The Art of Choosing "Right"

We love to choose; from the time we wake up to decide our outfit till the moment we go back to bed and decide the position of our body and pillow. But as Sheena Iyengar says in her great book “The Art of Choosing” choices are intertwined with meaning. In other words, we use choices to define our identities, our values. 

Risk perception is subjective.

Iyengar has analyzed how the context of decision can bias our choice. Like the brilliant paradox “Less is more”, where shoppers exposed with less options where 10 times more likely to buy having fewer options. She also reflected about how members of fundamentalist faiths seemed to experience hope and positivism (low depression probability) even when many of choices were taken away, they experienced a sense of control over their lives.

Risk avoidance bias.

Some of the human biases identified while managing risks and uncertainty were defined at Prospect Theory by Daniel Kahneman and Amos Tversky. Showing for instance that loss is more significant that equivalent gain. Or like the Risk-seeking, we will drive across the city to save 5$ for a 15$ calculator but not for 125$ coat. Or how we misread the small probabilities that add up when chances are taken repeatedly. As an example could be the probability of getting Covid while commuting could be hypothetically really low e.g. 0.02, while if we do it 200 times is 98% probable to catch it (you can play with this simple calculator). 

Quantitative risk vs perceived risk.

If risk perception is subjective the only common language to compare risk is mathematics. Do not confuse reporting simplification with risk evaluation. We should rely on robust science for risk evaluation, while simplification can be good for human understanding.

Measure risk perceived is key for closing the gap between human bias and reality. You can check this study from Owen Shen comparing real reported death causes vs Google Trends (what we search) and news from The Guardian and The New York Times. While news are very correlated between them, nor humans searches nor news are aligned to facts. 

Also, as I mentioned in my previous posts (The Power of Narratives), we need to take into consideration that perceived risk is context and time dependant. We can use for instance how Google Trends vs GDELT news has evolved along last year as a proxy of this risk perceived along the time globally. 

Some super simple recommendations to improve our decisions: 

1. Decouple emotions from decisions. This comes from psychology: Do not get distracted with our emotional attachment when we take decisions. Do not personalize decisions, if is need it you can even talk in 3rd person about them. Do not overgeneralize. Remember that time pressure is correlated to risk seeking. But talk, is the best way to rationalize decisions, trying to explain why we want this decision vs others.
2. Focus on global risk vs individual. Do not underestimate global impact of our decisions. I fact a great practice is to analyze from outside how decisions will impact overall. A great example is our Top 3 Global Challenges: Pandemics, Sustainability and Redistribution. Were our individual decisions have a clear impact to an overall global optimization challenge. BTW of course not all players have the same impact, so is always good to use Pareto rule. 

3. Think about worst case scenarios. Both frequency and impact are key things to consider when defining a decision. When we evaluate the impact, we can think of different scenarios depending on our actions. Check this link from the Institute for Health Metrics and Evaluation to compare different scenarios of Covid-19 depending on the measures taken. Also, find bellow an example of Global Warming scenarios by 2100 depending on our decisions. 

Build your own Decision framework.

I like to think about Decisions as the process of learning. That is how we built our own decision framework.

References

The Art of Choosing. Sheena Iyengar 2010

Charting Death: Reality vs Reported. Owen Shen

Institute for Health Metrics and Evaluation (IHME)

Tversky, A., Kahneman, D. Advances in prospect theory: Cumulative representation of uncertainty. J Risk Uncertainty 5, 297–323 (1992). https://doi.org/10.1007/BF00122574

Emissions by sector – Our World in Data

How hot will Earth get by 2100? (Nature, April 2020)