Uncertainity in Decision Making

Decision making in uncertainity is often underlied by the same concept – simplicity.

Simple Heuristics

Gerd Gigerenzer is a member of a group of interdisciplinary scientists at the Max Planck Institute for Human Development. His basic premise for making better decisions is to follow simple heuristics1Raab, M., & Gigerenzer, G. (2016). The power of simplicity: a fast-and-frugal heuristics approach to performance science. Front Psychol 2015; 6: 1672.. Most of the world is a complex environment, and trying to solve your problems by considering all the factors is difficult, if not impossible.

Imagine catching a falling ball. You would need to know gravity, the material the ball is made of, the spin and speed. Not to mention fluctuating wind speeds and calculate all of that in a 3-dimensional space. Or you could just keep a constant gaze with the falling ball and keep that gaze at specific angle. Which is simpler?

Uncertainity in Nutriton

I first noticed the problem with uncertainity when I got interested in nutrition. Like most people I wanted to become leaner, gain more muscle, be alert and focused throughout the day. But the problem is most of us do not understand the biochemistry of our own bodies, not to mention the chemistry of the substances we eat.

Every year we know a bit more. Epistemology is a science but any self-respecting epistemologist knows that their methods are highly limited in terms of how an individual should live. And not a lot of highly controlled, diverse, big sample experiments have been done in nutrition. Last but not least, individual people are different from a statistical group average.

So what do we do about nutrition? The fundamentals we should know in nutrition should be biochemistry of glucose metabolism and the 1st law of thermodynamics. Calories in and calories out. However, it’s not that simple, there is further nuance, because hormones and human psychology are factors too. For more information on how to actually lose weight I suggest you consult your personal physician.

Uncertainity in Relationships

Meet face-to-face

Reducing uncertainity in relationships would mean to prefer meeting face to face. Being able to see someone’s emotions and behavior will help us better understand what is being communicated intentionally and unintentionally.

Furthermore, we need to consider that individual preferences are highly variable. Consider dating. There is nothing we can do if one day we prefer chocolate over vanilla ice cream. Similarly we do not choose who we love. We simply do. The same goes for other people. They don’t exactly “choose” to love you. There are genetic and cultural conditions that go into that process. Consider the fact that beauty standards vary from culture to culture. Being thin hasn’t always been a beauty standard, nor is it today in every corner of the earth.

Numbers game

Another fundamental is to meet more people. Whether in dating or friendships, drawing conclusions based on a few experiences is a mistake. Meeting more people helps you understand if it’s you who’s doing something wrong or whether you simply met someone who’s having a bad day.

One study found that most people meet their partners through friends or work. Friends and work might be what is most common because these are environments where we run into the same people over and over. The mere-exposure effect states that the more often we see something the more familiar and pleasant it becomes.

Conform to the status quo

It’s a good idea to be relatively “normal”. Take as an extreme example of an alcoholic homeless person. What are the reasons that these people do not inspire love in us? It could be the smell of alcohol or being unwashed. It could be the messy hair or dirty clothes. Neither does the slurred speech or confusing topic help us understand them.

Now imagine the opposite. Someone who is well dressed, groomed, clean (smells nice even), sober, speaks clearly and looks healthy. Who do you want to associate with?

Uncertainity in Business

Gerg Gigerenzer notes that the markets are chaotic. That one’s ability to predict the markets is limited. He shows how Harry Markowitz’s idea that dividing assets equally between alternatives is more profitable than a complex Noble prize winning formula.

Similarly Daniel Kahnemann in his book “Thinking, fast and slow”, recommends focusing on the fundamental truths in a given field. He is against investing because it’s not something that can be mastered in the usual sense.

“All behavioural economists are against active investing — I might as well say it outright — because we think the market is unpredictable, or very, very difficult to predict. And yet we believe people who believe they can predict the market. That illusion is very important.”

Daniel Kahnemann 2http://take15audio.cfainstitute.libsynpro.com/kahnemans-insights-beyond-thinking-fast-and-slow

Finally, in business the Pareto principle is the king of the fundamentals. Are you focusing on the 20% that gives 80% of the results? Are you cold calling clients or are you avoiding doing that by designing your website? Cold calling clients will eventually pay off as your sales skills increase and your understanding of the clients needs and wants does too.

However, if you’re stuck designing your website you will never understand what your client wants. Which brings us to an equally important fundamental truth of business: it’s not about you, or your product, it’s about what the customer needs.

Summary

In conclusion I have a few principles for decision making in uncertainity:

  • What are the fundamental truths in a given field? If it’s complicated then it means you really don’t understand it.
  • Always account for variable change.
  • Don’t take big risks but instead learn to take smart small risks.
  • Learn as much as you can before making a decision. Consider your options. Maybe ask second and third opinions.
  • Uncertainity isn’t avoidable. Mistakes are inevitable. The best we can do is play the best game we know.

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