Smart Choices. Howard Raiffa

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Smart Choices - Howard  Raiffa


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further about the issues we had explored. He discussed his objectives and alternatives with his family and his partner. Bill’s ultimate smart choice, a complete reversal of his original plan, was not to sell out. Instead, he and his wife moved to southern California, where he established a branch of the soundproofing business. They enjoyed their new lifestyle, and Bill found it invigorating to build a new business almost— but not quite—from scratch. He did so well with the business, in fact, that when, eight years later, he was really ready to retire, his partner bought him out for $1.7 million.

       Start Making Your Own Smart Choices Now

      Bill’s experience illustrates the benefits of learning how to make good decisions. Of course, a good decision doesn’t necessarily guarantee a good result, just as a bad decision doesn’t necessarily guarantee a bad result. The careless can hit it lucky; the careful can be shot down. But a good decision does increase the odds of success and at the same time satisfies our very human desire to control the forces that affect our lives. In the chapters that follow, we will lay out, step by step, the PrOACT approach for decision making—the method that proved so valuable to Bill. Reading these chapters will enable you to improve the way you make the decisions that determine the course of your own life.

      Before we plunge in, though, we want to review a couple of important tips that will help ensure that you get the full benefits of our approach.

      First and foremost, always focus your thinking where it matters most. Cycle quickly through the eight elements to gain a broad perspective on your decision problem. Typically, for all but the most complex decisions, you will not need to consider all the elements in depth. Usually, only one or two elements will emerge as the most critical for the decision at hand.

      Sometimes, the simple act of setting out your problem, objectives, alternatives, consequences, and tradeoffs, as well as any uncertainties, risks, or linked decision factors, will fully clarify the decision, pointing the way to the smart choice. If not, you should try reconfiguring your problem in various ways. Display it graphically, as a table, diagram, or chart, for example. Restate it in several forms, using different words, phrasings, and emphasis. Describe your problem to others, asking for their opinions and advice. For Bill, imagining himself giving his partner $250,000 in cash was an eye-opener, as were his family’s recollections about the struggles and stresses of the past.

      Although the systematic approach we prescribe will greatly increase the chances of reaching a smart choice—as it did with Bill—it doesn’t assure it. You must also avoid certain psychological traps that can derail your thinking. Psychologists have shown, for example, that the first ideas that come into our head when we start out to make a decision can have an undue impact on the ultimate choice we make. This can, without our even knowing it, distort our decision-making process and lead us to the wrong decision. In Chapter 10, we will show you how to identify and temper the impact of the most common psychological traps.

      Bill’s story underscores one more important lesson about making smart choices: take control. Create your own decision opportunities. Be proactive in your decision making. Look for new ways to formulate your decision problem. Search actively for hidden objectives, new alternatives, unacknowledged consequences, and appropriate tradeoffs. Most importantly, be proactive in seeking decision opportunities that advance your long-range goals; your core values and beliefs; and the needs of your family, community, and employer. Take charge of your life by determining which decisions you’ll face and when you’ll face them. Don’t just sit back and watch what—good or bad—comes your way.

      CHAPTER 2

      Problem

      YOU CAN MAKE A WELL-CONSIDERED, well-thought-out decision, but if you’ve started from the wrong place—with the wrong decision problem—you won’t have made the smart choice. The way you state your problem frames your decision. It determines the alternatives you consider and the way you evaluate them. Posing the right problem drives everything else.

      You’re planning to move to a new city, and you need to find an unfurnished apartment to rent. So your decision problem seems straightforward: Which apartment should I choose? But is it really so simple? Maybe it would actually be in your best interest to rent a house, not an apartment. Or maybe you should put your belongings into short-term storage and rent a furnished apartment for a few months to learn more about the city before committing to a lease. Or maybe you should try to find someone who’s looking for a roommate. Or maybe you should just go ahead and buy a condo. In fact, maybe you shouldn’t move to that city at all.

      How you pose a problem profoundly influences the course you choose. The decision you reach from ‘‘What city?’’ will be entirely different from the decision you reach from ‘‘Which apartment?’’. The way you state the problem therefore represents a crucial choice in its own right. Get it wrong and you’ll march out in the wrong direction. Get it right and you’ll be well on your way to where you really want to go. A good solution to a well-posed decision problem is almost always a smarter choice than an excellent solution to a poorly posed one.

       Be Creative about Your Problem Definition

      The greatest danger in formulating a decision problem is laziness. It’s easy to state the problem in the most obvious way, or in the way that first pops into your mind, or in the way it’s always been stated in the past. But the easy way isn’t necessarily the best way. To make sure you get the problem right, you need to get out of the box and think creatively.

      Many years ago, a struggling West Coast port was reinvigorated because someone posed a decision problem creatively. Every three years, the powerful dock workers’ union negotiated a new contract with management. To avoid layoffs, the union had over the years demanded—and been granted—a slew of restrictive work rules. The rules had come to tie management’s hands, preventing the adoption of more efficient new technologies for loading and unloading ships. As a result, the port was losing business.

      The management bargaining committee, entering a new round of contract negotiations, saw its problem as getting the union to relax some of the more obstructive rules, in exchange for increased wages and benefits. But then a committee member, a consultant from outside the industry, asked a bold question: ‘‘What could management afford to pay the union in a one-time settlement to have all the work rules dropped?’’ The negotiators had never thought of this possibility before, because the existing work rules had constrained their thinking.

      The answer to ‘‘What could management afford?’’ depended, of course, on how the port would operate if freed from the work rules. A study, commissioned by the bargaining committee, concluded that the changes would be revolutionary and the savings enormous.

      The upshot: the committee negotiated a generous buyout with the dock workers, eliminating the work rules for a price that, though considerable, represented only a fraction of the projected savings. During the years that followed, the port completely changed its mode of operation, adding, among other things, the ability to handle containerized cargo. The results were spectacular. Ship owners benefited—with ship turnaround times cut from days to hours, their ships became far more productive, and their costs plummeted. Consumers benefited, as perishable fruit from Hawaii became cheaper and more plentiful. And, as traffic at the port grew, the workers themselves benefited. More and better jobs became available on the docks.

      It was a real breakthrough—all because someone had taken a fresh look at an apparently routine problem and posed it in a creative new way.

       Turn Problems into Opportunities

      Decision problems are called ‘‘problems’’ for a reason. Rarely, after all, do we make a decision for the fun of it. We make decisions because we have to deal with difficult or complicated circumstances. We’re in a quandary, we’re at a crossroads, we’re in trouble—and we need to find a way out. But problems aren’t always bad. In fact, by stating your problem creatively, you can often transform it into an opportunity, opening up attractive and useful new alternatives. As Albert Einstein said, ‘‘In the middle of difficulty lies opportunity.’’ No matter how bad a situation seems, ask yourself:


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