Why Smart People (Sometimes) Make Bad Decisions

This podcast episode discusses the dangers of excessive noise in decision making within the corporate world. It explores the sources of variation and highlights the role of judgment personalities in contributing to noise. The episode emphasizes the negative impact of noise on business success and the importance of reducing noise to improve decision quality. The speakers caution against relying solely on AI or automation, emphasizing the need for human judgment and the effective management of algorithmic bias. Decision hygiene is introduced as a strategy to reduce noise and improve the quality of human judgments. Practical steps to implement decision hygiene in organizations are provided, including gathering independent judgments, structuring evaluations, and conducting structured interviews. The importance of incorporating different perspectives and actively open-minded thinking in decision making is also discussed. The chapter explores the balance between the costs and benefits of decision-making procedures and highlights the need for periodic review and improvement. Overall, the episode emphasizes the importance of recognizing superior solutions, improving meeting efficiency, and eliminating bias and noise from decision-making processes. Takeaways • Excessive noise in decision making can lead to inconsistencies, errors, and fluctuations in outcomes within organizations. • The sources of variation in decision making include differences in toughness of sentences, taste and preferences, and within-judge variability. • Judgment personalities play a significant role as a source of variation in decision making. • Excessive noise in decision making can negatively impact business success and the credibility of the decision-making process. • AI and automation are not a guarantee for optimal decisions and should be seen as tools to augment human judgment rather than replace it entirely. • Decision hygiene is a strategy to reduce noise and improve the quality of human judgments in decision making. • Practical steps to implement decision hygiene include gathering independent judgments, structuring evaluations, and conducting structured interviews. • Incorporating different perspectives and actively open-minded thinking can enhance decision quality. • Decision-making procedures should involve employees in their creation and periodic revision to avoid becoming bureaucratic. • Balancing the costs and benefits of decision-making procedures is crucial, and continuous improvement is necessary. • Recognizing superior solutions and improving meeting efficiency are important aspects of better decision making. • Recognizing and eliminating both bias and noise are essential in improving decision-making processes.