Multistage Decisions
I’ve always thought of myself as an intuitive decision maker
based on learned behaviors from past experiences both through my own and
vicariously through others, but I admit, I don’t necessarily look ahead to
future possibilities when making decisions.
As much as I make efforts to do so as in cases when I begin a new diet
and set strict parameters for myself, ultimately, I find that although I had
good intentions, the results most often show that the larger picture of the
future state hadn’t been considered, resulting in failure. When using intuition in making important
decisions, I attempt to minimize risk by considering historical results to
determine future expectations along with my emotions from personal thoughts. On the flip side, dynamic decision models use
math equations to make more complex decisions where the human mind falls short.
Authors Hoch, Kunreuther, and Gunther in Wharton on
Making Decisions recommend a balance between mathematics models that balance
out myopic human tendencies to not think ahead and intuition in decision
making. Being aware of the dangers of
being overly confident in our intuition in solving dynamic decisions and
becoming clear on the implications of making the wrong decision when stakes are
high is a balanced approach recommended to managers. The authors, however, emphasize
when to use our intuition because most often, our everyday reasoning can lead
to the most optimal decisions. This
conclusion would improve my decision making for several decisions where the
stakes are high such as in the workplace in a management role where
stakeholders rely on my decision making.
In such a case, it would reduce errors and subsequently save a lot of
money.
A recent decision I made was choosing a graduate program to
pursue. In making this decision, I
didn’t evaluate risk or use data. I used
intuition and took into consideration factors the following factors: I had to
feel good about it, had to feel motivated by learning outcomes and objectives
of the courses, there had to be a high success rate for graduates of the program, I had to consider the workload and schedule, online or classroom, I
had to determine if the risk is worth the reward, as well as considering my
feelings and emotions about taking the required time away from my homeschooled
son. Overall, I had forecasted the Project Management program to be very
beneficial all things considered, and intuitively it felt as if I was pointing
myself in the right direction.
It may be possible to predict the future impact of a
decision applying optimal dynamic decision analysis only if the probability of
given states at given times is determinable.
By considering a starting point, it can be solved as if it were a series
of independent two-stage problems and solved through backward induction and forward
thinking to the endgame or best-case scenario.
In my example, applying optimal decision analysis wouldn’t work because
the total utility value is not so linear and additive.
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