Smart Choices: A Practical Guide to Making Better Decisions

About the Authors

John S. Hammond

“Dr. Hammond is a management consultant based in Lincoln MA, known for helping his clients make tough choices. He blends the rigors of sound theory with extensive practical experience from four decades in the industry, academia, and consulting. Dr. Hammond has worked in the computer division of NCR; taught at the Harvard Business School and at MIT’s Sloan School of Management; and consulted for the American Stock Exchange, Bank of America, CIGNA, DuPont, Estée Lauder, General Electric, IBM, the United Nations, the World Bank, and scores of other organizations. He is the co-author of Strategic Market Planning and a co-author of Management Decision Sciences. He also wrote or supervised more than 100 Harvard case studies. Dr. Hammond’s articles have appeared in the Harvard Business Review, the Sloan Management Review, the Journal of Finance, Management Science, and other journals” (p. 243).

Ralph L. Keeney

Dr. Keeney is Research Professor Emeritus of Business Administration, Duke University, and Research Professor Emeritus of Industrial and Systems Engineering, University of Southern California. He is especially known for his work on making difficult choices. His consulting clients include American Express, British Columbia Hydro, the Electric Power Research Institute, Kaiser Permanente, Pacific Gas and Electric, Seagate, and the US Department of Energy. Dr. Keeney is the author of Value Focused Thinking: A Path to Creative Decision-making and co-author of Decisions with Mltiple Objectives, winner of the 1976 Lancaster prize. He recently published Give Yourself a Nudge. He was the founder and for seven years the leader of the decision and risk analysis group of a major geotechnical and environmental consulting firm. Dr. Keeney was previously a professor at MIT and was elected to the National Academy of Engineering (from Smart Choices, Hammond et al., 1999, p. 243-244; and https://ralphkeeney.com).

Howard Raiffa

“Dr. Raiffa was a pioneer in the development of decision analysis, negotiation analysis, and the theory of games. He taught the art and science of decision making at Harvard University at the Harvard Business School, the division of Engineering and Applied Sciences, the Economics Department, the Kennedy School of Government, the Law School, the School of Public Health, and the Statistics Department. Doctor Raiffa supervised over 100 doctoral dissertations. His writings have influenced the teaching and practice of decision making in universities throughout the world. Among his most influential authored and co-authored books are Games and Decisions, Decisions Analysis, Decisions with Multiple Objectives, and the Art and Science of Negotiation. Raiffa helped negotiate the establishment of the International Institute for Applied Systems Analysis, an international think tank in Vienna, and served as its first director” (p. 244).

Sources: https://ralphkeeney.com and “About the Author” section of the book

Our one-sentence summary

The PrOACT method provides a comprehensive framework with practical tools for making better decisions by considering the specific problem, objectives, alternatives, consequences, and trade-offs.

Publisher’s Summary

“Where should I live? Is it time to get a new job? Which job candidate should I hire? What business strategy should I pursue?

We spend the majority of our lives making decisions, both big and small. Yet, even though our success is largely determined by the choices that we make, very few of us are equipped with useful decision-making skills. Because of this, we often approach our choices tentatively, or even fearfully, and avoid giving them the time and thought required to put our best foot forward.

In Smart Choices, John Hammond, Ralph Keeney, and Howard Raiffa – experts with over 100 years of experience resolving complex decision problems – offer a proven, straightforward, and flexible roadmap for making better and more impactful decisions, and offer the tools to achieve your goals in every aspect of your life.

Their step-by-step, divide-and conquer approach will teach you how to:

• Evaluate your plans
• Break your potential decision into its key elements
• Identify the key drivers that are most relevant to your goals
• Apply systematic thinking
• Use the right information to make the smartest choice

Smart Choices doesn’t tell you what to decide; it tells you how. As you routinely use the process, you’ll become more confident in your ability to make decisions at work and at home. And, more importantly, by applying its time-tested methods, you’ll make better decisions going forward.

