Decision Making and Action E-Book

Jean-Charles Pomerol

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 534

Veröffentlichungsjahr: 2012

Beschreibung

Making a decision, of any importance, is never simple. On the one hand, specialists in decision theory do not come within the reach of most policy makers and, secondly, there are very few books on pragmatic decision that are not purely anecdotal. In addition, there is virtually no book that provides a link between decision-making and action. This book provides a bridge between the latest results in artificial intelligence, neurobiology, psychology and decision-making for action. What is the role of intuition or emotion? What are the main psychological biases of which we must be wary? How can we avoid being manipulated? What is the proper use of planning? How can we remain rational even if one is not an expert in probabilities? Perhaps more importantly for managers, how does one go from decision to action? So many questions fundamental to the practice of decision-making are addressed. This book dissects all issues that arise almost daily for decision-makers, at least for major decisions. Drawing on numerous examples, this book answers, in plain language and imagery, all your questions. The final chapter takes the form of a brief reminder - everything you have to remember to be a good decision-maker.

Leseprobe

Table of Contents

Introduction

Chapter 1. What is a Decision, or What Does Decision Theory Have to Teach Us?

1.1. Actions and events

1.2. Probabilities

1.3. Expected utility

1.4. Subjective probabilities and rationality of the decision

1.5. Caveats and recommendations

Chapter 2. Scenarios and Conditional Probabilities

2.1. Scenarios

2.2. Compound probabilities

2.3. Scenarios and conditional probabilities

2.4. Decision tree

2.5. Scenarios, information and pragmatics

2.6. Pursuance of the scenarios and the “just one more push”

2.7. Conditional probabilities and accidents

2.8. Caveats and recommendations

Chapter 3. The Process of Decision-Making and its Rationality, or What Does Artificial Intelligence Have to Teach Us?

3.1. A decision as a problem

3.2. Decision table

3.3. The general process of decision-making

3.4. Case-based reasoning

3.5. The Olympian point-of-view, and H. Simon’s view

3.6. Information

3.7. Limited rationality

3.8. Heuristics

3.9. Cognitive limitation

3.10. Feedback on rationality in decisions

3.11. Caveats and recommendations

Chapter 4. Intuition, Emotion, Recognition and Reasoning or, What Does the Neurobiology of Decision-Making Have to Teach Us?

4.1. Introduction

4.2. Animal “decision”

4.3. Recognition-primed decision

4.4. The brain and emotion

4.5. Short-term, long-term

4.6. The Bayesian brain

4.7. Caveats and recommendations

Chapter 5. Decision-Making in the Presence of Conflicting Criteria, or What Does a Multicriterion Decision Aid Have to Teach Us?

5.1. Preference structures

5.2. Multicriterion decision aid

5.3. Weighted sum aggregation

5.4. Other aggregation methods

5.5. Aggregation of votes

5.6. Social choice and collective decision

5.7. Individual reactions to multicriterion decision-making

5.8. Constraints and multicriterion decision-making in organizations

5.9. Caveats and recommendations

Chapter 6. The Decision-Maker’s Psychology, or What Does Psychology Have to Teach Us?

6.1. Introduction

6.2. The decision-maker’s rationality and utility function

6.3. Constructing the utility function

6.4. Utility function in the risk

6.5. Loss aversion and the endowment effect

6.6. Biases related to the probabilities

6.7. Self-confidence and the illusion of control

6.8. Biases linked to memory

6.9. Frame effect

6.10. Level of reference and anchoring

6.11. Rationalization and reinforcement

6.12. System 1 or System 2?

6.13. Biases or heuristics?

6.14. Caveats and recommendations

Chapter 7. Context of the Decision: Intention, Commitment, Trust, Fairness, Authority and Freedom

7.1. Intention and commitment

7.2. Trust and reciprocity

7.3. Fairness

7.4. Freedom and responsibility

7.5. Authority

7.6. “Leadership” in organizations

7.7. Rationality between logic and probabilities

7.8. Rationality and “good reasons”

7.9. Caveats and recommendations

Chapter 8. Action: Giving the Impetus or Managing

8.1. Deciding and acting

8.2. Quick or slow decision-makers

8.3. Consensual or imperative decision-makers

8.4. To act or to manage? That is the question

8.5. Reflect long, project long term: strategic planning and decision-making in organizations

8.6. Feedback and learning

8.7. Conclusion

8.8. Caveats and recommendations

Chapter 9. Vade Mecum of the Acting Decision-Maker

9.1. That which depends on you, and that which does not

9.2. That which depends on you: information, imagination and the process of decision-making

9.3. That which depends only on you: learning and planning

9.4. That which depends on nature: the pitfalls of probabilities

9.5. That which depends on our human nature: the pitfalls of the human brain

9.6. That which depends on other people: conflicts and manipulation

9.7. What the result depends on: your style and your action

9.8. And finally…

Bibliography

Index of Names

General Index

First published 2012 in Great Britain and the United States by ISTE Ltd and John Wiley & Sons, Inc.

Apart from any fair dealing for the purposes of research or private study, or criticism or review, as permitted under the Copyright, Designs and Patents Act 1988, this publication may only be reproduced, stored or transmitted, in any form or by any means, with the prior permission in writing of the publishers, or in the case of reprographic reproduction in accordance with the terms and licenses issued by the CLA. Enquiries concerning reproduction outside these terms should be sent to the publishers at the undermentioned address:

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© ISTE Ltd 2012

The rights of Jean-Charles Pomerol to be identified as the author of this work have been asserted by him in accordance with the Copyright, Designs and Patents Act 1988.

