Fast and frugal in Harvard Businses Review
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A BRIEF HISTORY OF DECISION MAKING
The January 2006 Harvard Business Review provides a managerially oriented summary of the history of decision making, including the concept of “fast and frugal” reasoning, coined right here at Decision Science News.
Quote:
“The study of decision making, consequently, is a palimpsest of intellectual disciplines: mathematics, sociology, psychology, economics, and political science, to name a few. Philosophers ponder what our decisions say about ourselves and about our values; historians dissect the choices leaders make at critical junctures. Research into risk and organizational behavior springs from a more practical desire: to help managers achieve better outcomes. And while a good decision does not guarantee a good outcome, such pragmatism has paid off. A growing sophistication with managing risk, a nuanced understanding of human behavior, and advances in technology that support and mimic cognitive processes have improved decision making in many situations.
Even so, the history of decision-making strategies is not one of unalloyed progress toward perfect rationalism. In fact, over the years we have steadily been coming to terms with constraints–both contextual and psychological–on our ability to make optimal choices. Complex circumstances, limited time, and inadequate mental computational power reduce decision makers to a state of “bounded rationality,” argues Simon. While Simon suggests that people would make economically rational decisions if only they could gather enough information, Daniel Kahneman and Amos Tversky identify factors that cause people to decide against their economic interest even when they know better. Antonio Damasio draws on work with brain-damaged patients to demonstrate that in the absence of emotion it is impossible to make any decisions at all. Erroneous framing, bounded awareness, excessive optimism: the debunking of Descartes’s rational man threatens to swamp our confidence in our choices, with only improved technology acting as a kind of empirical breakwater.
Faced with the imperfectability of decision making, theorists have sought ways to achieve, if not optimal outcomes, at least acceptable ones. Gerd Gigerenzer urges us to make a virtue of our limited time and knowledge by mastering simple heuristics, an approach he calls “fast and frugal” reasoning. Amitai Etzioni proposes “humble decision making,” an assortment of nonheroic tactics that include tentativeness, delay, and hedging. Some practitioners, meanwhile, have simply reverted to the old ways. Last April, a Japanese television equipment manufacturer turned over its $20 million art collection to Christie’s when the auction house trounced archrival Sotheby’s in a high-powered round of rock-paper-scissors, a game that may date back as far as Ming Dynasty China.”
Source:
Buchanan, L., O’Connell, A., (2006). A brief history of decision making. Harvard Business Review, 84(1)
