Decision Making Process - A632.1.4.RB_MilliganSteven
My decision-making processing generally
varies depending on the problem at hand.
Sometimes it’s a simple decision. Do we go to the park or to the pool? Do I want
the chicken or fish? These are simple choices and the solution doesn't usually
matter all that much. However, decision
making becomes more difficult as the problem becomes more complex. Do we buy the $15k car or the $8k car that
may need some work? Do we want to be in
debt or free of loans? Which of the two cars is more likely to have maintenance
issues and will cost more in the long run? If possible I like to guess as
little as possible. When a problem is at
hand I gather as much information about it as I can. I look to the past, what is being done in the
present and what will changes likely hold for the future. It can be difficult to see the third, fourth
and fifth order of effects that seemingly small decisions can cause. When it comes to big business, small
decisions now can mean millions of dollars in the future. I'm sure Samsung did not realize that the
manufacturer of the Samsung Galaxy Note 7 was going to produce a phone that
would start blowing up on people. There
was no prior experience with this issue and no clue that the future would cost
them in the hundreds of millions of dollars.
In the text they discuss Dynamic Programming. The book states, "dynamic programming
exploits the idea that even though a decision problem may involve a large
number of stages, one need not enumerate and take expectancies of all possible
contingent future realizations to arrive at an optimal decision policy"(Hoch
& Kunreuther, 2001). Essentially, we
don't need to take every future outcome into account when making
decisions. Rather than knowing every
possible outcome we look to an end state and work backwards. This is called backward induction. I was once given a puzzle to solve with a
group of friends. The goal was to figure
out the correct password when given a series of short sentences that all
connected in some way. We discovered
that we had been given three possible passwords. When starting from the password first and
working our way back through the connecting sentences we were able to quickly
figure out which password connected with all the sentences and therefore which
was correct. The same can be done with
decision-making. Look at the end state
of a decision we'd like to make. Tonight,
I will decide if I will run 6 days a week for 3 months straight or if I will
run 3 days and week and lift weights three days a week. I can look out three months and decide what
kind of shape I would like to be in and work backwards from there. Doing this will enable me to make the
decision that is best for me. In real
life there will always be some level of variables when it comes to this, but
this will help us to make better decisions more often. This would impact my forward planning greatly
because I would be looking at the possibilities that may occur when making a
decision.
A few years ago my mother had come to visit
my wife, myself and our new born baby in Germany. The day she needed to return we drove to drop
her off at the train station so she could take the 2-hour train ride to the
airport. Upon arrival at the train
station we learned the train had been significantly delayed. This meant she would miss her next train stop
and then would miss her flight. We had
to quickly leave and head for the airport ourselves. It was at this point we realized we were low
on gas and had not brought any food or diapers for our baby. We were definitely not prepared for the more
than 4 hours of travel it would take to get her to the airport and back. From then on, when traveling, we always
looked at the possible outcomes our road trips could have and did what we could
to mitigate any possible problems we might run into.
Optimal dynamic decision analysis suggests
that "individuals are no less astute at drawing proper statistical
inferences from current events and learning from the past as they are planning
for the future"(Hoch & Kunreuther, 2001). This essentially means that we are not good
at doing math in our head. A considerable
amount of work needs to be done in order to provide us with data we may need to
make certain decisions. When new data
comes to light we may need to change our ideas about the world. One example I have of this is based on Nissan
and Ford cars. When I first graduated
from college we purchased a slightly used Nissan Sentra. Less than one year later it broke down and
could not be fixed. Since then I have
driven other Nissans and have decided I will never purchase one ever
again. Similarly, we were in need of a
new car because of our Nissan breaking down.
We purchased a Ford Focus station wagon.
It was older than the Nissan with more miles. It drove great, had lots of room for storage
and zero issues during the time we owned it.
I then purchased another Ford Focus that has similarly been a great car
with very little issues. This experience
I've had has pushed me toward purchasing another Ford when we move again back
to the U.S. The military will only ship
one car for us so we will need another vehicle next time we move. This data, or experiences we've had has
caused me to avoid purchasing Nissans and lean towards purchasing Fords.
As I learn new information about problems and
the world I can make more informed decisions and will have a better idea as to
what the future of those decisions may hold.
I am more likely to make a better decision about fixing my roof if I
learn something about roof fixing. The
knowledge and expertise we have should play a significant role in the decision
process. I hope to get better at this as
life goes on and rely on the experts around me that already know a lot more
about the world than I do.
Bibliography
Hoch, S. J., & Kunreuther, H. C. (2001). Wharton
on Making Decisions. Hoboken: John Wiley & Sons, Inc.
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