Decision making in times of uncertainty (Stanford)

A new Insight from Stanford Business School tells us something we probably already know: when it’s difficult to predict the outcome, people become more cautious.

Researchers found that when faced with a choice between being given $100 or having a 50:50 chance of winning $200, most people chose the guaranteed $100. Similarly, when faced with the choice between losing $100 or having a 50:50 chance of losing $200 or nothing, most people chose the certainty of the smaller loss.

“People,” the researchers explained, “really don’t like the complexity and cognitive load of making decisions under uncertain circumstances.”

“People really don’t like the complexity and cognitive load of making decisions under uncertain circumstances.”

In other words, when thinking becomes difficult, people tend towards what seems to be the safer option.

But in a world where so much is changing all at once, this creates two problems.

The first is that the tried and tested options may no longer work: the world might not work that way any more and what seems to be the safer option could be leading us into a false sense of security that actually increases our risk.

The second problem is that when people choose what seems the more certain outcome, because that’s how things used to work, they are missing out on the new opportunities that are emerging during a time of change.

What Can We Do Instead?

There are three steps that we can take to address this natural human tendency.

The first is to learn to manage the discomfort we can feel when faced with uncertainty and  then make clearer sense of the situation. The tools of Chapters 1 and 2 of Inner Leadership do this.

The second is to get better at identifying more opportunities in any situation brings and then choosing the best way forward for us. Chapters 3 and 4 provide tools for doing this.

And third, we can learn to describe our chosen way forward in ways that inspire us and other people to want to make it happen. Chapters 6 and 7 provide tools for achieving this.

Most human beings have a natural tendency to want to avoid risk. That’s just the way it is. But in a time of change this actually increases our risk — because the world might not work like that any more.

By taking these three steps we can overcome the uncertainty that researchers found was so critical in shaping the choices people made. We can overcome our bias, reduce our stress, reduce our risk, and increase our opportunities, enthusiasm, and engagement. All of which makes us more antifragile.

Have you taken a decision recently where the outcomes were uncertain? Did you choose what seemed to be the safe option? Would it have been useful to have explored the opportunities more deeply?


Photo By Dean Hochman via StockPholio.net

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