Be proactive. Don’t wait until a decision is forced on you or made for you. Seek out decisions that advance your long-term goals, values, and beliefs. Take charge of your life by making Smart Choices a lifetime habit.”

Source: Book Jacket

 Detailed Summary

 Chapter 1: Making Smart Choices

• Decisions impact our lives by influencing opportunities, challenges, uncertainties, and even our roles and relationships.
• Learning to make good decisions can significantly influence both your personal and professional goals, as it is a fundamental life skill. However, fear and discomfort often prompt us to make decisions hastily, slowly, or arbitrarily, resulting in mediocre choices.
• Few of us are ever taught how to make good decisions, so it is normal to struggle. But, as you become more skilled, making good decisions will become natural.
• The PrOACT Approach is a decision-making process comprised of eight elements. The first five are the core of the approach and what make up the acronym PrOACT. The three other elements help make decisions in complex or changing environments.

1. Problem: The first step is to clearly define the problem and precisely determine what needs to be decided. How you frame your decision from the outset, discarding unwarranted assumptions, can make all the difference.
2. Objectives: Step two is defining specific objectives, ensuring that your decision gets you to where you want to go.
3. Alternatives: Step three is pondering your alternatives. Make sure you consider all options. Be creative.
4. Consequences: The fourth step involves measuring how well each of your alternatives satisfies your objectives. Consider the consequences of your decisions for yourself and the people you care about.
5. Trade off: Step five is seeking a balance, coming to terms with the fact that you’ll likely have to sacrifice something in favor of something else.
6. Uncertainty: Step six involves clarifying uncertainties by taking time to consider potential future scenarios and their likelihood of occurrence.
7. Risk Tolerance: Because some decisions are particularly risky, be aware of your risk tolerance beforehand to make the process smoother. Step seven is choosing alternatives that meet your level of risk tolerance.
8. Linked Decisions: In complex situations, current decisions impact future decisions. Resolve near-term issues while gathering the information necessary to address those that will arise later.

• The following chapters will delve more deeply into each of these elements.

 Chapter 2: Problem

• Even the most thoroughly thought-out decision can be wrong if you don’t start from the right place. How you pose your problem influences the course of your decisions.
• “A good solution to a well-posed decision problem is almost always a smarter choice than an excellent solution to a poorly posed one” (p. 16).
• Be creative in how you define your problem, even if it seems routine. The greatest risk at this point is succumbing to laziness.
• A good strategy is to turn your problems into opportunities by thinking about what you can gain from the situation.
• To define or redefine your problem:

1. 1. Determine what triggered the decision and why you’re even considering it.
   2. Take a moment to identify and challenge any constraints in your problem statement. The goal is to have a better problem definition.
   3. Identify the essential components in the problem to make sure you’re focusing on the right call.
   4. Understand what other decisions depend on this one, to remain on the right track. A decision rarely exists in isolation.
   5. Determine how big the scope of your problem definition is. Make sure it’s as comprehensive and broad as necessary.
   6. Consult with trusted or involved others.

• Consider several problem definitions. Once you’ve chosen one, it’s a good idea to pause from time to time to ask yourself if you’re still working on the right problem.
• Spending time clearly defining your problem will save you time in the long run; however, maintain perspective. Be mindful of the effort you invest, balancing it with other considerations such as time, importance, saliency, and emotional energy.

