How smart people make a decision

There’s a misconception that the purpose of experts is to tell you what to do. That’s not right. What they do is help you think.

Imagine that you are a person making a momentous decision. You could be the CEO of a large company pondering an acquisition, a consumer deciding whether or not to buy a house, or the President of the United States conducting foreign policy. How should you use experts to help you make those decisions?

It’s easy to make a decision

Look at the alternatives and decide. There’s you go, you made a decision.

Acquire a company or build the capability yourself? Buy the house with the damp basement and the cute garden or the one with the leaky roof and the south-facing windows? Assassinate the evil general on foreign soil or suffer continued losses from terrorism?

These are difficult decisions, but making them is easy — you just say “do it” and it’s done. What’s not easy is seeing the future.

It’s easy to see one step ahead. Buy the company and you can offer their products. Buy the house with the garden and you can plan flowers. Bomb the general and he won’t stir up trouble any more, and the country he worked for will think twice about messing with you any more.

What analysts do

Analysts make you smarter. I know — I used to be one.

When faced with choices, the smart decision-maker asks the analyst or expert. They tell you what the trends, the data, the past behavior of the players, and historical precedent presage about the consequences of the decision.

How hard will it be to integrate the new company? How hard would it be to just compete with them, and how long would it take? Is the market going to shift based on new technology or consumer trends? What is the cost of capital right now, and how will that change? How will current customers react?

The analyst, who has been watching your market for some time, has already been thinking about these questions for years. When you turn to the analyst, they can answer quickly and authoritatively, or if you have time to wait, perform the analysis over a period of hours or days and get back to you.

The analyst is often wrong. Analysts have biases and blind spots. This is why you’re better off talking to several, who come at the problem from different perspectives.

Analysts don’t decide. You do.

Crucially, analysts don’t make decisions. They don’t tell you what to do. They tell you what might happen based on what you decide. You, the executive, choose what to do — but at least you know the potential consequences.

The expert might tell you that capital is cheap right now, and even if the acquisition goes badly, it won’t be too costly. Or they might explain that as your company is currently structured, the merger would create internal conflict that would take years to resolve, sapping productivity.

The expert might tell you that the damp basement shows signs of mold, and that fixing it would cost you tens of thousands of dollars — but that you could put a garden in next to the other house for a lot less than that.

The expert might tell you that the country where you are dropping the bomb might expel your troops, deprive you of a base of operations, and fall under the influence of the country you were trying to hurt. The analyst could predict that the general’s country operates through stealth and proxies, and would likely retaliate through cyberterrorism and proxies around the world — “asymmetric” warfare that’s difficult to counter. Or that it is unlikely to back down in response to verbal threats. Or that it no longer has any incentive to abide by its deal not to create nuclear weapons, and how long it will take to build those weapons, absent any restraint.

These are all predictable consequences, if you have the right analyst helping you.

Experts and “elites” get a bad name — because they are always describing head-in-the-clouds scenarios and telling you what “might” happen. It’s a lot easier to just go with your golden gut.

But your choice is not between going with your gut and doing what the experts say.

It’s between listening enough to understand potential consequences and being smart — or ignoring established experts and remaining ignorant.

Experts support decisions. They don’t undermine decision-making.

You know what undermines decisions? Ignorance. In the long run, that’s the expensive and difficult choice.

One response to “How smart people make a decision

  1. Oh, Josh. Did you miss the memo? Like many on the American right, the current administration doesn’t believe that there are “experts” in nonscience fields. Hell, many of them don’t believe there are experts even in recognized fields of science, such as climate science, risk assessment, and economics. That’s why President George W. Bush refused to believe the evidence that “Just Say No” won’t prevent unwanted pregnancies. It’s why the same Bush refused to believe that needle-exchange programs would save lives without creating moral hazard.
    To learn how we reached this sorry state, read The Death of Expertise: The Campaign against Established Knowledge and Why it Matters by Tom Nichols.
    https://www.amazon.com/Death-Expertise-Campaign-Established-Knowledge-ebook-dp-B01MYCDVHH/dp/B01MYCDVHH/

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