Marlene Sanchez - IT Architect
October 2013
Since I began my career some years ago, I made
decisions that hopefully resulted in positive results, while others were
completely disastrous. If you asked me what percentage of those delivered the expected
results versus non expected ones, I would say that maybe 50/50, and to be
honest I was never comfortable with that statistic given that I wanted to have mostly
positive results. However during those days, I was not able to identify if I
have used the correct reasons and rational during the decision process.
Now, during my masters, I had the
opportunity to read a book recommended by a brilliant professor that explains decision
making and which make me understand my decision making process and the rationale
behind it. This last has been a positive breakthrough for me not only at work
but also in my personal life.
And based on this valuable experience, I
want to the share with you some important concepts of the book and some
applications of this theory in the IT field so you improve your decision making
abilities.
The Decision Making Process
For this blog, I’m going to give an general
resume of the book “Thinking, Fast and Slow” from Nobel Laureate Daniel
Kahneman (specifically I read parts 1 and 4 for this book and the first
appendix). In resume, in the mentioned chapters the author explains: 1) the decision
making process of a human, 2) where decision biases come from, and 3) why
people´s rationality use to fail.
Initially, Kahneman divide in two phases a
person´s decision process. The first part is called “System 1”(Fast Thinking)
and is responsible for: associations among ideas, detection of simple
relationships, priority assignment of self-protecting actions, hostility
detection, expression of feelings, among others innate skills . In short,
System 1 is our intuition and it is normally impulsive, impatient, and operates
automatically and very quickly. Conversely, Kahneman defines the second part as
System 2 (Slow Thinking), the conscious and reasonable self that: has beliefs, requires concentration and attention
to perform a task, has a limited capacity and is responsible of comparing,
choosing, and following rules. Just to exemplify, if you see an angry human
face, System 1 is the one that identifies the feelings that the person is
expressing; however if you are asked to perform the product 56x78, System 2 is
involved since you require to maintain in memory several ideas
simultaneously.
According to Kahneman, System 2 monitors and controls
thoughts and actions of System 1 to take reasonable decisions, however sometimes
System 2 endorse System 1´s intuitive answers due to certain specific beliefs
and personal background. In this regard, an experience that an individual lived
and that is transformed into a personal belief can affect the reasonable decision process. For instance, a person can use
representativeness[1] as
heuristic to predict the nationality of people in a room, however if its decision
is based on stereotypes about races, he will experience a narrow frame[2]
issue, given that he will categorize a person using cognitive shortcuts
influenced by his beliefs and not using useful statistical information that
could converse to a more accurate prediction.
In addition, Kahneman affirms that “System
2” can experience a flaw of reasoning due to overload; and given that fact, it
tries to achieve a goal selecting the least demanding course of action, which
results in cognitive errors. This specific situation is called “Lazy thinking”.
Decision
making problems in IT Projects
Working in an IT firm allows you to
interact with a lot of managers, which contrary to my belief, base their
decisions on personal judgments. No surprisingly I have witnessed the
consequences of such practices that turn out to be: delays in project schedule,
and loss of client credibility and profit. For instance, I worked in a project that
was delayed by approximately one year; however management team extended the
project duration even if the company began to experienced losses. Some managers
claimed that this project was a door to new opportunities with the same client,
however after reading Kahneman´s book, I began to question if senior managers were
facing loss aversion[3]
in this subject.
In my humble opinion,
management team should be rational and consider serious calculation of Expected
Monetary Value and Risk of its decisions. If it´s true that there is a great
risk of losing this client, we also have a great risk of not obtaining a second
contract, so given these facts I recommend the following options: 1) educate
managers to use efficient methods of decision making like: risk return frontier
or other statistical and forecast methods and 2) create policies to avoid irrational decisions of managers. Both options not only will help the company to achieve a better wealth, but also they are going to
guide our managers to become better decision makers and increasing their
general wealth also.
Finally, clever policies that force
canceling problematic projects not only could avoid “biased decisions” but also
can help managers to understand consequences of supporting partial judgments. Managers
must be aware of our human limitation to make rational decisions.
Conclusion
It is evident that all human beings try to
make reasonable decisions, however our nature did not help us to do so. And in
this regard we must develop our consciousness about ourselves and identify the
real reasons behind our decision making process. This is a continuous work that
we must perform and that requires personal responsibility. Are you ready to do
it?
[1] The representativeness heuristic is used when making judgments
about the probability of an event under uncertainty (Kahneman & Tversky,
1972)
[2] Tendency of people to evaluate a risky prospect in isolation rather
than mixing it with the other risks they face. http://www.eief.it/files/2009/01/paper_december_22_08.pdf
[3] Loss aversion refers to people's tendency to strongly prefer avoiding losses to acquiring gains. http://en.wikipedia.org/wiki/Loss_aversion
References
Kahneman, Daniel (2011). Thinking, Fast and Slow. Penguin Books. Introduction, Part 1
(Section 1,2 and 3), Part 4, Conclusions and Appendix 1.