Chapter 3: Objectives

• Before rushing into making decisions, stop and think about your objectives. Ask yourself, what do you really want/need?
• Your objectives are your decision criteria.
• Simply thinking through and writing your objectives may lead you to your decision. But even when the answer isn’t so obvious, your objectives will help make a choice. They:
  • Help you determine what information you need to gather,
  • Make explaining your decisions to others easier,
  • Inform you about how much time and effort a decision deserves.
• The importance of taking time to think is that we don’t always know what we want (e.g., societal or people’s expectations may alter our perceptions of what’s important to us).
• There are five steps to identifying objectives:

1. 1. Write down the concerns you want to address. Don’t worry about being organized as you don’t want to inhibit your creativity.
   2. Convert your concerns into objectives.
   3. Separate ends from means. Continually ask “Why?” until you can’t go any further. That’s your fundamental objective. Your means objectives are the steps you need to take to achieve your fundamental objective.
      • • Use only your fundamental objectives to evaluate alternatives.
        • Means objectives help you find alternatives and understand your problem.

       

   4. Define what you mean by each fundamental objective. Ask “What?” The goal is to understand the components of your objectives.
   5. Test your objectives. Evaluate alternatives and see if you’d feel comfortable living with the choice. If not, you may have overlooked an objective.

• The authors provide some advice for setting your objectives:
  • Objectives are personal. Two people in the same situation may have different objectives.
  • Each objective will suit a different problem.
  • Don’t limit your objectives to immediate, tangible, or measurable objectives. They don’t necessarily reflect the true problem.
  • If what appears to be the best decision feels uncomfortable, you may have overlooked an important objective.

 Chapter 4: Alternatives

• Alternatives are potential choices. We tend to overlook alternatives, assuming we know all of the options available.
• Poorly constructed alternatives are often due to laziness and lack of thought, but other pitfalls include:
  • Assuming a problem is “business as usual.” Because problems are similar, we tend to choose the same alternative. New alternatives emerge from making small and seemingly meaningless changes to previously determined alternatives.
  • Defaulting to a solution because you can’t think of another. Every decision has multiple alternatives.
  • Choosing the first solution you can think of. The easy choice does not mean the smart choice.
  • Relying on alternatives that come from other people.
  • Waiting too long to make a decision, risking being stuck with what’s left.
• Some techniques to generate alternatives include:
  • Asking yourself, “How you I achieve each of my objectives?”
  • Challenging the constraints or barriers that appear to limit your alternatives. You’ll find that some are assumed For the real ones, think creatively to find ways around them.
  • Setting targets that feel like they are beyond your reach to find unconventional alternatives.
  • Doing your own thinking, before asking for advice or opinions.
  • Learning from past experience, and doing some research to find out what others in similar situations have done.
  • Asking other people for suggestions after you have thought carefully about your decision and your alternatives on your own.
  • Giving yourself enough time to think. (E.g., We can have the best ideas when we’re falling asleep or taking a shower.)
  • Focusing on creating alternatives and not evaluating them while you’re still generating.

As you move through the decision process steps, don’t stop looking for alternatives. You can still come up with alternatives that may suit you better.

• There are four alternative categories that are specifically suited for particular problems:

1. 1. Process alternatives: This is when the alternative is the process rather than a set choice (e.g., situations where you have to ensure fairness or the decision involves conflicting parties or interests). Examples include tossing a coin, voting, auctions, and standardized test scores.
   2. Win-win alternatives: This is when your decision requires someone else’s approval (such as your boss or your spouse).
   3. Information gathering alternatives: This is when there are uncertainties that affect the situation, and you need to gather information to dispel them. Your focus is on generating alternatives for gathering information.
   4. Time buying alternative: Sometimes, deferring a decision can provide time to understand the problem and gather more information or perform more complex analyses. You may reduce risk or come up with better alternatives. However, be careful not to overdo it as alternatives might disappear in the interim.

• Obsessing over alternatives can take a toll on your time, mental health, and emotional energy. Balance your effort against the quality of the alternatives.
• To know when to stop generating alternatives, ask yourself:
  • Have you thought hard about your alternatives? Would you be satisfied with one of them? Do you have a range of alternatives? Do other elements of this decision require your time and attention? Would your time be better spent on other decisions or activities?
  • If your answer to each question is “Yes,” you’re ready to move on.

