{"id":40989,"date":"2025-03-05T23:13:36","date_gmt":"2025-03-06T07:13:36","guid":{"rendered":"https:\/\/blogs.georgefox.edu\/dlgp\/?p=40989"},"modified":"2025-04-23T07:20:56","modified_gmt":"2025-04-23T14:20:56","slug":"decision-making-and-uncertainty","status":"publish","type":"post","link":"https:\/\/blogs.georgefox.edu\/dlgp\/decision-making-and-uncertainty\/","title":{"rendered":"Decision-Making and Uncertainty"},"content":{"rendered":"

The reading this week was Thinking, Fast and Slow<\/em> by Nobel Laureate Daniel Kahneman.[1]<\/a> I looked forward to this book above all other entries on the reading list. This one deserved more than inspection, and Kahneman did not disappoint.<\/p>\n

I first came across Kahneman and his colleague, Amos Tversky, in a historical review of risk-taking by Peter Bernstein.[2]<\/a> He credited Kahneman and Tversky as conducting \u201cthe most influential research into how people manage risk and uncertainty.\u201d My readings typically involve equations, so books like Ang and Tang have been the norm.[3]<\/a> Kahneman wrote on familiar risk and decision-making topics, but his focus was on the why<\/em> behind the what<\/em> that I have studied.<\/p>\n

Many of the illustrations involved simple gambles, reflecting that \u201cevery significant choice we make in life comes with some uncertainty.\u201d[4]<\/a> This is my language: expected returns, small sample sizes, and bias. If I am the random sample representing our cohort, then everyone fired up Excel to compute the Bayesian probability that the cab involved in the accident was blue.[5]<\/a> Such a conclusion would be a planning fallacy<\/em> as well as a mischaracterization of how normal I am.<\/p>\n

\"\"<\/a>
\nFigure 1 \u2013 An Expensive Plot of Bias with Small Sample Size<\/p>\n

The read was time consuming. Kahneman would describe his observations, and I would pause to survey my hard drive for instances that came to mind. One of the more compelling correlations between his theory and my experience was his description of interviewing military recruits to determine fitness for combat. Kahneman observed that clinical interviews failed because they \u201callowed the interviewers to do what they found most interesting.\u201d[6]<\/a> Forty minutes later, I had successfully dug out my 2009 Leadership Development Assessment to have a chuckle. I could not have cared less about the LDA, a necessary step for getting a managerial salary for my specialist job. The psychologist picked up on my obvious signals and dismissed my potential because I needed to improve my interpersonal impact when meeting an unfamiliar person. Kahneman nailed it. My assessment was about the interviewer, not the interviewee!<\/p>\n

Application to Leadership<\/strong><\/p>\n

All of this is fun, at least for me. How does Thinking, Fast and Slow<\/em> relate to leadership? The work highlights that our brains are powerful and imperfect. To improve decision-making, Kahneman observes that organizations naturally think slower than individuals\u2014a tactic of invoking System 2\u2014and can enforce processes and procedures which address pitfalls like optimism bias or WYSIATI<\/em>.[7]<\/a> Two examples come to mind.<\/p>\n

The first involved a multi-year study on high profile, catastrophic industry failures. Through research and interviews, I cataloged and grouped a wide variety of equipment and metallurgical failures. The stated goal for Lessons Learnt, Vol. I<\/em> was to identify the underlying causes, which would then underpin Vol. II<\/em>, which would provide a strategy for preventing future failures. Kahneman put names to this misguided System 1 way of thinking, like belief in the law of small numbers and hindsight bias.[8]<\/a> Thankfully, System 2 was engaged prior to launching Vol. II<\/em>. The biggest lesson is that we don\u2019t know what we don\u2019t know\u2014the same concept that Donald Rumsfeld later called \u201cunknown unknowns.\u201d[9]<\/a> Rather than foolishly claim an end to future failures, Vol. II was replaced with a recommendation for how to build an organization oriented toward responding to incidents and transferring knowledge.<\/p>\n

