I’m a student of problem solving. There are times when creative approaches are needed, but there are plenty of times when a structured decision criteria is the best way forward. Through out this week, I wrote entries hitting on this topic. One was about how all this data is becoming available to us to make decision, another was about simple cues, which is the filtering of data, I commented about our desire to make things black and white, and and lastly I showed a decision tree for a heart attack patient . Each of these deals with inputs to the decision making process. Below is a visual showing how decisions can be made:
The illustration shows four modes of addressing a decision.
Unbounded Rationality is the ability to aggregate information until the outcome of the decision is certain. This ignores real world factors like time and money.
Optimization under Constraints inserts a stopping point, but it’s a tricky one. It means that the costs of continuing data aggregation no longer warrants the benefits. It’s the point of diminishing returns. It’s tricky because there never is a clear line as to where that line is. It becomes very involved with expected outcomes, probabilities, and utilities coming into play. A super mathematician might like it but normal individuals wilt under these calculations.
Satisfying is the playing out of scenarios, or options, one by one with the very first one to “satisfy” or meet the desired threshold is taken or chosen. It respects the limitations of time and knowledge and it doesn’t investigate or pursue all the alternatives or consequences.
Fast and Frugal Heuristics takes the best of each of the others and ascertains which approach or if a combination of approaches is best. It could be to take the first or could be to compare alternatives. The guidelines for searching for more information and alternatives is established. The guidelines for stopping the search are initiated. And the Decision Making principles are determined. It could be to put a lot of weight behind a particular cue or it could be through a process of elimination or some other way all-together.
It’s important to remember we live on the right side of this illustration and there is a level of uncertainty in our choices. We use data to make it feel like the left side, but that comes with the cost of a search (time). Thanks again to Simple Heuristics That Make Us Smart for helping me understand this better.