Chapter 5: Consequences

• The next step in the process of making smart choices is comparing your alternatives, assessing how well each satisfies your fundamental objectives.
• First you need to lay out the consequences of each alternative per objective.
• Simply describing your consequences can lead you to a choice without requiring further analysis, but sometimes decisions are more complex.
• If your consequence descriptions are inaccurate, incomplete, or imprecise, you risk making a poor choice. To describe consequences effectively,

1. 1. Imagine yourself in the future, focusing on the long-term consequences of a decision rather than the immediate ones.
   2. Create a description of the consequences of each alternative using precise words, numbers, and even graphics.
   3. At this point, you can eliminate any clearly inferior alternatives. To do so, you can play King of the Mountain or grab pairs of alternatives and choose one, and then compare it to another and choose one, until you have a King (or fewer alternatives).

• • • Use your descriptions to identify the pros and cons of each alternative in relation to the one you’re comparing it to.

1. 4. Organize the descriptions of the remaining alternatives into a Consequence Table or matrix, similar to the one below. Compare them again and eliminate inferior ones.

• • • At this point you may have an obvious choice. If not, you’re going to have to make trade-offs (Chapter 6).

Table taken from Smart Choices by Hammond, Keeney, and Raiffa, p. 71

• To describe consequences adequately, follow these techniques:
  • If possible, experience the consequences of an alternative.
  • Use scales to describe the consequences. When possible, use dollars, percentages, and any form of specific measurement. In other cases, you’ll have to select an existing scale that captures the essence of the objective or construct a subjective scale that measures it.
  • Don’t rely solely on hard data, but give recognition to objectives that cannot be easily measured.
  • Make the most out of available information, noting that sometimes you’ll have little data, and you’ll need to supplement it with judgment and logic.
  • When possible, consult experts, but be sure to understand not just the consequences they project but also their analysis.
  • When choosing scales, make sure they reflect an appropriate level of precision.
  • Address uncertainties head on, being aware of your risk tolerance (Chapters 7 and 8).

Chapter 6: Tradeoffs

• At this point, you have eliminated poor choices. The ones that remain are likely conflicting objectives, so you’ll have to make tradeoffs.
• Decisions with multiple objectives should not be resolved by over-focusing on only one.
• To rule out some of your alternatives before making tough tradeoffs, follow this rule: If alternative 1 is better than alternative 2 on some objectives but not worse than 2 on all other objectives, 2 can be eliminated.
  • Here, alternative 1 dominated option 2, as alternative 2 has disadvantages without any advantages.
• Using the consequences table from the previous chapter, you can identify dominant alternatives. To do so, create a second table and replace the descriptions of the consequences with rankings.
  • Objective by objective, rank with a one your best consequence, with a two the second best and so on (see example below).
  • Some objectives will be quantitative and straightforward, but others will be more subjective. For example, in the table below, Vincent found dental insurance more important than a retirement plan.

Table taken from Smart Choices by Hammond, Keeney, and Raiffa, p. 87

• If at this point you still have more than one alternative, you’ll need to make tradeoffs.
• The Even Swap Method helps adjust the consequences of different alternatives, making them equivalent in terms of a given objective.
  • An even swap increases the value of an alternatives in terms of one objective while decreasing its value by an equivalent amount in terms of another objective.
  • Dominance assessments lets you eliminate alternatives, but the even swap method allows you to eliminate objectives.
  • g., if you’re having to decide the location of your new office, and two of your objectives are the commute and client access, between your alternatives, you could make an even swap where a 5 minute increase in commute time could be compensated by a given percent increase in client access.
• Determining the relative value of the different consequences is difficult. Every swap requires subjective judgment, but to make sure your trade-offs are done properly,

1. 1. Make the easier swaps first. For example, the monetary value of a number of frequent flyer miles is easy to determine. But swapping between airline safety and flight departure times can be challenging. Make the fair mile swap first.
   2. Concentrate on the amount of the swap, not the perceived importance of the objective. You need to consider the degree of variation among the consequences for the alternatives. For example, whether salary is more important than vacation depends on the circumstances.