The second example of improving organizational decision-making came from a study on competitiveness. My department had overreacted to a previous incident by requiring every engineering document to undergo cross-discipline reviews. It was common to have twelve signatures on a 160-page report, effectively guaranteeing that no one individual was responsible for the comprehensive plan. This was akin to the study of students who did not aid a choking person because someone else could help.[10]<\/a> Improvements included clear accountability assigned to one engineer and their direct supervisor (two signatures), conducting training on fallacies like continuation bias, and adding a designated challenger<\/em> role to risk assessments such that System 1 decisions were openly questioned by a System 2 thinker (we do not use Kahneman\u2019s language, though). We still have room to travel for dissemination of learnings.<\/p>\n

Kahneman has shared how people think and how decisions are made. His conclusion related to organizational procedures is a counterpoint to Friedman\u2019s teaching that leadership is emotional.[11]<\/a> I would suggest that the values and behaviors of the differentiated leader are emotional but should be underpinned with a cognitive understanding of how organizations work. Both works contribute.<\/p>\n

\n

[1]<\/a> Daniel Kahneman. Thinking, Fast and Slow<\/em>. 1st pbk. ed. (New York: Farrar, Straus and Giroux, 2013).<\/p>\n

[2]<\/a> Peter L. Bernstein. Against the Gods: The Remarkable Story of Risk<\/em>. (New York: John Wiley & Sons, 1996), 270.<\/p>\n

[3]<\/a> Alfredo H.S. Ang and Wilson H. Tang. Probability Concepts in Engineering Planning and Design<\/em>, vol. I, Basic Principles<\/em>. (New York: John Wiley & Sons, 1975).<\/p>\n

[4]<\/a> Kahneman, 270.<\/p>\n

[5]<\/a> Kahneman, 166-67.<\/p>\n

[6]<\/a> Kahneman, 230.<\/p>\n

[7]<\/a> Kahneman, 418.<\/p>\n

[8]<\/a> Kahneman, 113, 202<\/p>\n

[9]<\/a> Donald Rumsfeld. \u201cKnown and Unknown: Author\u2019s Note.\u201d The Rumsfeld Papers, Accessed March 5, 2025. https:\/\/papers.rumsfeld.com\/about\/page\/authors-note.<\/p>\n

[10]<\/a> Kahneman, 170-71.<\/p>\n

[11]<\/a> Edwin H. Friedman. A Failure of Nerve: Leadership in the Age of the Quick Fix<\/em>, ed. Margaret M. Treadwell and Edward W. Beal, rev. ed. (New York: Church Publishing, 2017), 14.<\/p>\n","protected":false},"excerpt":{"rendered":"

The reading this week was Thinking, Fast and Slow by Nobel Laureate Daniel Kahneman.[1] I looked forward to this book above all other entries on the reading list. This one deserved more than inspection, and Kahneman did not disappoint. I first came across Kahneman and his colleague, Amos Tversky, in a historical review of risk-taking […]<\/p>\n","protected":false},"author":219,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[1],"tags":[3397,2052],"class_list":["post-40989","post","type-post","status-publish","format-standard","hentry","category-uncategorized","tag-dlgp04","tag-kahneman","cohort-dlgp04"],"acf":[],"_links":{"self":[{"href":"https:\/\/blogs.georgefox.edu\/dlgp\/wp-json\/wp\/v2\/posts\/40989","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.georgefox.edu\/dlgp\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.georgefox.edu\/dlgp\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.georgefox.edu\/dlgp\/wp-json\/wp\/v2\/users\/219"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.georgefox.edu\/dlgp\/wp-json\/wp\/v2\/comments?post=40989"}],"version-history":[{"count":8,"href":"https:\/\/blogs.georgefox.edu\/dlgp\/wp-json\/wp\/v2\/posts\/40989\/revisions"}],"predecessor-version":[{"id":41784,"href":"https:\/\/blogs.georgefox.edu\/dlgp\/wp-json\/wp\/v2\/posts\/40989\/revisions\/41784"}],"wp:attachment":[{"href":"https:\/\/blogs.georgefox.edu\/dlgp\/wp-json\/wp\/v2\/media?parent=40989"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.georgefox.edu\/dlgp\/wp-json\/wp\/v2\/categories?post=40989"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.georgefox.edu\/dlgp\/wp-json\/wp\/v2\/tags?post=40989"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}