October 2020 | 

Making Better Decisions Under Uncertainty

Making Better Decisions Under Uncertainty

Just a few months ago, would you have deliberated about getting on an airplane, eating in a restaurant, or sending your kids to school? How about signing a contract with a different supplier or okaying new hires? These and almost every other decision we’re faced with right now — both in and out of the office — don’t just feel different than they would have in March. They are different.

We used to rely on past experience, and on reasonable expectations about the future, to help guide us. Unprecedented levels of uncertainty have now made those approaches mostly ineffective. But uncertainty doesn’t just change the basis for our decisions: it also causes new problems of its own. Wharton professor Maurice Schweitzer says uncertainty elicits emotions that can cause us to make choices irrationally, or bring on a kind of paralysis that makes even minor decisions seemingly impossible to make.

“Anxiety and even fear can pervade our decisions,” he explains. “But that doesn’t mean we have no control over them. When we understand and recognize what these emotions do, we can learn how to regulate their influence.” That’s one of the critical lessons in the five-day Effective Decision Making: Thinking Critically and Rationally.

Directed by Schweitzer, the program shows participants how to make the best decisions possible under uncertainty. “That means first characterizing the uncertainty we’re facing and understanding how to gather the best information available to inform our decision making,” he says, “and then learning how to integrate the information we gather to make the best decisions that we can.”

Avoiding Decision Paralysis

Professor Cade Massey, who teaches a session on the “logic of chance” in the program, says that all too often leaders simply fail to acknowledge the reality of their environment. “High levels of uncertainty mean you can never know exactly what the future holds — whether that future is hours, weeks, or months from now. Stop trying to get a complete picture and understand that some things are simply unknowable.”

Schweitzer adds that a lack of information (never mind a complete picture) can easily lead to decision delays. “You can’t know everything you’d like to know. Making decisions without a complete set of facts is always a challenge. Sometimes you should delay a decision and gather more information; other times you should make your decision. This program will help you navigate this process.”

He says, though, that it’s also common that the information you think you need — let’s say it’s the outcome of the presidential election, or the date for a COVID vaccine — might not really be necessary. “Often, says Schweitzer, “the plans we are considering aren’t really contingent on that information. You need to think carefully about why you are delaying a decision, and whether your reasons are valid. Your delay is consuming resources, potentially missing opportunities, and preventing follow-on decisions. We teach a research-based, systematic approach for understanding when it’s time to decide and for making that decision. The goal is not to be faster, but to avoid the costs of deferring for too long or for the wrong reasons.”

Crowdsourcing the Right Way

Another decision pitfall involves including others in your decision. The program explores the process of group decision making and how to harness the wisdom of the crowd. “In general,” says Schweitzer, “we tend to discount the information other people have. But there are best practices for choosing whom to look to [for] input, and how to include that input in your decisions. Many group processes inhibit people from speaking up — and they may be the people you most need to hear from. Learning proven techniques for group decisions can help you avoid common mistakes.”

Even if you’re not in a group, it often makes sense to gather input from others to guide a decision. Today, though, that can be a risky move. “My research reveals that the anxiety that comes from uncertainty can cause us both to seek more advice and to be less discerning about who we turn to. You need to be aware of this tendency, and know who to reach out to and whether and how to incorporate their advice into your decisions.”

Learning a Multi-Dimensional Approach

A strength of Effective Decision Making: Thinking Critically and Rationally has always been its wide-ranging view of decision making, drawing on talent both in and beyond the Wharton School. Sharing their academic research, real-world experience, and evidence-based approaches are professors Tom Donaldson, an expert on business ethics; Cade Massey, half of Massey-Peabody Analytics, whose professional and college football rankings have been cited in the Wall Street Journal; Joe Simmons, whose latest research on the psychology of second guesses and “wisdom of the inner crowd” was just published in Management Science; and Abraham Wyner, statistics professor and faculty lead of the Wharton Sports Analytics and Business Initiative.

New to the faculty lineup are Annie Duke, professional poker player, consultant on corporate decision making, and author of How to Decide: Simple Tools for Making Better Choices; and Angela Duckworth, a psychologist and newly appointed Wharton faculty member. Duckworth’s ground-breaking work on grit and perseverance “is fundamentally changing the way we think about the science and practice of behavior change, empowering people to grow through evidence-based decision making,” according to former Wharton School dean Geoffrey Garret.

“I am excited to build on the strengths of the program and to involve two new colleagues as we switch to an online format,” says Schweitzer. “It’s more important than ever to be more systematic and careful in decision making. It’s not about speeding up or slowing down, both of which can present drawbacks of their own, but about using an approach that avoids common biases and other pitfalls and assures the best possible decision with the information you have at the time.”