• • • If the salaries in two potential jobs are similar but the vacation days are widely different, then the vacation objective may be more important.
    • Solely focusing on perceived importance can get in the way of making wise tradeoffs.

1. 3. Value and incremental change based on what you start with. The value of what you swap should be relative to what you start with. For example, adding 300 square feet to a 700-square-foot office might make a difference, but adding 300 square feet to a 1,000-square-foot office may not be as valuable.
   4. Make consistent swaps. While the value of what you swap is relative, the swaps should be consistent. If you swap option one for option two and option two for option three, you should be willing to swap option one for option three.
   5. Seek out information to make informed swaps. Regardless of your tradeoff’s subjectivity, always think carefully about the value of each consequence to you.
   6. Practice makes perfect. This method will take some time to get used to.

Chapter 7: Uncertainty

• Some decisions will involve calculated risks. To raise the odds of making a good decision, systematically think through the uncertainty, understanding possible outcomes, their likelihood, and their potential impact.
• Sometimes, good choices lead to negative outcomes while poor choices can yield positive results. Making sense of uncertainty requires that we simplify it, isolating elements and evaluating them separately.
• Risk profiles help understand how uncertainty affects a given alternative by answering four main questions:
  • What are the key uncertainties?
  • What are the possible outcomes?
  • What are the chances of occurrence of each possible outcome?
  • What are the consequences of each outcome?
• To construct a risk profile:

1. 1. Identify the key uncertainties that impact the consequences enough to matter. Determine whether and to what degree possible outcomes impact your decision.
   2. Define how many possible outcomes need to be defined to express the extent of each uncertainty.

• • • In cases when there are too many possible outcomes, organize them into ranges (e.g., $5,000 to $9,999) or categories (high, medium, low).
    • Narrow down the set of outcomes to the fewest possible.
    • Make sure the categories are mutually exclusive but collectively exhaustive (including all possibilities).

1. 3. Assign a likelihood that the outcome will occur. Use your judgment, but also consult existing information or collect new data, whether by investigating or asking experts.

• • • Sometimes, you’ll need to break uncertainties into their components to help establish probabilities.
    • When justifying decisions to others, steer clear of qualitative labels. “Fairly likely” can vary in interpretations. Instead, express probabilities quantitatively, using decimal points or percentages.
    • Probabilities should always add up to 100% (or 1.0).

1. 4. Clarify consequences, following the process covered in Chapter Five.

• Some decisions are more complex and require further analysis. A decision tree is a graphical representation of the relationships between the alternatives, uncertainties, and consequences.
• Decision trees are great for explaining your decision processes to others.
• In the example below, Janet must choose between having an employee party at a picnic or a hotel dinner dance. She leans towards a picnic due to its inclusivity for families and cost efficiency, but she’s concerned about the potential impact of rain on the event (an issue not present with a hotel dinner dance).
  • After constructing her decision tree, Janet concludes that the picnic aligns better with her objectives, even considering the 30% chance of rain.

Chapter 8: Risk Tolerance

• While people’s risk attitudes vary, we should try to strike a balance in our risk-taking. The goal is to take a certain level of risk, recognizing its potential for rewards, without it resulting in excessive worry or stress.
• If you’ve done everything covered up to this point, and you still cannot decide, you need to go beyond your risk profile and focus on the degree of risk you are willing to take.
• Risk tolerance refers to your willingness to take risks in your pursuit of better consequences, depending on how significant you consider the downside to be.
• “The basic principle is this: the more desirable the better consequences of a risk profile relative to the poorer consequences, the more willing you will be to take the risks necessary to get them” (p. 138).
• Making a smart choice requires balancing desirability with the probability that a given consequence will occur.
• To incorporate your risk tolerance into your decision process,

1. 1. Think hard about the desirability of a given outcome.
   2. Weigh the desirability of the consequences by the likelihood of their outcomes.
   3. Compare and choose.

