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"The Perfect Decision"

interview with the authors of Smart Choices: A Practical Guide to Making Better Decisions, 272 pages, just published by Harvard Business School Press this month.  The authors are Ralph L. Keeney (professor at University of Southern California), John S. Hammond (former professor at Harvard and MIT), and Howard Raiffa (professor emeritus at Harvard).  The interview appeared in Inc. magazine, October, 1998, pp. 74-78.

Inc. magazine wanted to find out how entrepreneurs do and should make business decisions.  A common mistake is that people often jump in and solve the wrong problem.  They "jump at the first characterization" of the problem.  The western world, especially in the U.S.,  praises the seat-of-the-pants decision-making.  Those who take risks, making decisions with sketchy information and huge uncertainties—and whose companies benefit—are regarded as heroes.  [This is somewhat like the "John Wayne" syndrome.]

On the positive side: "What distinguishes entrepreneurs is the way they choose to define the problem.  They aren't limited by a lack of resources; they find a way to acquire them."  Someone in a large corporation would be more inclined to be bound by apparent resource constraints, e.g., a capital budget.

Some suggestions these authors provide:

• Practice pre-decision-making.  This is contingency planning.
• Ask, what is my decision problem?  What do I have to decide?
• Clarify your real objective.  Take account of your attitude toward risk.
• Make appropriate trade-offs among conflicting objectives
  
  This last item is the heart of their prescriptive decision-making process, as I recall from reading about it elsewhere.  While not as complete as using expected value and a value function or an objective way to measure value, this book's approach may become widely used.

These professors have sterling credentials.  Keeney's Value-Focused Thinking is excellent (now in paperback from HBS Press).  (I ordered a copy of Smart Choices, and the review is posted as Tip 52.)

Link to HBS Press pages describing this book and ordering ($22.50).

—John Schuyler, October 1998, revised May 1999

Copyright © 1998 by John R. Schuyler. All rights reserved. Permission to copy with reproduction of this notice.