Library of Congress Cataloging-in-Publication Data

Pomerol, Jean-Charles.

Decision-making and action/Jean-Charles Pomerol.

p. cm.

Includes bibliographical references and index.

ISBN 978-1-84821-410-1

1.Statistical decision. 2. Decision making. I. Title.

QA279.4.P66 2012

519.5’42--dc23

2012023897

British Library Cataloguing-in-Publication Data

A CIP record for this book is available from the British Library

ISBN: 978-1-84821-410-1

To Jean-Yves Jaffray and Pierre Lévine, whose enlightened discussion and attentive reading I deeply miss.

Introduction

“Only those who never do anything never make mistakes”

Common wisdom

“Thinking is easy, acting is difficult, and to put one’s thoughts into action is the most difficult thing in the world”

Goethe

There are a number of good treatises on decision-making (e.g. [VON 86, BEL 88, BOU 09]) and — which are scarcer — a few serious books aimed at a wide audience [MAR 94, HAM 99]; yet there are precious few which consider decision and action in a single movement, although naturally, we think before we act; hence we decide to act. It is true that there exists what we call reflex actions, which do not stem from reasoning and reflection but rather from automatic responses triggered by perceptions. Although our discussion will lead us to touch upon these, they do not form the main object of our examination here.

Reflection before action involves anticipating events because — it is obvious, but crucial for the rest of this book — the decision relates to the future. We do not decide retrospectively — we can have regrets, and tell ourselves “Had I known, I would have acted differently”, but the problem is precisely that we do not know what the future holds. As the humorist Pierre Dac once said: “Prediction is a difficult exercise, particularly when it relates to the future!”

Thus, in only the third paragraph of this book, we are already faced with concepts and ideas with contours which are difficult to outline, which defy analysis and which, ultimately, do not aid us in making a decision at the moment of our greatest difficulty.

This book has three main objectives: the first is to present clear and accurate ideas about the main concepts of individual decision and action, because there is no science without precise definitions; the second is to offer readers some true rules of decisions which will help them to make better decisions and avoid the main pitfalls of action. Finally this book is deliberately quite simple, and for the main theoretical points the reader is referred to existing literature in particular Bouyssou et al. [BOU 09]. Examples of the main rules of action and caveats of decision-making are highlighted in order for this book to be usable by all decision-makers. The main precepts found in this book will be brought together in the form of a vade mecum at the end.

Chapter 1

What is a Decision, or What Does Decision Theory Have to Teach Us?

Si lon observe ensuite que dans les choses mme qui ne peuvent tre soumises au calcul, elle [la thorie des probabilits] donne les aperus les plus srs qui puissent nous guider dans nos jugements, et quelle nous apprend nous garantir des illusions qui souvent nous garent; on verra quil nest point de science plus digne de nos mditations, et dont les rsultats soient plus utiles.

if we observe that even when dealing with things that cannot be subjected to this calculus, it [the probability theory] gives the surest insight that can guide us in our judgment and teaches us to keep ourselves from the illusions that often mislead us, we will then realize that there is no other science that is more worthy of our meditation, nor whose results are more useful.

P.S. Laplace, Philosophical Essay on Probabilities, 1814.

Nothing ventured, nothing gained

Common wisdom

1.1. Actions and events

Let us begin our discussion with an example.

EXAMPLE 1.1. You are the CEO of a small company which manufactures faucets, and you are considering increasing your production capacity. In your cogitation, you consider that you could construct a new building next door to your existing factory (option a), construct a new building in Nowheresville where the local council is offering a viable plot of land (option b), or buy the business of one of your competitors who wishes to retire (option c).

These are the three possible options. In decision theory, each of these options is called an action.

DEFINITION. An action, or an alternative, is one of the possibilities for acting which depends on the decision-maker and on him alone.

We can see that the meaning of the word action in decision theory corresponds, grosso modo, to the usage made of it in everyday language. The important point is that as soon as the movement which is under consideration does not depend only on the decision-maker, it is no longer an action.

EXAMPLE 1.2. You are preparing your backpack to go off on a trip to the mountains, and you have the choice between taking your coat in case it rains or leaving it behind. You are faced with two possible alternatives: c to take the coat, nc not to take it. Now, let us attempt to evaluate the result of your decision. If it rains and you have not brought the coat, your satisfaction is -2; if the weather is pleasant and you have avoided having to carry the coat, your satisfaction is +2; if you have brought the coat and the weather is pleasant, your satisfaction is +1; and it is -1 if you have brought the coat and it rains.

The fact of whether or not it rains is called an event, and as in the above example, whoever or whatever controls the event is called nature. Certain religions might say it was God, but scientists prefer the neutral term nature. In example 1.2, there are only two events: either it rains or it does not.

DEFINITION. The term event is used to describe a movement of nature over which, by definition, the decision-maker has no control.

The situation is fairly simple: there is you, the decision-maker, who has total power to choose and to put your actions into effect, and there is nature, which controls the events.

Going back to example 1.2, we have seen that depending on the events, the decision-maker is more or less satisfied. The situation can be represented in a table.

Table 1.1.Decision matrix

DEFINITION. We use the term decision matrix to denote the table showing the decision-makers satisfaction depending on the actions chosen and on the ensuing events.