Everything about goals, resources and thinking traps in "The Wisdom of Decision Making"
This is not a general theoretical book about decision-making, but a book that focuses on daily practice and some business decisions. The author is an economics professor and the other is the president of a consulting company. For an analysis of the form and focus, let’s look at the ignored English title as always: “Making Great Decisions - in business and life”. According to the subtitle in business and life, this book is about life and business: decision-making ideas, resource allocation, and implementation. The original book has 15 chapters. I have adjusted the structure and divided it into 3 parts for introduction. Although some of the content is overlapping and a little messy in terms of structure and logic, the content is rich and comprehensive, and the examples are rich and diverse. There is a summary at the end of each chapter for easy review. Overall, it is worth reading and suitable for those interested in decision-making and economics. In addition to reorganizing the content into three parts for introduction, this article also quotes some wonderful examples from the book (under the item of thinking training) after each part.
From the first second you open your eyes in the morning, you start making decisions. One is whether to get up or whether to go to work (don’t laugh, many people have this); there is no time, I Can’t you tell if you don’t brush your teeth and wash your face (boys,,,,); are you wearing a handsome windbreaker or a bright dress today? Let me check the weather forecast (girls still work harder than boys to make this world beautiful) Waiting for these are decisions, even what to eat for breakfast and whether to say hello to an acquaintance when you see them. We make hundreds or thousands of decisions a day, but we are not bored or exhausted to death. In fact, it is because our brains have simplified and optimized some daily decisions. We have habits, even when you are not aware of it. The body has made its decision. The more obvious choice for breakfast. My friend, when you go to the cafeteria every day, you go through all the stalls, think about what you had for dinner last night, calculate the calories, and then choose? The real scenario is that you will go directly to buy the one you often eat. Of course, sometimes you will make a reference based on yesterday's diet, which is also very fast. For example, you ran 5km yesterday, and today you are looking at fried dough sticks that are full of calories. The fragrant yellow deliciousness will make you happy involuntarily. Although there are many decisions, there are actually only a few important decisions involving the economy (the key to modern people's survival) in a day, and this book about decision-making talks about how to handle such decisions well.
Since we have to make a decision, the first thing we need to clarify is what the goal of our decision is. This step is not only very important, but if we get it wrong, everything will be lost. Just like going in the wrong direction, no matter how well the resources are allocated and no matter how perfect the implementation, the mistakes can only be more outrageous (of course, the mistakes can be made quickly, but they can also be successful quickly). To clarify the goals of decision-making, you must first have a clear understanding of the situation. A clear understanding of the status quo enables an assessment of the likelihood and impact of events. For example, before deciding on a product promotion plan, how are we selling now, whether the customer base meets the original expectations of the product, what is the single purchase behavior, and whether the products in different packages are designed to fit the original scenario. All this is based on data collection and analysis. On the other hand, when it comes to personal decisions, such as changing jobs, renting a house in another location, or whether to get married this year, you must also make a more objective assessment of the situation before and after (the individual evaluates it by himself, and objectivity requires special attention. If If possible, try to find others to provide some feedback) and describe it. On this basis, relevant tasks are guided in decision-making. And think repeatedly about the ultimate goal of the decision.
Next, reflect on your attitude. To achieve the purpose of decision-making, where do you stand? Calm down and ask yourself two questions. The first one: Is this what I want or what I must do? ;Second: Are my obligations regarding this decision fictitious? Questions are the first step to getting the right answer, and they are also an excellent tool for self-examination. As the famous saying goes: Questions create reality. For example, when you are busy with a very important task, your leader temporarily adds a seemingly urgent task, and then the decision comes. Should you do the task at hand or switch to a new task? Am I forced to be the only one for conflicting businesses? Or was it just a coincidence that I was seen? After completing this task, what will happen to the work at hand? Do I want to do the new task or must I do it? For new tasks, can I authorize others to do them and transfer the obligations?
When the goal and reflection of the decision-making are completed, the remaining decision-making tasks are what we should take seriously. At the last point, we can close our eyes and remind ourselves that I have clarified the purpose and confirmed this. It's a task we have to accomplish. We have clearly defined our goals, and have a rough idea of how much thinking and analysis is required to achieve this goal (remind ourselves of energy allocation)
When it comes to making decisions, we invest resources, including money, time, and energy. etc. One side is output decisions. First of all, when investing resources, it is necessary to make it clear that the resources are related to the value of the decision. You can refer to the "one percent" rule, that is, the investment in the decision is one percent of the value of the decision. That is to say, the resources used in the decision must be consistent with the value of the decision. is a strong correlation.
Looking back on my life, I often make two or more decisions. For example, a while ago, I wanted to buy a mobile phone film and a bicycle. The decision-making time was really about the same. This is because we often use tasks as units. Buying a mobile phone case and buying a bicycle are both tasks, and perhaps because the mobile phone case can protect the mobile phone, it unnaturally increases the value of this decision. In fact, there is no strong correlation between mobile phone cases and dropping the phone. .
This brings us to the second issue that needs to be considered in resource allocation. How to measure the value of decision-making more accurately. In fact, what I want to say is that the book gives examples of artificial scarcity (having bought various Stones, gold and diamonds? ) and life are examples of pricelessness. In fact, many things can be measured using values, sometimes due to standard confusion, and sometimes due to moral embarrassment, we cannot make correct judgments. As a result, rational decisions cannot be made.
