Decision Quality

8Sound Reasoning

I would not give a fig for the simplicity this side of complexity, but I would give my life for the simplicity on the other side of complexity.

—Oliver Wendell Holmes

Imagine working for a company facing a very important long-term decision that will shape its future. The frame of this particular decision problem leads to several compelling alternatives, each with its own set of uncertainties that affect how much value it could deliver over the next decade. It's impossible to intuit which alternative is best in a situation like this, where both complexity and uncertainty are high. Instead of going with our gut, we need a robust and rigorous approach to determine which alternative will provide the most of what we truly want. Sound reasoning, based on normative decision theory, allows us to reach clarity with confidence given the information we have.

In decisions that are simple, quick, or repeated frequently, the best alternative can usually be spotted based on experience and intuition. Little reasoning is required; a brief check is used to ensure that biases aren't misleading us. In slightly more complicated cases, basic calculations will reveal the best choice. Truly complex decisions require much more rigorous analysis.

Recall Michael's decision about whether he should keep his current job or accept a new position with a startup. This chapter begins with the reasoning for Michael's decision: Pencil, paper, and simple math will clarify the best choice. Next, ...