, which are not always definable or constant. For the variety seeking and deal prone person like myself, I don’t know what I want until I see what is available. So I can’t always give you my criteria beforehand. People also make what seems to be irrational decisions, i.e. based on gut feeling or spur of the moment anxiety. There are many good books in this area, and I will not attempt to summarise my bookshelf right now.