[MUSIC] In this video, we have an opportunity to learn from Dr. Edward Rodgers, on decision making in today's complex world. We'd hear his perspectives on why some of our decisions don't quite work out the way we anticipate. How do we learn from our bad decisions? And how do we make good decisions? Ed Rodgers is a visiting professor at the Indian School of Business. He has been teaching a highly popular and sought after elective course on managing complexity. He has a rich, multicultural background. He grew up in Saudi Arabia, attended boarding school in India, managed relief operations for some years in Lebanon, and works presently in the United States of America. He's also someone who straddles the worlds of academia and practice. His doctorate in business is from the Cornell University. He has taught courses on entrepreneurship, strategy and human resources management, and has consulted for a number of organizations. He is currently the Chief Knowledge Officer for NASA at the Goddard Space Flight Center outside of Washington DC. >> So this is a fairly common question. Why is it so hard to make good decisions? Well, I think there's two big reasons that make it difficult to make good decisions routinely. The first one is that we have a natural tendency to be afraid of making the wrong decision. And this fear, when coupled with a lack of confidence in our decision making ability, can inhibit our ability to make good decisions routinely. The second reason I think that we have difficulty making good decisions is because we fail to learn from the decisions that we make. Failing to learn from prior decisions actually makes our fear of failing, the first point, even stronger. So failing to learn causes us to continue to be afraid of failing and then we continue to be hesitant about making good decisions Good decisions are often confused with good outcomes. As long as we're confused that anything that worked must have been a good decision, we won't be spending enough time learning about how we actually made the decision in the first place. So there are two points that are most critical to making good decisions. The first is being informed about the type of decision that we're actually trying to make. So the most important decision you will actually make is choosing how you're going about making the decision. Is the decision based on ambiguous data that requires study and analytics? Or is this a routine decision based on prior experience? Making that decision initially is the most important decision you actually make. Managers often confuse the two, commission a study in a team, then try to make a gut decision along the way. Undermining the team and making a poor routine decision in the interest of time or speed. Understanding whether it's a decision that requires study or a routine decision will help you stick to the decision that you first made and how you're going about it. And if you do, you'll bring less confusion and make better decisions. Delays are a common problem in decision making. Someone said, once, that the worst decision you can make is to make no decision. So delay is actually a decision to not decide, and it can be a sign of weakness or a sign of lack of confidence. But primarily it's driven by a fear of making the wrong decision. So we want to delay, thinking we can make a better decision later than making a decision now. That goes back to the point I made earlier about making a good decision is understanding what type of decision needs to be made. Then you can go forward with the right process. Thinking that a decision can be delayed in order to get more information often leads to a poor decision made later when a better decision could've been made with less information in a more timely manner. That's a factor of understanding the type of decision that needs to be made, and choosing wisely about your process, not the actual decision itself. The other reason that we delay, most commonly, is this constant addiction to more information. We think if we only had more information we would make a better decision. Sometimes we wait for the outcome and get overtaken by events, and try to make our decision after things have already happened. This is a complete failure of making decisions and not a good decision at all. Making a decision in the right timely manner, makes a good decision better than making a decision later when other people or events may have actually chosen the course of outcome for you. And you spend your time trying to recover rather than actually making a strategic decision in a timely manner. Understanding that a delay is itself a decision can help you avoid this problem. So the most important thing to understand about decision making is you need to be able to learn from every decision you make. The reason we don't learn from our decisions is because we fail to understand how the decision was actually made. Failing to understand how the decision was made inhibits us from learning from it because we think we're more rational than we actually are. Thinking you're more rational than you are allows your biases and assumptions to come into play, and you end up being defensive about your decision rather than open to learning. Sometimes when decisions don't work out, we need to have the openness to say, what assumptions did I make? What information did I not have? What wrong assumption did I make about how the decision should be made in the first place? You can reconsider all those points when you're open to that and not caught up in the biases of thinking that you're overly rational, and avoid the defensiveness that it so typical when we post analyze our decisions. Being able to learn from your decisions means you can make better decisions. Knowing that you can make a better decision each time you come to making a decision gives you confidence that you don't need to delay or be afraid of making a wrong decision. And that, in itself, helps you to make better decisions. I've drawn a map and a model to show you what this looks like which you can look on the chart. Often people want a good decision or a bad decision as an example to know how to follow it. But of course your decision is never exactly like someone else's decision so it's difficult to copy. I'll give you a couple of very simple examples. You'll have to extract the principle and apply it to your situation. Let's take gambling, gambling is always a bad decision. It's bad odds, you lose money, it's addictive, it's wasteful. However, if you win, if you by chance win, you tend to think that you made a good decision simply because you won. If you win or lose, gambling is always a bad decision, the odds are not in your favor. You will lose more often than you win, however, so we've seen that gambling can be a bad decision, every time, whether you win or lose. However, let's consider a different type of decision, say, you're on an airplane that's falling out of the sky, and you need to decide whether to jump out of the airplane or not. This is always a good decision because certain death is never the right choice, however, even though your chances of surviving from jumping out of the plane may be low and you still may die, it's still the right decision in every situation, because it's the right calculated risk. And so here is the summary of how to know a good and bad decision. Do you understand how the decision was made? Or was it made in a manner that you would make the same decision again, regardless of what the outcome is? Most of us substitute the outcome for evaluation of whether the decision was correct or not. So if someone takes a very outlandish chance, takes a gamble, for example, and wins, we tend to think they made a good decision. We've seen that that's never a good decision. Another person who may make a good decision to jump out of an airplane may actually end up dying anyway and we think, that was a bad decision. They shouldn't have jumped out of the airplane that was falling. But jumping out of a falling airplane is always a good decision if the airplane's going to crash anyway. So being able to separate the outcome of what happens from how you made the decision is your key to actually learning from every decision you made and not being biased by the outcome or whether it was correct in terms of how it worked out. That will help you the most in understanding whether you've made a good decision and what you can learn from it, and be able to make better decisions in the future. [MUSIC]
