“Still a man hears what he wants to hear
And disregards the rest”Paul Simon — The Boxer
I’ve yet to meet a person who claims to be irrational. Everyone is convinced that they make rational decisions — this idea is at the core of theories in economics, organisations, and technology. When faced with a decision, a rational decision maker:
- Defines the opportunity/problem
- Lists all the constraints (time, budget, resources etc)
- Searches for all solutions
- Chooses the solution that gives the maximum benefit
According to Stanford Professor James G. March’s A Primer on Decision Making, this model of decision making is called a maximisation
The idea of maximisation, the concept of a rational decision maker is based on 3 lies.
The first lie is that we can predict the future, that we can know every possible solution in advance. This is absurd — no-one can see into the future.
The second lie — we can predict how we will feel in the future about a benefit or consequence. The feeling we get after an event is rarely the feeling we had expected beforehand. To quote tennis great Andre Agassi from his autobiography.
‘Now that I’ve won a slam, I know something very few people on earth are permitted to know. A win doesn’t feel as good as a loss feels bad, and the good feeling doesn’t last long as the bad. Not even close.’
The last lie is the biggest one of all — that we have the time and brainpower to search for every potential solution that exists. The first problem here is a lack of time. If we fully worked out each decision we had to make in our lives, we would have no time for anything else. The courses of action are infinite. A minor change at one level can unleash a butterfly effect of consequences for every level below. The second problem concerns our brainpower. We are incapable of comparing complex outcomes because we suffer from problems of:
- attention — too much noise
- memory — our limited capacity to store information
- comprehension — difficulties in organising, summarising and using information
- communication — different people (cultures/generations/professions) communicate information in different ways.
Because of these limitations, we simplify decisions by:
- replacing the problem we face with a simpler one
- decomposing problems to their component parts and solve these, hoping to solve the full problem by doing so.
- seeking patterns and then following rules we have previously established instead of looking for new possibilities
- narrowing the problem to a ‘frame’ — narrowing the decision choices available for selection. Frames come from early individual experience, recent frames used come from friends, consultants, and writers.
The legendary Herbert Simon tells us that instead of using a rational strategy, most decision makers ‘satisfice’. This means we compare alternatives until a ‘good enough’ solution is found, then we choose that option. If there is a better alternative, we rarely chose it because we stop thinking about that decision and move on with life. We often fool ourselves into thinking we are maximisers — finding the best solution after an exhaustive search. In reality, we are more likely to satisfice, and move onto the next item on our agenda.
In organisations, situations become more complex. A decision may involve a group of people. The process may continue for a predetermined time, rather than stop when a satisfactory outcome is reached. There may be situations (usually simpler decisions) where the organisation maximise.
To quote March:
“Decision makers look for information, but they see what they expect to see and overlook unexpected things. Their memories are less recollections of history than constructions based on what they thought might happen and reconstructions based on what they now think must have happened, given their present beliefs.”
We think we make sound decisions, but in reality our ability to be rational is bounded by the constraints of time and cognition. We are not rational creatures.
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This piece has also been published by the Cutter Journal here under the title ‘The 3 Lies of Maximization’
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