After the resource value system is established, we sometimes find that decision-making is like a function, with different results under different parameters. In other words, there is often such a thing as a critical point for decision-making. . For example, I am fat and tall, and want to buy a swimming card. There are two swimming pools in front of my home. Under other similar conditions, one offers an annual pass worth 10,000 yuan, and the other offers a one-time pass worth 3,000 yuan for 30 trips. Here I will evaluate how many times a week I can go and calculate the boundary value. When I can go more than 100 times a year, it is more appropriate to choose an annual card. If I can only go once a week, the sub-card is much more cost-effective. 100 times here is the critical value. At the same time, we must also pay attention to reflection and not make all-or-nothing decisions, such as gritting our teeth and stamping our feet. In the past year, I have strengthened my exercise and traveled twice a week, 104 times a year. I bought an annual pass. Think about it realistically. With so many holidays a year, there are always times when you can't go. In addition, there are illnesses and other things that are really unavoidable. In fact, you start from a starting point with no exercise habit. Don't be too extreme and think that you can change it immediately. Or they hope to force themselves to change through external factors and make extreme decisions.
Finally, don’t ignore the opportunity cost when allocating resources. That is to say, if you spend money on a fitness card, you may not have money to travel; if you sign up for a painting class, you may not be able to take dance classes together. In order to measure the opportunity cost, you can analyze it from NPV, probability, balance and Pareto. For example, Pareto is actually used in many places in life. This law says that 20% of classifications may bring 80% For example, 20% of your work creates 80% of the value; 20% of your expenses bring 80% of the experience, etc. It’s the same thing as prioritizing things and decisions that can bring more change and value.
One Saturday night, I stayed at home with my family, enjoying a relaxing and relaxing weekend. I always enjoy spending time with my family, but this time I was particularly happy. Because someone invited me to a bachelor party that day, I really wanted to go, but after weighing it, I decided to stay home. My “opportunity cost” is what I give up by staying home, the joy I might have gained at the party. If the bachelorette party was so much fun, I gave up even more to be with my family.
So why was I so happy to be home that night? Because after I decided to stay home, I learned the bachelorette party was postponed. So, my cost of staying home was immediately reduced. Opportunity cost is the cost incurred by doing this instead of doing something else.
After the resources and ideas are clear, we can make a series of decisions to meet our requirements. At the same time, due to the fear of failure or loss and our own stubborn prejudices, we still A lot of mistakes will be made. In the last part of the book, the author puts forward some practical advice. This part can also be read directly as thinking-related content.
Some of the more profound traps are: (1) Good reason trap: Sometimes, sufficient reasons are not good reasons to take action. For example, the family feud in Hamlet can no longer be justified, but the decision of constant revenge is really a bad choice. Perhaps people are like this, which makes it even more valuable to reflect and escape from similar thoughts. (2) Black-and-white trap: A thing or a person is often not as good or bad as people think. In different dimensions and in different fields, some people agree with you and some do not. Don’t label people easily. (3) Changes come from variables: When something changes, generally speaking, it is a scientific and effective way to find variables, rather than supervisory attribution. In order to make ourselves feel more at ease, we often use various hypothetical and unproven reasons as explanations for changes. In fact, there are many causes and correlates of one thing, so you must be extra vigilant with your own logic and explanations.
To be a leader in thinking, we must pay attention to reducing the impact of bias. Prejudice stems from isolation. When we step into other people's lives and realize that they have the same needs, desires, and values as we do, we may become more empathetic to them. Political leaders understand this, so they sometimes deliberately distance themselves from different groups in order to reduce mutual understanding between them and thereby weaken that humanitarian feeling of fraternity. This was exactly what Adolf Hitler did when he kept Jews, Gypsies, and homosexual groups isolated and ignorant of each other. Once this humanitarian sentiment is weakened, it becomes easier to hate and kill.
Finally, the author summarizes that the decision-making process is actually the process of collecting and utilizing information. The value of the information is evident, and it contains the following elements:
David R. Henderson:
Naval Postgraduate School, Monterey, California, USA Associate Professor of Economics and Research Fellow at Stanford University’s Hoover Institution. Graduated from the University of California, Los Angeles, under the guidance of famous economists Amen Alchian, Harold Demsetz, Jack Hirshulafa, Ben Klein and Sam Piltzman. PhD and has taught at the University of Rochester and Santa Clara University. Before attending the Naval Postgraduate School, he served as senior economist on President Reagan's Council of Economic Advisers and edited the Encyclopedia of Wealth Economics.
Charles L. Hooper:
A visiting fellow at the Hoover Institution at Stanford University and president of the consulting firm Objective Insights and founder. He received a bachelor's degree in computer science and a master's degree in engineering economic systems (now renamed management science and engineering) from Santa Clara University and Stanford University respectively, and studied under the decision-making theorist Ronald A. Howard and economist James James at Stanford University. L. Sweeney and David G. Lunberg conduct learning research. Before founding Target Analytics, Hooper worked at Syntex Laboratories, Merck & Co., and NASA Ames Research Center.