Ron Howard implored us
"Don't confuse the quality of the outcome with the quality of the decision". He was giving a talk at the Stanford Business Breakfast on
"Decision Analysis: Why Don't We Naturally Make Good Decisions?".
Cambridge Alumni have a table at the Breakfast Briefings and the next breakfast, on
Getting the Best from Others by Doug Harris, Managing Director and Leader, The Kaleidoscope Group, on Wed Jul 11 is likely to sell out - so we were urged to
sign up fast. I guess that's a reason we have the alumni group - to get the best from (and give it to) our fellow alumni.
Ron started by saying how Decision Making was fundamental across many disciplines - including business, engineering, lawand medicine. He has been at this a very long time - being a Stanford Prof since the mid-1960s where he founded the field of modern Decision Analysis. Its a long time since I was in college, but one of my favorite books while at Cambridge was Ron's classic treatise on Dynamic Programming and Markov Processes (MIT Press, 1960).
Still his work is very recent, compared with Seneca, whom he quoted
"When the words are clear, then the thought will be also". He claimed that serious Decision Analysis was about 300 years old. After all Laplace
wrote about it in 1812, but his analysis is still overlooked by many. Ron's son had presented him with a list of
Cognitive Biases. One he especially favored was the Lake Wobegon effect - when humans tend to flatter themselves and believe that they are above average (aren't you a better than average driver?).
To test our own intuition and decision making ability three conundrums were posed.
1. Open the Box, being familiar to most audience members was not expounded on in detail, but you may want to
check it out.
2. We had to do
this - to illustrate Anchoring - put down the last three digits of your phone number, add 400, then write down the date Attila the Hun was defeated. Amazingly the adding 400 influences people to move their estimate upward.
3. The
Envelope Exchange Paradox - 2 envelopes containing money for you - if you choose one and know how much is in it, should you exchange it for the 2nd one?
More seriously, there are many
tools for analysis - too many for him to describe in detail so I'll put some links here -
strategy tables,
decision diagrams (he showed one for deciding how to design a motorbike), deterministic models, tornado diagrams (
add-in for Excel),
decision trees (
add-in for Excel),
probabilities, utility diagrams,
kiviat charts, etc..
If you're having surgery would you prefer Ron with good tools in a Stanford Medical Center operating room, or an expert surgeon with a knife in the Stanford faculty club? Good tools are not enough!
Summing up with 10 principles of realizing good decisions,
"Do not gather useless information that cannot change a decision" he illustrated by telling us about a doctor who ordered a test, but was going to give the same prescription whether or not it was positive.
During the question time Ron was asked whether cultural differences affected the science of decision theory. He said it was like arithmetic - it's cross-cultural. He went on to cite examples of how his PhD students in China and the Middle East were successfully adopting his theories to these very different environments.
I hope that more Cambridge Alumni will be able to join the next Stanford Business Breakfast and thanks to Jo Ellis for inviting us to the event. I know at least one didn't find the Cambridge Table - but it was marked!
