This article first appeared on Mental Models

Once again the failures of human decision making have been thrown into the spotlight by Daniel Kahneman, with his new co-authored book, Noise.

As someone who co-owns a SaaS decision-making model, Kahneman releasing another book always feels like a small lottery win. We get a Nobel Laureate telling people something that we talk about all of the time: the fact that people suck at making decisions.

People are genuinely bad at decision making, not because they are stupid or careless but because their thinking is subject to all sorts of interference – mainly factors known as bias and noise.

A lot is written about bias, you can easily track down a cognitive bias codex which will categorise the many types into broader problems like having too much information or needing to act fast. The individual biases have their quirks such as our tendency to prefer to keep things the same, Status Quo Bias, or the Dunning Kruger Effect which relates to people’s tendency to overestimate their capability when they have a low ability in an area (and vice versa). This newsletter contains articles on many of the other types of bias such as Perception Bias or Halo Bias. With a cursory dip into these, it is easy to get an idea of how fallible human decision making is.

The inconvenience of noise

The interesting (or perhaps annoying) thing about noise is how bloody inconvenient it is. This is especially true as it’s often caused by environmental factors that are more difficult to identify and avoid when making decisions. They can be things like how tired you are, if it’s too hot or cold, how many other decisions you might have made that day if you’re hungry. Perhaps the most inconvenient thing about noise is that the impact it has on decision making is variable and unpredictable, which is harder to spot, understand and control.

One of the things that Kahneman and Co are clear on is that there are ways to get better at decision making. One of the most prominent recommendations is to take a systematic approach to decision-making (hear hear, says the person with a decision-making model!)

“Algorithms are noise-free. People are not.”

Kahneman has been talking about the use of disciplined thinking in organisations for years, essentially the use of algorithms. An algorithm is just a system, a set of rules that are not impacted by noise. People get scared by this idea, it sounds complex but as Kahneman said in 2016 “a good algorithm does not require a massive amount of data”. Even something as simple as systematically ranking a set of criteria around a decision on 5 or 6 measurable dimensions will give you a better outcome than sitting around the boardroom table for a chat and coming up with your plans without any sort of rule-based analysis.

You’re probably already thinking that asking your team to make every important decision algorithmically might be met with resistance. I’ll refer to our friend Daniel again ‘“When you tell team leaders that there is 50% variability [in expert judgment] when they expected 5% or 10%, then they’re willing to take an algorithm.” 

Fancy seeing what all of the fuss is about? Why don’t you take a look at the N2D Method? It uses algorithms to reduce the impact of noise and bias and to streamline the process of decision making. What’s even better is that it’s completely free for 30 days.