PITFALLS OF
CONVENTIONAL DECISION MAKING


Drill, baby, drill! *


A potentially serious shortcoming of the conventional decision-making approach is that, since it is primarily a subjective undertaking based on personal judgment and opinion, it can easily lull the decision maker into a smug complacency and surprise her with an unexpected disastrous outcome. There are powerful reasons why this is so.

* Rallying cry of Republican Party (USA) leaders advocating an aggressive policy of offshore oil drilling prior to the April 2010 BP Gulf of Mexico disaster


Bounded Rationality and Complex Systems
Human beings have limited cognitive abilities. Yet conventional decision making presumes that decision makers are endowed with superb intuition, vast experience and exceptional skills of judgment, nothing short of an ideal super-rationality (in the sense of fictional superheroes like those posited by neoclassical economics, not Douglas Hofstadter's concept of superrationality). However, the evidence from social and cognitive psychology bluntly contradicts that assumption. Moreover, when complexity kicks in —as it inevitably does in our technologically sophisticated day and age— things become even messier for the unaided brain. Evolution, after all, designed the human brain for survival in the relatively placid savannah, not the hectic contemporary world where complicated problems and information overload are the norm. Innate cognitive limitations aside, findings from experimental psychology indicate that performance in problem solving and decision making deteriorates under cognitive strain which, again, is a prominent feature of modern life that bounds rationality even tighter.

Herbert A. Simon: Decision Making and Problem Solving
• George A. Miller: The Magical Number Seven, Plus or Minus Two  -  Site 1   Site 2
Daniel Kahneman: Maps of Bounded Rationality
W. Brian Arthur: Inductive Reasoning and Bounded Rationality
Ariel Rubinstein: Modeling Bounded Rationality
Edward Tufte: Magical Number Seven Not Relevant
Wikipedia: Bounded Rationality
Wikipedia: The Magical Number Seven, Plus or Minus Two
University of Michigan AI Lab: Bounded Rationality
SFB Glossary: Bounded Rationality


Dynamic Socioeconomic Environment
The world is inexorably dynamic; nothing endures except change. Heraclitus was correct in observing that a man cannot step into the same river twice: constancy is illusory. Rapid change characterizes modern culture, and the ever-accelerating technological progress that drives social and economic transformations shows absolutely no signs of subsiding. Rapid cultural change increases not only problem complexity but also cognitive strain, thus impairing decision-making performance.

Uncertainty
Related to change, the other cardinal certainty in life is the ubiquitous presence of risk. Uncertainty —the basis of risk— cannot be eliminated, only managed. Unfortunately, humans exhibit meager abilities in dealing intuitively with chance phenomena, especially in unfamiliar situations. Managing risk by intuition is like playing Russian roulette: you make your move and hope for the best. The way to manage uncertainty intelligently is by means of probability theory, which intuition blithely ignores.

Nonlinearity
The world is nonlinear in structure and function. Nevertheless, the human brain has a propensity to linearize its constructs about the world. For example, the list of steps for conventional decision making given on the previous page is linear: start here, end there. In actual fact, any real-world decision-making exercise will jump forth and back between steps in seemingly random spurts of activity. Linearity is useful because it simplifies things for the brain, but one must be careful to avoid oversimplification. As Einstein remarked, things should be as simple as possible, but no simpler. Chaos theory demonstrates that the dynamic behavior of even simple nonlinear systems modeled with deterministic equations can quickly become impossible to predict. One must verify that any linear model —intuitive mental constructs included— used to represent real-world phenomena does in fact hold for the problem at hand, at least as a valid approximation. Beware of what your brain informs you is "reality".

"The Law of Universal Reaction"
To every action, declared Isaac Newton, there is an equal and opposite reaction. Although his law may not strictly hold beyond the domain of classical mechanics (because of random factors, dissipative/amplificative effects and things of that nature), the fact remains that in our physical world actions entail consequences. Yet people behave as if their physically-grounded actions were exempt from effects and repercussions. Frequently, the undesirable consequences are not foreseen at the time the decision is made. But more disturbing is the human disposition to discount evidence that contradicts our cherished notions; even being forewarned of dire consequences does not prevent us from leaping into trouble. This deleterious tendency is aggravated when the consequences lie in the misty distant future instead of the palpable here and now. Judgmental decision making is highly susceptible to these and other psychological distortions of the reasoning process, the more prominent of which are discussed in the Psychological Factors module.

Habit
Der Mensch ist ein Gewohnheitstier — Man is a creature of habit. Habits can be defined as ingrained patterns of behavior acquired through repetitive conduct that ordinarily are evoked unconsciously in response to triggering stimuli or situations. Routine decision making, especially in stable domains, can become habitual and result in reactive, non-rational and precarious decision making. Compounding the problem is the potential of habits to induce cognitive dissonance, namely, that the decision maker be convinced she is thinking and acting rationally while in reality she is just reacting out of habit. The best way to counteract the Gewohnheitstier syndrome is by Regelgeleitetheit: adherence to systematic analytical procedure — the principle that sustains scientific method's illuminative power.

Habit  (Catholic Encyclopedia)
Habit  (Wikipedia)


Culture
People do not make decisions in a vacuum but within a social context of some sort, such as groups of related individuals, formal organizations, wider communities and society as a whole. Inevitably, the norms, customs, values, attitudes and behavioral traits prevailing in such groupings —the group's culture— will exert significant influence on the decision maker's choices. Culture can be either a boon or a bane to intuitive decision making, depending on the nature of the cultural traits. Alas, cultural influences often do hinder sound decision making by imposing on the decision problem —or the decision maker herself— irrelevant or irrational strictures that impede attainment of sensible solutions.

Conformity
In addition to cultural influences, the psychological process of social conformity can affect the decision maker by conditioning her behavior according to her impression of what other problem stakeholders expect her conduct to be. Conformism encompasses a variety of kindred behaviors such as herd mentality, groupthink, the bandwagon effect, peer pressure, and team player conduct. These collective behaviors impair decision making by prompting abandonment of critical thinking and analysis for the sake of social acceptance or group cohesion.


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