• If you still can’t decide, you need to be more precise and follow these steps using numbers to express desirability.

1. 1. Assign desirability scores to all consequences, ranking them from best to worst. If you have five options, you would assign a 100 to the best, a zero to the worst, and the remaining three should have any number in between.
   2. Calculate a consequence’s contribution to the desirability of the overall alternative, accounting for each outcome’s probability. To do so, outcome probability x desirability = contribution.
   3. Calculate each alternative’s desirability score. Add the individual consequence contributions to arrive at an overall desirability score for each alternative.
   4. Compare desirability scores and choose.

• When you have too many possible consequences, assigning desirability scores can be difficult and time consuming. A desirability curve (or utility curve) can be a shortcut.
  • After plotting the desirability scores of a few representative consequences, connect them on a graph to form a curve to determine the scores for the remaining possible consequences.
  • One important limitation is that you can only do this when consequences are expressed in numbers (e.g., dollars, acres, years).
  • You can also use the even swap method to convert consequences described by multiple variables into a single numerical term.
• Some pitfalls to watch out for:
  • Don’t over-focus on the negative.
  • Avoid manipulating probabilities to accommodate risk, as leaning towards a pessimistic outlook may lead to excessively cautious decisions.
  • Avoid disregarding significant uncertainties in an attempt to reduce complexity.
  • Beware of foolish optimism.
  • Don’t avoid making risky decisions just because they are complex.
  • If you’re a leader, ensure your reports reflect your organization’s risk tolerance in their decisions (most organizations have institutional risk tolerances).
• Whenever you find yourself facing a risk that exceeds your comfort level, you can manage the risk to make it more acceptable by:
  • Sharing the risk with others.
  • Seeking risk-reducing information.
  • Diversifying the risk (avoid “placing all of your eggs in one basket”).
  • Looking for ways to hedge.
  • Insuring against risks with a significant but rare downside and no upside (but don’t over-insure).

Chapter 9: Linked Decisions

• Important decision will often impact future decisions. E.g., your college major will likely influence your career options. These are linked decisions.
• The elements of a linked decision include:
  • A basic decision needs to be addressed now.
  • Uncertainties influence each alternative’s desirability.
  • A future decision also influences relative desirability.
  • There’s opportunity to obtain information before making the basic decision, but it comes with a cost (e.g., money or time).
  • The decision-making pattern involves making a choice, learning from it, making another choice, further learning from it, and repeating this process iteratively.
• Decisions that are linked can take two forms:

1. 1. Information decisions that are pursued before making the basic decision.
   2. Future decisions that are made after the consequences of the basic decision.

• Like playing chess, making smart linked decisions is about planning ahead. To do so,

1. 1. Understand the basic decision problem. Begin by following the three first elements of the decision-making approach: define the problem, specify objectives, and generate alternatives. Then, identify uncertainties that influence the consequences. And then, narrow down the list, selecting the uncertainties that will most greatly impact consequences.
   2. Identify ways to reduce critical uncertainties. Decide what information is important to know and determine how to gather it.
   3. Identify future decisions that are linked to the basic decision. List all the future decisions you can think of. Then, narrow down the list to the most significant ones. Try not to go too far ahead in time.
   4. Understand relationships between linked decisions. To do this, you can draw a decision tree, making sure you:
      1. Get the timing and order right.
      2. Use your notes to construct a decision tree.
      3. Describe the consequences at the end points of the tree using the ideas covered in Chapters Five through Seven.
   5. Decide what to do in the basic decision. Think ahead and then work backwards in time. Decide what choices you would make at that given point, and cross off the alternatives you did not take.
      1. In some cases, you may need to quantify tradeoffs, uncertainties, or risk tolerance as described in the previous chapters.
      2. In this step, consider the costs and benefits of gathering deciding information.
   6. Treat later decisions as new decision problems. Once you’ve made a decision and you face its consequence and the new decision, rethink the situation, starting the process over.

