Think or Blink: Decision-Making in a 'Blink' of an Eye
Interview of Paul J. H. Schoemaker, Ph.D., Chairman and CEO, DSI
by Carol Coletta of Smart City public radio talk show
Abridged Version of the Interview Transcript
Paul Schoemaker is author of Winning Decisions: Getting It Right the First Time. He is the founder and chairman of Decision Strategies International, and research director of the Mack Center for Technological Innovation at the Wharton School. He has consulted with many organizations, including a two-year sabbatical with the Royal Dutch/Shell Scenario Planning Group in London. Paul has been a professor at the University of Chicago and the Wharton School, and is a frequent speaker in various executive programs.
Paul, what leads to wrong decisions?
Well, mostly that people don’t spend enough time framing or defining the problem. They tend to jump in and solve the problem as they initially see it or the way other people have defined it. Consequently, they often solve the wrong problem.
There’s been a lot of public discussion recently about the value of gut instinct. Are decisions better when they’re made with gut instinct, or with the head?
You may be referring to the book “Blink” by Malcolm Gladwell (read Paul's co-authored review of Blink here), which is on the top of the best-seller list. If you deal with decisions you encountered frequently, and where you actually were able to learn, then intuition may be great. If you play tennis, you know that you are in an environment where you can learn a lot about what works and doesn’t. In addition, you need to use blink, or intuitive judgments, because you don’t have the time to do an analysis.
So when time pressure is high, you have a lot of experience in that domain, and the task is relatively stable, follow your gut. For example, firefighters or people in emergency rooms excel at pattern recognition. Because they have so much experience, they can size things up quickly, almost instantly, and it seems to be largely unconscious. It’s sort of automated in a sense. It’s below consciousness. But the really good experts, be it in law, medicine, or firefighting, also know when a case is really different.
So, I think that blink judgments can work, but I am afraid that the book Blink over-promises and oversells the power of thinking without thinking. Most of the time, we really don’t have to make blink judgments. Only in some tasks, like driving a car or when playing a fast sport, you don’t have the time to do any analysis. And unfortunately, we still have 40,000 people die on the highway each year in the US. The problem with teenage drivers illustrates the point well. Teenagers have a very high accident rate because they don’t have that experience base yet. Their pattern recognition is still immature and they don’t appreciate that. A child might suddenly appear from behind a parked car and they don’t have any instincts developed for that yet.
You use this term, “framing.” Explain what it is, and give me an example of its impact on decision-making.
We define the frame as a mental construction. Different labels are used in cognitive psychology to describe cognitive structures. Some people refer to them as paradigms. Some call them scripts or schemata. But they all refer to the notion that when we face a problem we need to simplify it, and how we simplify it dictates to a very large extent the solutions we see, or how we make decisions.
Let me give you a simple example. Say that you decide to go see a play, and then en route to the theatre you somehow lose fifty dollars out of your pocket. You don’t realize this until you get to the theatre. Let’s also suppose the theatre actually costs fifty dollars to see that particular performance. We ask people, well, will you still go ahead and see the play, given that you’ve just lost fifty dollars in cash? And most of our MBA students would say, sure.
Then we contrast that with another scenario, where people go a little bit early to the theatre to make sure they have a seat. The ticket costs fifty dollars. You shop around a little bit and when you go back to the theatre to go in you realize that you’ve lost the ticket. Will you buy a new ticket? In that case, our students frame it as paying one hundred dollars to see the play, and say, no way. I’m not going to do that.
These situations are really the same, rationally speaking. But psychologically, they’re very different because people have framed it differently. If I lose fifty dollars en route to the theatre, I would put that in a different mental account, so to speak. I put that in the bad luck account, but once it becomes a ticket, it now naturally falls in the entertainment account. So how we draw our mental boundaries, what is part of the problem and what isn’t, is the essence of framing.
Is there a way to peel that back and understand how we are framing a decision, and when we are framing it wrong?
Ultimately there is no “right frame,” because any frame is a simplification. A problem is just a mental state that says there is a gap between what I think should happen and what I think is happening. So there are a lot of perceptions operating, and therefore, different people see different problems. You may have a complaining customer and one person may think there’s a big problem whereas another person doesn’t see any problem. So at some level, all decisions and all frames are simplifications.
It’s a bit like asking if you come and visit me, what is a good map for Philadelphia. Well, all maps simplify. They leave certain things out, and it isn’t until we know a little bit about what your interests are that I can find a suitable map. If you are an art connoisseur you get a different map than if you want to play local golf courses.
It’s the same with decision-making. Any decision can be made more or less complex. Suppose I want to buy a new car. I can just leave it at that level and say what car can I purchase? I can also make that a bigger problem and ask why do I need a car? Suppose it is because I need to go to work. Well, then I can ask do I really want to go to work every day? Maybe I should work from home, and you can even make this decision yet bigger, and become very existentialistic, and in the end say, do I really want to continue to live? But you don’t want every decision to become an existentialistic question about whether to be or not to be.
