Monday, September 12, 2011

Changing the way you make decisions

I've been re-reading Switch: How to Change Things When Change is Hard (Chip Heath & Dan Heath) as a way to improve my productivity at work. (It's already helped me quite a bit by using some "Shape the Path" techniques.) I hit an interesting section this weekend that discusses two basic decision-making models. The first is the "consequences" model:
The consequences model is familiar to students of economics. It assumes that when we have a decision to make, we weigh the costs and benefits of our options and make the choice that maximizes our satisfaction. It's a rational, analytical approach.
Then there's the "identity" model:
In the identity model of decision making, we essentially ask ousrelves three questions when we have a decision to make: Who am I? What kind of situation is this? What would someone like me do in this situation? Notice what's missing: any calculation of costs and benefits.
This struck a chord with me. I thought about a recent decision I made that was based solely on the consequences model. I collected all the data I could, did a number of calculations, made a few adjustments to control for certain factors and then I heavily analyzed the results. My decision was ultimately based on how numbers played out. (Incidentally, I'm not satisfied with the decision I made.)

Then I thought about it some more. Most of the big decisions I make tend to use the consequences model. Should I buy this car or that car? Calculate the fuel efficiency, expected maintenance costs, insurance premiums and even weigh some non-monetary costs. Which vehicle will be better in Minnesota's winters? Will one vehicle be more of a burden than another when it comes to hauling kids around? There are costs involved there as well -- mostly in convenience. But there's little emphasis on identity. I'm not suggesting a car purchase be cosmetic; rather, how does my identity influence my decision? In such a scenario, the identity line of reasoning might go something like this:
  • Who am I? I am a person that values sustainable manufacturing processes.
  • What kind of situation is this? One car is built in a zero-landfill plant by an LEED-certified company; the other is not.
  • What would someone like me do in this situation? He or she would buy Car A instead of Car B because the former reflects environmentally-conscious values.
Another line of reasoning might be: I am a person who wants to buy American goods; one car is made by an American company; a person like me would buy that car.

I'm wondering whether the identity model would help make decisions that will ultimately lead to higher satisfaction. I suspect people place a higher relative value on identity than consequences, meaning that if the cost/benefit analysis doesn't strongly suggest you make one decision while the identity model suggests you do, it should be used as the default. It might take many thousands of dollars of extra cost on a vehicle, for example, to overcome your identity preference.

Furthermore, deferring to identity by default and using in-depth consequence analysis only when there's no strong identity preference may provide some extra fuel for the Rider discussed in Switch (which actually comes from Jonathon Haidt and his book The Happiness Hypothesis). In other words, if you consciously establish a default approach of not doing a cost analysis unless you have to and you instead focus on identity aspects, you may retain your power over the Elephant.

No comments:

Post a Comment