• In cases when uncertainty is great and the environment is unpredictable, consider developing flexible plans:
  • All-weather plans: These are plans that work well in most situations but are seldom the optimal choice for any one situation. It’s often the safest plan.
  • Short cycle plans: In this case, you make the best possible choice, and then reassess the choice often (e.g., business managers often reassess one year plans every quarter).
  • Option wideners: Seek ways to expand your set of future alternatives.
  • Be prepared: Have backup plans.
• Throughout this process, maintain your perspective. Seek smart choices rather than perfect

 Chapter 10: Psychological Traps

• Psychological traps – our minds playing tricks on us – impact decision-making.
• Heuristics are unconscious routines that we develop to cope with the complexity of making decisions. While these can be helpful, they aren’t guaranteed to work.
• We seldom recognize psychological traps, but awareness can help protect against them.

1. Overrelying on the first thought – The anchor trap. When considering a decision, we tend to give disproportionate weight to the first information we receive (initial impressions, ideas, estimates, or data), and they anchor our thoughts.
   • Anchors establish the terms of a decision, making them a valuable tactic for savvy negotiators.
   • To reduce their impact, view decision problems from different perspectives and think about the problem on your own before consulting others.
   • If you seek others’ input, approach diverse individuals, and be careful not to anchor them when you provide information.
2. Keeping on – The status quo We tend to find the status quo comfortable and avoid taking any actions that would upset it. This effect is even stronger when there are several alternatives rather than just one.
   • While maintaining the status quo might be the optimal choice in certain situations, avoid choosing it simply because it’s familiar. Take a moment to reassess your objectives and evaluate how they influence the status quo.
   • Never think of the status quo as your only alternative.
   • Ask yourself whether you would choose it if it weren’t the status quo.
3. Protecting earlier choices – The sunk-cost trap. We have a tendency to justify past decisions, even when they no longer play a role in our choices going forward.
   • Sunk costs refer to investments of time or money that cannot be recovered. While logically we may recognize that these costs should not influence present decisions, they can still impact our mindset and lead us to make poor choices.To reduce the impact of this heuristic, make a conscious effort to set aside any past decisions, and examine why admitting to the mistake distresses you.

4. Seeing what you want to see – The confirming-evidence trap. Our minds tend to seek information that aligns with our existing beliefs or viewpoints, while avoiding contradictory information. This bias influences not only where we seek information but also how we interpret the evidence we receive.
   • To overcome this trap, have someone you respect play devil’s advocate.
   • Honestly assess your motives, expose yourself to conflicting information, and seek advice from others without biasing them with leading questions.
5. Posing the wrong question – The framing trap. The way you ask questions can influence the answers you receive. Poorly framing a problem can lead to suboptimal choices. Framing can also emphasize different objectives, affecting decision outcomes.
   • We become risk-averse when a problem is posed in terms of gains, but risk-seeking when the problem is posed in terms of avoiding losses.
   • To prevent this bias, frame your problems properly and clearly. Keep your objectives in mind, challenge the initial frame, strive to pose problems neutrally, and consider how different framings might alter your perspective.
6. Being too sure of yourself – The overconfidence trap. In the context of setting ranges, we tend towards overconfidence in the accuracy of our predictions (when we seldom are), often resulting in narrow ranges of possibilities.
   • Anchoring is the main cause of this overconfidence.
   • To reduce this effect, avoid being anchored by initial estimates, challenge your extremes, and question any experts’ or advisers’ estimates.
7. Focusing on dramatic events – The recallability trap. We infer probabilities based on our experiences, but our judgments can be overly influenced by dramatic events.
   • g., we tend to overestimate the probability of rare catastrophic events such as plane crashes due to the disproportionate attention they get in the media.
   • To minimize this error, scrutinize your assumptions, seek relevant statistics, and break down the event you’re assessing into its individual components.
8. Neglecting relevant information – The base-rate trap. We often overfocus on the first information we encounter or are provided with, disregarding the base rate.
   • To avoid this trap, carefully analyze your thinking process when making decisions to uncover hidden or unacknowledged assumptions.
9. Slanting probabilities and estimates – The prudence trap. Extreme caution, exemplified by the “worst-case” analysis approach in weapon creation, often results in unnecessary added costs without practical benefits. This is because the probability of the worst-case scenario occurring is typically very low.
   • To prevent this trap, state your probabilities and estimates honestly, and document your reasoning in arriving at your estimates.
10. Seeing patterns where none exist – The outguessing randomness trap. Our minds have a natural inclination to seek patterns, even where none exist, resulting in poor choices.
    • To mitigate this, maintain discipline in assessing probability. If you suspect a pattern, test your theory in a low stakes setting to verify its validity.
11. Going mystical about coincidences – The surprised-by-surprises trap. People often struggle to accept coincidences, attributing improbable events to supernatural causes like luck, divine intervention, or rigged systems.
    • To avoid this trap, remember that the world is full of surprises, what appears rare may not be, and that there’s a significant chance that flagged events will occur.

