Decision Making Under
Pressure
Vincent Walsh
@vinwalsh
[email protected]
Science of risk taking and
decision making
Style of decision maker
Sex, risk taking & decision
making
Strategies for risk & decision
making
What do we mean by decision
making?
What do we mean by pressure?
Your Language vs Brain Language
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Perceptual decisions
Financial decisions
Aesthetic decisions
We are wired for expectation (based on
experience, social pressure, evolution)
People are not rational
• (not even you)
• Just as you’re wired to see, you’re wired to
think
• Worst advice from a book ever….
An Example of How You’re Wired
to NOT Reason
Which card do you turn over
to establish whether the rule
is true or false?
Lazy thinking about problem framing
Which card do you turn over
to establish whether the rule
is true or false?
A and 7
Lazy thinking about problem framing
But this is all for other people…
• MY decision making is fine
• I don’t have biases
• It’s my colleagues that need the help
• …isn’t it?
You’re wired to see in certain ways
You’re wired to see in certain ways
Classic Pieces of Irrationality
• People tend to sell stocks too soon if they
go up and keep them too long if they lose
• We have an irrational tendency to be less
willing to gamble with profits than with
losses
We are impressed by big, infrequent
things
Availability Error
9/11
• People stopped flying
• Deaths on 9/11 flights: 256
• Extra deaths on roads post
9/11: > 1500
• Every 12 miles in a car as dangerous as
flying NYC to DC
17
Strategy Point #1
• If you’re serious about improving decision
making, leave your ego at the door.
• The design of the brain is against you
The Problems
“Decision Making”
• Everyone means something different
“Pressure”
• Everyone means something different
The Solutions
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Produce useable categories of DM
Produce a language
Produce tests
Effects of physical/mental/temporal/
emotional stress
• Propose interventions
• Choose your “player”
• Buddy up
Strategy Point #2
• Understand types of decision making
• Understand types of pressure
Categories of Decision Making
Categories of Pressure
Gunslinging
A lot of decisions feel like this
Playing Chicken
It’s not only the decision that’s in
question, it’s when
Playing Poker
We imagine too many decisions to
be like this
Three types of decision
Four stresses:
physical, mental, time, emotional
Profile of one person: Poker Player
Gunslinge Chicken
r
Player
Physical Pressure
Mental Pressure
Time Pressure
Emotional Poker Player
Stress and Decision Making
Strategy Point #3
Know how you/your colleagues/your
competitors change in this stress/style
matrix
Strategy Point #4
Get to know the kinds of stress you
respond to well/badly:
Deadline? Conflict? Precision?
Tiredness?
How do you make a decision?
Iowa Gambling Task
Gain/Deck
Loss/10
Net gain/10
Tell me…
What you know about the game
What you feel about the game
Questions repeated every 10 cards
Not how you think
Sometimes…
People never “get” the rule.
But their body does and they make
advantageous deck choices.
Strategy Point #5
• Become HONESTLY aware of reading
your instincts (experience)
Brain Diffs and Sex
Women are doing the thinking?
Men are going with their feelings?
Risk, competition and sex
“Men are risk takers
Women are timid”
Women and general election
deposits
Incumbents win 95% of the time
Men challenge them, women don’t
Why? Two narratives
Women DO take fewer risks
Chess: Women make fewer aggressive openings
Tennis: Women play safer earlier
Game shows on TV. Women risk
less than men
There’s another language for this
Women might be right.
Stock market
traders: women risk
less than men
Pension Funds
Elite women investors outperform elite
men
Strategy Point #6
• Difference in a group is good
• Decision making is not a competition to
achieve one style
Strategy Point #7
• If there are different styles & different pressures, what
do you know about
(a) your own
(b) your opponent’s
strengths and weakness?
Team GB example: race the poker players to a gunfight
Groups
Group Decision Making
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ABBA
Beatles
Queen
String Quartets x 1000
US Navy Seals
Led Zeppelin
The Who
Barcelona
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Spice Girls
Rolling Stones
Eagles
Trout Quintet…?
