Making better decisions, part II
🤑 The phrase “Black Friday” has its roots in Philadelphia: During the 1960s, police there used it to refer to the throngs of shoppers — and resulting bleak traffic — that descended upon the city after Thanksgiving.
Issue #218: Prospect theory, goal maps, and bad ideas
Last week, we wrote about making imperfect decisions; consider this sort of a sequel. When faced with two choices, you might be tempted to look at it through the lens of risk: Which one seems like the most sure thing? Often, tough decisions in our lives have that shape: Should you take the job in another city, should you ask the boss for a raise?
However much we might like to think differently, our brains are hardwired to react in certain ways. And there are two things human brains dislike in particular: Risk and loss.
Prospect theory, which helped its discoverers win the Nobel Prize in Economics in 2002, says that there’s a counterintuitive relationship between risk and loss when we make decisions, depending on which of those two we’re focused on. At a basic level, prospect theory says:
- We tend to value avoiding loss higher than an equivalent gain
- We choose options with “safe” outcomes
- But if the “safe” option feels like a loss, we’re happy to take big risks
As Mark Shrime, MD, PhD, writes on Medium, the seemingly “safe choice” can be misleading: “When we’re offered a choice between a risky thing (like a mystery box) and a sure thing (like a boat), we humans avoid risk only when the sure thing is good.” So much hinges on your personal perspective and frame of reference (and is part of the reason that making “imperfect” decisions is better than making no decisions at all).
To help whenever you’re in the midst of trying to make such a decision, Shrime recommends a short exercise: For 3 minutes, sit and visualize taking the risky choice, and all that comes with it. Then for another 3 minutes, sit and visualize everything you stand to lose by not taking it. This will help clarify which part of the decision for you is about risk, and which is about loss.
1️⃣ 1 sentence, 1 story
- Facebook’s “goal map” is a simple way to visualize and tie together goals from the company mission level all the way down to individual teams. (Analytics at Meta)
- When subways first debuted in London, engineers didn’t include proper ventilation for the tunnels because they assumed that, unlike steam engines, they didn’t really need it; subway systems globally followed suit, and now rising global temperatures are making this early design flaw visible around the world. (Rita Kind-Envy)
💡 Your daily dose of practical wisdom about “bad” ideas
Bad ideas can be a useful starting point; learn from them and then move on to the next idea, which will be just a little better.
Deepen your understanding every day with the Medium Newsletter. Sign up here.
Edited and produced by Harris Sockel & Carly Rose Gillis
Questions, feedback, or story suggestions? Email us: tips@medium.com
🎉 Read without limits or ads, fund great writers, and join a community that believes in human storytelling with membership.