 Chapter 11: The Wise Decision Maker

• Wise decision-making entails systematic thinking.
• It may appear that the process provided in this book is too complex. But eventually you’ll get used to it.
  • The extra effort is ultimately not “extra,” as it will save you from overthinking and it will lead you to better decisions.
• This process will lead to smart decisions, but there are practices that will help you become a smart decision-maker:

1. 1. Avoid procrastinating and get started as soon as possible. Deciding by default is not deciding. The sooner you start, the more likely you’ll give your decision proper thought.
      • Starting early doesn’t mean you should hurry. Give your subconscious time to help you.
      • Don’t become obsessed with each element of the process. If you tend towards this, try running through the process as quickly as possible first.
   2. For most decisions, whatever is bothering you is the most important part of the decision. In cases when you feel like it isn’t obvious, ask yourself what’s blocking you. The answer will help you determine where you need to focus your attention.
   3. Make a plan to find a solution to your problem. But sometimes, the problem definition may change as you move through the process, so re-examine your strategy regularly.
   4. When you’re faced with seemingly impossible decisions,
      • Find interrelations and examine the broadest decision problem first. Then, slowly work through to the next levels. At each level, make sure you have a clear sense of the alternatives in the following level.
      • Continually shift your focus, looking at the big picture and then the details.
      • Determine if there are choices that go together (consistent decision bundles).
      • Match the level of detail in your analysis to your problem definition (the broader the definition, the less detailed the analysis should be).
   5. When you get stuck, find someone to talk to about your problem. Talking allows you to see connections that you might not yet have seen.
      • You can also imagine yourself advising someone else about the same problem.
      • Sometimes imagining what decision you’d make if the obstacle wasn’t present can help (e.g., if money wasn’t a problem).
   6. Learn to know when to quit. Obsessing can take a toll on time and psychological well-being, resulting in poorer decisions.
      • To know when to quit, balance the cost of your effort with the benefit of coming up with a potential better choice.
   7. When the decision is outside of your area of expertise, consult advisors or experts, but don’t ask, “What should I do?” Instead, communicate your objectives, trade-offs, risk tolerance, etc., and then gather information.
   8. Establish decision making principles for minor routine decisions so that you can dedicate more time and effort to complex decisions.
   9. Define your decision-making style (habits that guide your decision). Analyze your decision-making processes and find patterns.
   10. Own your decision-making. Try not to let others decide for you.

• For the first few times, give the ProACT approach a try with important decisions but not critical ones. Eventually, the method will become routine and you’ll find it more comfortable and easier to perform.