In the previous section, World Problems, I outlined some serious problems plaguing humanity. In order to effectively address these problems we need to make some tough decisions and find the best possible answers to critical questions. Given significant but limited resources with which to make the world a better place, how do I allocate those resources to best advantage? Which problems are the most serious? Which ones cause the most suffering today? In a hundred years, which ones will have caused the most suffering? Which are easy to fix, and which are hopeless? And the key questions: Which problems yield the most preventable suffering per dollar of remedy? How do I allocate my limited resources to most effectively meet my objectives?
People make important decisions all the time, and most of the time they do a good job. They make decisions without needing to quantify probabilities and outcomes, instead relying on a sense of risk and some feeling as to the relative desirability of the various outcomes. Decision Analysis is a branch of mathematics which breaks down the decision process to quantify all the probabilities, outcomes, and cause-and-effect relationships which affect the decision. Formal decision analysis does not contradict the "intuitive" human decision making -- it pursues the same course but with sharper focus.
There are a couple cases where intuitive decision making fares especially poorly. First, human intuition fares poorly in decisions where most of the information you would like to have is not available. People make decisions easily when the alternatives are well distinguished and the likely outcomes for each alternative are clear. But many important decisions must be made with "high uncertainty." Most of the information one might want just isn't available. The number of alternatives is bewildering. The effects of the alternatives are just guesses. Intuition is fine when things are clear, but with high uncertainty, intuition is too uncertain to provide reassurance. The uncertainties distract from what little information there is and under this stress people often begin to think "this is hopeless" or "I have no idea." Confronted with a decision at that point, people may avoid making a decision, pick an alternative at random, or choose the most conservative alternative to avoid short term, visible risk as much as possible. These are poor choices.
Intuitive decision making also fares poorly when the decision somehow incorporates very large or very small values. Most people have a reasonable sense of values as small as a hundredth or thousandth. But very small values such as one millionth and one billionth all get lumped mentally into the "very small value" category. If you ask a person directly for the difference between two very small values, they can convert the values into the explicit number system we all learned in grade school and compute the difference explicitly. However, if you ask a person to make a decision which hinges on weighing the difference between the two very small values, their intuitive sense will fail to distinguish between them. The problem was, they were never challenged to convert the conceptual values to concrete numbers. This is fine for reasonably sized values, but for very large or very small values, the intuitive sense cannot make distinctions.
Decision analysis does not magically solve these problems -- but it does much better than intuition alone. Even with very little information, decision analysis can piece together a course of action which is much better than just guessing. Decision analysis accepts uncertainty in any or all of the elements of a problem and does the best job it can. In the next couple pages I'll present some examples of important decisions involving very large and very small numbers, outline some strategies people can use to make better decisions, and discuss some important factors that a good decision making technique should account for.
"When decision analysis was first developed, a common comment was, "If this is such a great idea, why doesn't [insert name of large, famous company] use it?" Today, it is difficult to find a major corporation that has not employed decision analysis in some form... Increasing uncertainties and rapid change require fresh solutions rather than tested "rules of thumb." Some day, decision analysis of important decisions will perhaps become recognized as so necessary for conducting a provident life that it will be taught in grade school rather than in graduate school."
-- Ronald Howard, The Evolution of Decision Analysis
The Bottom Line
Decision analysis can help us overcome the inadequacies of human
intuition when making tough decisions.