Einstein had a great quote on this. He said, “We have to make things as simple as possible, but not simpler.” So the art of good decision-making is to simplify the situation so that you see the forest and not all the trees. If your frame gets you to your goal, then it is presumably a well-framed problem.
Conversely, if your frames differ from other people all the time, or if you’re always looking at things in ways that cause conflict without getting what you really want, then maybe you’re not framing things appropriately. So at that level, there is perhaps a framing yardstick, namely are you happy with your life? Are you making progress with respect to your goals?
But suppose that someone has ridiculous goals. What do I do with a student who comes in totally upset that he hasn’t made his first million by age 27? I can say, well let’s try to solve that problem. But if I could, I wouldn’t be a professor presumably. The better thing to say is hey, that’s not a realistic goal. You’re beating yourself up, and I don’t know why you think you should have that first million at that young age, etc. So there is an inherently subjective quality to decision-making.
You’ve said that we see what we expect to see, and that our assumptions filter what gets through. Weak signals are filtered out because they don’t fit the frame. Scenarios are one way of creating alternative frames, and you worked with one of the most advanced scenario-planning groups in the world. Describe the scenario process, Paul, and what it can teach us.
I view scenario planning as a tool to help improve how we frame issues. Royal Dutch/Shell pioneered scenario planning in the early 1970s because they were looking at potential energy crises.
First you ask what trends are going to continue in the future? If you take the oil industry, is there going to be further environmental legislation? Are new oil fields going to be discovered in the Far East? The real object, however, is to get to what we don’t know that might matter. What are some of those big key uncertainties? Obviously, future oil prices would be one area.
Because Shell was looking at the political dynamics of the Middle East in the early 1970s, they developed a scenario that anticipated what happened in 1973, namely the quadrupling of oil prices. It wasn’t so much a prediction that oil would go up, but an understanding that the Middle East was ripe for a frame shift.
Up to that point, the oil-producing countries were all maximizing their own revenue and profit targets. But because there was a galvanizing event, the war between Egypt and Israel in 1973, the political agenda changed. Also, there was a key country, Saudi Arabia, and a particular leader, Yamani, the Oil Minister at the time, who was willing to police those OPEC countries that were exceeding their production quotas. Shell saw this complex dynamic.
The ability to see that the future is ripe for this kind of a shift, that’s what scenario planning is all about. If we had done it in Iraq, and I realize that hindsight is 20/20, the big two uncertainties might have been (1) how easy is it to get a military victory and (2) how easy is it to transform Iraq into a peaceful democratic country?
So in scenario planning, we explore multiple outcomes. There can be an easy victory or a long military battle, and the reconstruction can either be swift or very protracted. It seems that the administration assumed that it was going to be a difficult military battle followed by swift reconstruction. They put a lot of effort into that scenario. And they didn’t put a lot of planning and resources into the reverse scenario, namely an enormously tough situation on the ground, after a relatively quick military victory.
So, this is a good example of reframing the situation into different scenarios and asking if your overall strategy will serve you well in each scenario.
Paul, does the culture of an organization play a role in encouraging better or worse decisions?
Oh, most definitely. I think organizations that focus on the short-term only, who have downsized and outsourced so that they are all about efficiency, will not generally do well in a world of change. They don’t have any slack, that additional attention you need to see what’s going on.
For example, Mattel for a long time had the Barbie doll which was a wonderful franchise. But slowly, in society, there was an age compression. Girls age four to twelve used to buy the Barbie doll, but because of MTV and changes in society at large, girls grow up faster. And so the Barbie doll only appeals now to girls ages four to maybe seven. Other dolls, such as Bratz dolls, which are very edgy dolls with lipstick, pouting lips, black boots and with real attitude, have taken much market share away.
Mattel was playing a protection game. They had a hundred plus page manual that described all the things that Mattel could and couldn’t do with the Barbie franchise. Barbie could become president or an astronaut or a senator, but she could not become this edgy, multi-cultural, at least initially not, creature that better reflected the globalization of society.
So, some companies play a protection game, others an offensive game; some look close to home only whereas others try to really understand the world in a broader way and bring in signals from the edges. In this way, I think that culture drives a great deal what people see, and also what opportunities they are willing to think about.
Intelligence gathering is another major part of decision-making. Where does intelligence gathering go wrong, and how can we improve it?
In our book Winning Decisions, we discuss three major traps in intelligence gathering. One is that people are over-confident most of the time. We don’t know what we don’t know, and we test that in a variety of ways.
We give people a trivia question, like how old was Martin Luther King when he got assassinated. People give their best guess and a range (i.e., a low and high guess) so that they are 90% confident they have the answer bracketed. If you give people ten questions of that kind, they should miss one and get nine answers inside their ranges. But people miss far more than ten percent; they typically miss 7 or 8 questions out of ten. Martin Luther King, by the way, was assassinated at age 39.
