How To Make Better Individual Decisions
By Koby Fleck
The latest issue of a national weekly newspaper recently arrived in my mailbox with the cover story: “The World’s Most Admired CEO’s.” The headline prompted me to recall a recent study suggesting that nearly 90% of common stock investors will make their investment decisions based solely on their perceived abilities of a company’s CEO.
This begs the question: can we put too much confidence in our own intuition or the wisdom of just one person, one expert, or one consultant when we make business decisions?
Individual decisions are largely based on a limited scope of information. No matter how smart an individual is, they are likely to make erroneous business decisions at some point. The greater the volume of decisions one makes, the greater the probability that one will make miserable decisions.
Any expert’s or consultant’s singular advice is egregiously inadequate to help you reach your objectives. Often different “experts” in the same field recommend a host of different solutions for the same situation. Which answer is right?
A well-known mathematician is famous for saying, “Invert, always invert;” so let’s invert for an answer. If one individual’s advice is not always completely right, what if we did the opposite, and relied on a group of individuals to help us with important decisions?
Group decision-making is often written-off as largely counter-productive. A brilliant sociologist coined the term “Group Think” to describe the tendency of groups of similar individuals to think or mis-think in the same way.
However, consider the television program Who Wants to be a Millionaire? that gave its contestants three options to aid their decision-making.
When show contestants consulted their pre-selected “expert,” the expert suggested the right answer more than 60% of the time. These are pretty good odds–but interestingly enough, the aggregated answers of the voting audience were right more than 90% of the time. Granted, a game show is not the most rigorous academic or scientific arena to solicit data; but a host of scientific research into the topic suggests that the collective wisdom of crowds is nearly perfect when four criteria are met.
To be accurate, a group must make decisions independently of each other, decision- making must be decentralized and close to the problem, the individuals in the group must come from diverse social/educational backgrounds, and there must be a consistent way of aggregating the groups collective decision making.[1]
My point is this: the collective wisdom of groups is largely accurate and their collective wisdom can support an individual’s decision-making.
Whether you are a CEO of a business or the CEO of your own life, you must make individual decisions. Since you are closer to your problems, challenges, or opportunities than anyone else, you should by default be more qualified to determine which ideas can help you reach your goals. Remember, though, that your proximity to a situation can limit you: you may be handicapped by your own thought processes, biases, incentives, and information.
The Solution:
Look externally and aggregate the best ideas you discover into your existing business processes, then monitor which ideas work and which ideas do not work. Draw ideas from the collective wisdom of others. Napoleon Hill shared that “A group of brains coordinated in a spirit of harmony will provide more thought energy than a single brain, just as a group of batteries will provide more energy than a single battery.”
When facing an important decision, consider incorporating the collective wisdom of others, based on the four requirements discussed, into your tactical or strategic decision- making. It could give you the advantage you need to be a more successful, individual, decision maker.
Copyright 2005 Koby Fleck. All rights reserved.
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