INDIAN INSTITUTE OF MANAGEMENT INDORE

COURSE: LEADERSHIP WORKSHOP

Review of
‘Before You Make That Big Decision’ by Daniel Kahneman, Dan
Lovallo, and Olivier Sibony – HBR June 2011

Submitted by:
Monika S – 2018IPM065
Article: https://hbr.org/2011/06/the-big-idea-before-you-make-that-big-decision

Summary:
Prejudices exist in humans that we are unable to recognise in ourselves. Being forewarned isn't
enough. When giving recommendations, it's not enough to be conscious of your prejudices.
Others, on the other hand, have discernible prejudices. In a business situation, the decision is
frequently taken by someone who is relying on the advice of their team.
We need to have the following questions or affirmations:
We should be asking ourselves these questions:

• Is there any reason to assume motivated errors and mistakes caused by the recommending
team's self-interest? (Intentional and unintentional self-interest)

• Have the people recommending it fallen in love with it? (Emotional heuristic)

• Were there any dissident voices on the recommending committee? (Groupthink)

The decisions that are being proposed must first be questioned in the following way:

Why Could a comparison to a well-known success have an unwarranted impact on the

situation's diagnosis? Have there been any credible alternatives considered? (This is known as
confirmation bias.)

• What information would you want if you had to make this decision again in a year, and how
quickly could you get it? (This is due to a bias in availability.)

• Can you tell me where the numbers originated from? (Bias in anchoring)

• Is the team expecting someone, an organisation, or a strategy that is successful in one area to
be successful in another? (There's a halo effect here.)

• Are the people making the recommendation overly committed to previous decisions? (Sunk
cost fallacy, endowment effect.)

Some questions should be posed about the decision-making proposal:

• Is it possible that the default scenario is overly optimistic? (Competitor obliviousness,

overconfidence, planning errors, and optimism biases, to name a few.)

• Do you have a serious enough worst-case scenario? (Disaster Ignorance) Is the consulting
group being overly cautious? (Irrational fear of losing)

When to use a formal procedure: A formal method is appropriate when a decision is both
important and recurring. The evaluation should be carried out by the true separation decision-
maker and the team providing the advice. It takes discipline, not ingenuity, to use checklists to
enforce discipline. Partially following the plan could result in complete failure. Benefits and
costs: The main barrier for executives who want to implement decision quality control is not
time or money. It's important to emphasise that even the most experienced, capable, and well-
intentioned executives can make mistakes.