Radiohead?
Springsteen
One Direction
Strategy Point #7
• Decision making buddy (promotion)
• Decision making groups
Gigerenzer
• Decision making “heuristics”
61
Risk vs Uncertainty
• Risk: calculable
• Uncertainty: incalculable – no place for a
poker player
• For uncertainty we need rules of thumb –
heuristics.
62
Who uses heuristics?
Portfolio Theory:
How to optimize
investment.
He invested 1/N
rather than use his
own Nobel Prize
winning solution
63
Why?
64
Strategy Point #8
Guidelines
Rules of Thumb
Red lines
Ten things to know…
1. There’s no such thing as “a good decision maker”
2. There’s no single thing it makes sense to call pressure
3. You need to know the types of decisions and the types of pressures (this is possible)
4. You should have “trained” for any given decision making challenge
5. Your instincts are valuable 6. People are not as smart as you think – but then neither are you
7. Being smart isn’t always smart (heuristics)
8. Posing a problem in the right way is the first step
in good decision making (AD37) 9. Be aware of your decision making diet (ebay, restaurants, status, situations). 10. Groups: there’s a reason the Navy Seals are not a boy band
Decision Making …
I decided to stop here
Vincent Walsh
@vinwalsh
[email protected]
So what about high uncertainty?
• When the data cannot be analyzed
• Follow your gut?
70
Executives Do
71
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What do they say?
• Rational justification is expected
• Group decision making conflicts with gut
feelings
• Anxiety at not knowing/considering all the
facts
73
The cost of this?
• Defensive Decision Making
• Decisions made so that reasons can be
given after the fact
74
Why do we pretend to be at the
wrong end of the spectrum?
75
76
Stress and Sex
Acute (think meeting):
Males become more risk taking
Females may become more risk averse
High cortisol responders more sensitive to
Immediate rewards
Chronic (think project):
Both become more risk averse
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Things we didn’t do
• Group decision making
• Influencing others’ decision making (Ariely)
• Moral decision making
81
Never confuse fact with familiarity.
Types of Errors
Availability Error: Judging by the most common reports. Crime/vio
Primacy Error: Judging by the first information presented.
Conformity Error: What has everyone else said?
Ignoring Evidence: -ve evidence in particular. What is NOT there.
Sunk Cost Error: I’ve put too much into this to let it go.
Distorting the evidence: memories are emotional, biased; ego.
Mistaking the cause: P x/y ≠ P y/x (copying an opponent may
be a mistake).
Confirmation Bias: To even consider a statement you have to cons
the P of it being true (& unbelieving is harder – referendum question
Wrong expectations: regression to the mean…don’t judge by the
Utility Theory vs Prospect Theory
• define the problem
• identify the decision
criteria
• weight the criteria
• generate alternatives
• rate each alternative on
each criterion
• compute the optimal
decision.
• decision & risk
depend on subjective
reference points
• risk and loss aversion
determined by
expectation
• & by feelings of
control
What kind of thinking?
Stress and Risk
Acute stress: Most work
Levels of stress hormones correlate with
market volatility
Males: high Cortisol = worse performance
Females: no worse
The Paradox
People who win more often, lose more
often
Or are even motivated by losing
Long term stress?
Chronic stress levels..hours, days, weeks…
This makes people risk averse
Think competition…good evidence that
competitors take fewer risks as competition
proceeds.
We need to tell stories
• The left hemisphere interpreter
Frequency vs Probability Matching
Next guess?
Frequency vs Probability
75% of 75% + 25% of 25% = 56.25 + 6.25 = 62.5%
100% of 75% = 75 %
Hemispheric
Asymmetries
Ignoring the negative
Can we become expert decision
makers?
• Certainty encourages post hoc reasoning
• Tetlock (2005)
• Political and Economic Experts: no better
at actual prediction but MUCH better at
explaining why they were almost right.
100
We attribute cause self-servingly
Job applicant
Was good… “My choice”
Was Bad…”Her fault”
Attribution Error (a version)