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What's the Likelihood?

decision making May 04, 2018

According to academic research, an adult makes somewhere between 23,000 and 35,000 decisions a day. Many of these decisions are made subconsciously. According to researchers at Cornell University we make 226.7 decisions each day on just food alone.

Some decisions are relatively insignificant such as what to have for breakfast or what clothes to wear, and are typically made on an individual basis requiring little thought. Others are more important, requiring a much more refined analysis and quite often involving group consensus in order to decide on the appropriate course of action.

Meanwhile, the world of business is becoming more complex. Rapid changes in technology, the political and regulatory environment, combined with increased competition and litigation burdens, is putting more pressure than ever on organizations to make the best decisions. Uncertainty grows right along with business complexity.

Imagine living in a world of certainty. You would know in advance what schools you would be attending, who would be your friends (and enemies), your career, who you would marry, the names of your kids, grand kids, and on and on. How boring, not to mention downright scary.

The reality is we don’t live in a world of certainty (thank goodness), yet as humans we sometimes make decisions on the illusion of certainty, believing that something is certain when it is not. This can be the result of experts and politicians presenting us with information backed up by facts and statistics which are nothing more that predictions and best guesses.

As Ben Franklin said “In this world nothing can be said to be certain, except death and taxes.”

The world of certainty is very small indeed – especially when compared to the world of risk and uncertainty.

In The Black Swan, author Nassim Taleb discusses the Problem of Induction or Problem of Inductive Knowledge – which he refers to as the mother of all problems in life.  He questions how we can go from specific instances to reach general conclusions.  How do we know what we know?

He then presents the case of the turkey that is fed every day.  Every single feeding will firm up the bird’s belief that it is the general rule of life to be fed every day by friendly members of the human race “looking out for its best interests,” as a politician would say.  On the afternoon of the Wednesday before Thanksgiving, something unexpected will happen to the turkey.  It will incur a revision of belief.

Thinking that an event won’t occur because it hasn’t happened in the past does not contribute to making good decisions. These examples demonstrate how easy it is to confuse the three worlds of certainty, risk, and uncertainty. By doing so we make decisions on the wrong basis. 

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