Video: How to improve decision making

In this World Economic Forum video, Daniel Kahneman, Professor Emeritus of Psychology at Princeton University, describes how using a two-step approach can help organizations reduce risk and improve decision making.

Kahneman, a Nobel Laureate in economics, urges organisations to spend more time thinking about how they make decisions. He suggests attending to the ‘quality’ of decision making, and gives advice on how to tap into the energy of groups and prevent paralysis.

Click on the video above for the full interview, or read key quotes below.

On Judgement and Decision making

I use Systems 1 and 2 as a metaphor. I use System 1 to describe automatic thinking. You’re almost the spectator of the way those thoughts come to mind. I use System 2 to describe more deliberate thinking. I feel I’m the author of my actions and my thoughts when they come from System 2, much more than System 1. System 1 provides suggestions, when endorsed by System 2 they become the beliefs that we have, the decisions that we make and the actions that we take.

If there is something that you really want to do, then you are probably overly optimistic about it. Optimism is the source of everything that’s good, but it’s also the source of a great many failures. The worst danger for many organisations is that towards the end when it becomes very critical to check on a decision, everybody has to be on board. So how to manage dissent without paralysis is the name of the game. My key advice is to keep track of the process… and querying the sources of information is well worth doing.

On Enabling Dissent

One suggestion for conducting meetings is to start by asking people to jot down their opinion on a slip of paper. It protects dissent, because if there is a minority view it’s going to be expressed. Whereas somebody who hears that everybody else is thinking another way, may actually not do it. It’s essential to tap the knowledge and the energy of the group.

An experienced decision maker will know not to narrow decision making prematurely. My key recommendation is to view decisions as a product that gets manufactured in a certain way in an organisation. And viewing it as a product, you want to question the manufacturing process.

Author: Daniel Kahneman, Professor Emeritus, Woodrow Wilson School of Public and International Affairs, Princeton University, USA

Image: A man walks beside the Bank of Japan (BOJ) building in Tokyo November 19, 2012. REUTERS/Toru Hanai