Another trap is that people don’t really challenge the source of their data. Do more people annually die from lung cancer in the United States or motor vehicle accidents? Most people would guess the latter. It turns out that about 150,000 people die of lung cancer in the United States annually and about 50,000 from motorcycles, buses and cars. Most people guess wrong because they go by what is most frequently mentioned in the media and the papers.
As we look at information, we should ask whether the information is representative. Consider again the Iraq war. The Bush administration relied a lot on informants who turned out not to have been very credible and who had their own agenda. So that’s an important trap.
The third trap that we caution about is anchoring. If I were to ask you to guess my age if you saw me, or my height and my weight, you would probably do so by starting with your own number because you know that. And then you say, does Paul seem to be taller, thinner, older, younger, etc. That’s all good and well except that people don’t move away enough from their starting point.
So if people do forecasts for next year, they start with this year’s numbers and they don’t move away enough. If you approach an estimation task from multiple anchors, you can overcome this anchoring bias. Leonardo da Vinci already identified this technique in his writings. He said he could never understand a subject well unless he looked at it from at least three different perspectives.
Coming to conclusions and learning from experience are the other key parts of the decision-making process that you identified. How can we come to better decisions, or better conclusions, and use experience as a teacher?
Should we trust our intuition and blink judgments? Are those any good? I see three approaches in terms of how we make choices.
We do it intuitively sometimes, like where to go to dinner tonight. We might just quickly pick a place and not think about it too much. Habit may drive that decision. We also use a layer called heuristics, from the Greek “to search, to discover”. This is really a set of guides or rules of thumb. You might say: we want a restaurant that isn’t more than fifteen minutes away. It should have alcohol. It should serve fish and meat, or vegetables, and not cost more than fifteen dollars a head or so.
That is a more deliberate strategy. And then, of course, you can become very analytical and say, well, we have ten restaurants we can choose from. Let’s put them in a spreadsheet. Let’s rank them with respect to food quality, entertainment, cost, distance, all the things that matter to you. And obviously, the importance of the decision, your familiarity with those kinds of decisions and the reversibility of the decision should dictate how you do it. The bigger the stakes and the less familiar you are with that particular decision, the more it pays to set up a more systematic frame.
On the learning side, it turns out that we are really not taught in school to manage the real world. In the classroom you are instructed by an authority figure, who hopefully knows the answers. Then you’re let loose in the real world and you get a job. Some things work out and some things don’t. Some dates work and some marriages work, and some don’t. But there’s no teacher anymore to explain what’s happened. You’ve got to figure it out on your own.
So as we note in the book, experience is inevitable but learning is not. If you play a game of golf, learning is not automatic by any means. The very fact that people who play a lot of golf or tennis often do not get any better over time illustrates my point. Each time they play golf, the average player gets ninety or so strokes of experience. But that doesn’t mean they will play any better the next time.
Somehow, they’re not able to take that feedback and translate it into learning. This has to do with the lack of good conceptual models for understanding what underlies the craft. Even something as intuitive as a sport can be analyzed. Coaches keep track of your statistics. How often were you on the green in regulation? How often do you three putt? They will do slow-motions. They will have you practice certain putts.
Coaches help us conceptualize what the swing is like in golf or tennis but we don’t do that with decision-making. We make thousands of decisions over the period of a decade, but there is no guarantee that these decisions are any better now than they were ten or fifteen years ago. Most people lack, I think, an understanding of what this higher-level cognitive function called decision making is all about. Our book shows how to view decision-making as a process that can be examined, analyzed, taught, and improved over time.
You’ve said that learning faster than the competition should be a goal of every organization. How do you learn to learn faster than the competition?
Now we’re talking about collective learning. What I just said was more individual learning. Collective learning has a lot to do with sharing information. There’s a great study about two kinds of garden birds in London, just after the Second World War, to illustrate the point.
In those days, they would put open milk jars out on the doorstep of homes, and birds would feast on the cream in these milk jars. Then, after the War, they started to use glass bottles with foil on top. Occasionally a sparrow would figure out that it could actually pierce the foil with its beak and get to the cream that way. But if one sparrow figured that out, the other sparrows would never learn about it, because they would be chased away. Sparrows are territorial birds.
Titmice, on the other hand, are communal birds. They flock together, they sing together, and if by accident one of these titmice pierced through the foil and got to the cream, within a week, they would all know how to do it.
That’s what organizational learning is essentially about. It is about knowledge management, sharing new information, having respect for people who think differently, etc. And that’s crucial in a changing world. As Darwin noted, it’s not the strongest nor the most intelligent who survive; it’s the ones who adapt most quickly to new environmental conditions, to the new ecology.
Paul, thanks so much for being our guest on Smart City.
*Paul Schoemaker is author of a number of books, including Winning Decisions: Getting It Right the First Time.
Download the interview on mp3 here.
