Can leaders make better decisions by thinking like computers?

In a business setting we often hear that a ‘rational decision-making process’ is the way to go. ‘Data driven’ decisions that take account of all the relevant information, and then, like a computer, decide the optimal course of action – but is that really the best approach to making decisions?

In a business setting we often hear that a ‘rational decision-making process’ is the only way to go. ‘Data driven’ decisions that take account of all the relevant information, and then, like a computer, decide the optimal course of action – but is that really the best approach to making decisions?

At Wyda we’re obsessed with the decision-making process, and with human behaviour, so when we came across a TEDx Talk about making optimal decisions by thinking like a computer we jumped in to challenge our thinking and learn what it was all about. Tim Griffiths, a computational cognitive scientist, lays out three models that computers use to make decisions, and then explains how we mere humans can use them in our everyday lives to optimise results. So, let’s explore the models, see how they apply in a business perspective, and determine if there are any leadership skills we can pick up along the way.

1. Optimal Stopping

What is it?
Optimal stopping is a decision-making process where you determine when to stop reviewing your options, and make a decision based on the facts that you have. The key is knowing when to stop, and there’s a mathematical theory that says once you’ve reviewed 37% of the possibilities, you’re in the best position to make a decision that will optimise your chance of getting the best outcome.

Where do we see this in a business perspective?
We’ve all kind of felt this, when you’re reviewing data or trawling through research there comes a point when you feel you’re becoming counterproductive. Also known as ‘analysis paralysis’, this can be avoided if you follow the 37% rule. If you’re looking for a new premises for the business, for example, review 37% of the options without making a decision, then chose the next one you see that’s better than everything you’ve seen so far.

How can we use it to increase our leadership skills?
Accept the fact that you’ll never have perfect information, and try to recognize when you’ve reached the point when you are ready to act. If you’re delaying to find more information, telling yourself you need more data then it’s not a rational decision making process that’s driving you, it’s probably fear.

“Some decisions we face as humans are not enhanced by simply applying more effort or finding more data.”
Kate Kesby

2. Explore / Exploit Trade-Off

What is it?
The explore / exploit trade-off is the dilemma faced when deciding between an option you’re quite familiar with, and one that you’re not. If you select the option you know then you’re choosing to ‘exploit’ the information you have, for a fairly predictable result. If you choose the option you don’t know then you’ve decided to ‘explore’ another route, and while you’ll learn along the way the outcome is less predictable.

Where do we see this in a business perspective?
Let’s say you’re faced with a choice between diversifying your product range and broadening your impact into the market you’re in, or using the power of your brand to develop a completely new product range, in a completely different market. First you’ll have to determine the potential benefit of moving into the new market. Then, how much will it cost to find out more information, to reduce the amount of risk being taken? And finally, how long will you be able to take advantage of this new (to you) market? In essence, the value of new information will increase the more opportunity you have to use it in the future.

How can we use it to increase our leadership skills?
When you’re faced with a limited number of decisions (as with the example above) this dilemma can be a useful way of analysing risk and reward, however it can also be applied at a more granular level, when deciding whether to delegate, or not.

“Is it easier to do this myself? Or shall I coach and train, then delegate and correct errors until my team gets it right.”

If you find yourself leaning toward the DIY approach, then is it really the most rational approach? How many times will you need to do this task again in the future? Are you, perhaps, taking the dependable yet sub-optimal solution, to avoid a small element of risk with the reward of more time on the other side of your efforts? If that’s the case, then it’s probably control that’s driving you, as opposed to a rational decision making process.

3. Limited Memory Storage

What is it?
This is a system that computer scientists have developed over time to decide what information should be stored in a computer’s fast memory system. This is the ‘quick access’ part of your computer’s memory, and it has a limited capacity so it needs to be as efficient as possible. This eventually led to the ‘least recently used’ model, where space is created for new information by the removal of the ‘least recently used’ piece of information.

Where do we see this in a business perspective?
You can see it in action, quite simply, on any pile of papers on a desk. So long as you put every piece of paperwork back on the top after you’ve finished with it, you’ll end up with a well-organised filing system, with the most frequently used information right at the top of the pile and you can keep purging the bottom of the pile that you rarely access.

How can we use it to increase our leadership skills?
To be honest, this model is conceptually a good way of breaking down larger problems into smaller ones, by removing the information that’s not required, and focussing on where you expect to get the best result, however it seems strongly subject to recency bias, just because we access the ‘same old’ tired information frequently doesn’t mean it’s the best information to solve new problems.

So what do you think?

Is there something in the way that computers approach problem solving, that we can use in our own decision making processes…?  It’s an interesting question in this day and age, with Artificial Intelligence becoming part of the picture more often. We certainly think models are useful in providing a framework, or a process you can use to make decisions, however the irony is no matter how logical you are, or how rational your decision making process is – the data shows 37% is the best you’re going to get. Meaning you’ll fail to get the optimal decision, most of the time.

So perhaps, and Tim Griffiths agrees, a benefit we can gain from all this is to allow ourselves off the hook, as emotional beings, for not always making the right decision. We are only human, after all, and we’re dealing with other humans too. Sometimes our emotions get in the way, sometimes it’s unconscious bias, and often people just don’t react in the way we might have expected.

Perhaps the computer approach can help us humans make decisions with more compassion rather than less, knowing that the best we can aim for is to ensure the best process, and accept there’s an element you can’t predict or control involved in every outcome, no matter how logical you happen to be, because we operate in complex adaptive systems.

Feel free to let us know your thoughts in the comments below, and if you’re interested in making better decisions in the workplace, check out our advanced business simulation here.