1. Decision Making
for
Business Leaders
David Wanetick
Managing Director
IncreMental Advantage

2. The contents of this presentation are the
property of IncreMental Advantage.
Reproduction of this presentation in whole
or in part is prohibited except with the
express written consent of IncreMental
Advantage.

3. Agenda
I. Generalities about Decision Making
II. Running Meetings
III. Integrative Thinking
IV. Common Mistakes in Decision Making
V. Steps to Making Better Decision
A. Devil’s Advocate Program
B. Predictive Markets
VI. Exercises

4. Decisions are processes not events
There are typically multiple decision makers, not one
decision maker
Decisions are made anytime two people talk, not in an
isolated room

5. There are social pressures, politics, lobbying, coalition
building—decisions are not just intellectual exercises
Managers analyze then decide–decision making is not
linear, sometimes there are solutions searching for
problems to solve
Managers decide and then act–there is an iterative
process of deciding and acting

6. One decision meetings – Gordon Binder of Amgen
Do not postpone meetings when someone is
unavailable
Invite subordinates – opportunity for them to prove themselves
Giuliani – commissioners could not blame subordinates
Supreme Court – spar with law clerks; discuss issues
with parties; when in chambers with just the justices,
everyone speaks once before anyone speaks twice

7. Make your meetings more efficient
First Decision Effect
Distribute an agenda in advance
Meetings should have agendas, and the agendas should
specifically request individual reports
Schedule meetings in close proximity to one another
No notes during meetings of extreme importance - Jobs
Calculate the cost of each minute
Make everyone stand – University of Missouri report claimed that
these meetings are 34% more efficient
Meet for breakfast
Less risk of cancellation; customer is alert; less expensive; menu is
simple; saves customer time in commuting

8. One remarkable recent study found that self-made
millionaires are four times more likely than the rest of the
population to be dyslexic.
Dyslexics struggle with L-Directed Thinking and the linear,
sequential, alphabetic reasoning at its core.
Dyslexics include:
Charles Schwab / Richard Branson / Pablo Picaso / Leonardo Da Vinci /
Thomas Edison / Tommy Hilfiger / Andy Warhol
Theory of Israeli success

9. Salience - Welcome complexity because the best
answers arise from complexity.
Causality - Don’t flinch from considering multidirectional
and nonlinear casual relationships.
Architecture - Integrative thinkers don’t break a problem
into independent pieces and work on each piece
separately.
Resolution - Always search for creative resolution of
tensions, rather than accept unpleasant tradeoffs.

10. Break the Rules / Models
Whatever models exist at the present moment do not represent
reality; they are simply the best or only constructions yet made.
Conflicting models, styles, and approaches to problems are to be
leveraged, not feared.
Better models exist that are not yet seen.
Not only does a better model exist, but that they are capable of
bringing that better model from abstract hypothesis to concrete
reality.
Be comfortable wading into complexity to ferret out a new and
better model. Be confident that you will emerge on the other side
with the resolution they seek.
Give yourself the time to create a better model.

11. Ego
Egocentrism
Yes-Men
Confirmation Bias
Automatic tendency to notice data that fit with our beliefs.
Framing / Anchoring Bias

12. Groupthink
The bonds of teamwork can make it hard to deliver tough news.
Teams tend to be formed of people who resemble each other in
many ways, and they become friends. You don’t want to tell your
friend he has messed up.
Faultlines – schisms that emerge because of demographics of
participants (engineers vs. marketing professionals); in-group /
out-group
Inability to manage airtime - a few people dominate the group –
hierarchy, status

13. Free-riding – some people do not want person accountability
associated with making decisions
Incentive to combat – ask people to rate the contributions of
other people on the team – each person has 100 points to
allocate
Groupthink
Too much focus on common (shared) information, not on
(private) information held by a one or a few members – lack of
adequate information sharing; perhaps the bearer of the private
information incurs some social costs such as the necessity of
establishing the relevance and credibility of the unique
information

14. Warning Signs of Groupthink
Are management teams more polite or offer a chance to debate?
Do subordinates wait to take their verbal and visual cues from the
leader before commenting on controversial issues?
Are planning sessions primarily about presentation of strategy or a
lively dialogue about what the plans and strategies should be?
Do the same people tend to dominate management meetings?

15. Warning Signs of Groupthink
Is it rare for the leader to hear concerns or feedback directly from
those several layers below in the organization?
Are meetings used to ratify decisions that have already been made
or to debate new issues?
Are people highly concerned about protocol when communicating
with people at different levels of the organization?
Viciousness of attacks when people don’t agree with you.

16. Barriers to Candid Dialogue
Structural complexity
People’s roles are ambiguous
Homogenous groups
Large status differences in status among team members
Leaders who present themselves as infallible

17. Preventing Groupthink
Leader does not have to attend every meeting.
A more neutral setting for the meetings – without trappings of the
power of the leader – is good.
Dividing advisors into a few subgroups that would meet separately.
Have a Devil’s Advocate.
Discuss multiple alternatives.

18. Preventing Groupthink
Testing of assumptions.
Vigorous debate.
People participating in decision making should look at the big picture
– write the speech for the leader.
No deference to specialists, generalists can challenge specialists.
Access to lower level officials.
Outside unbiased experts will be brought in.

19. Stimulating Conflict and Debate - Techniques for
Inducing Conflict
Role playing competition – scout teams in football – you can learn
what and how the other side thinks of you
Think about what new leaders would think and do about a situation –
Intel – no emotional involvement or sunk costs, much more objective
Mental simulation - Scenario planning – pre-mortem analysis

20. Stimulating Conflict and Debate - Techniques for
Inducing Conflict
New conceptual models or frameworks - Have an expert discuss
some possible models to benchmark against – this way the team
has specific issues to discuss
Point / Counterpoint Methods – use subgroups or devil’s advocates
– dialectical inquiry (exploring clashing dialogues) – Polycom has
red and blue teams that gives the pros and cons of doing
acquisitions – Electronic Arts – the producer ensures game quality
and the development director focuses on project management,
budget, schedule, on-time deliverability – conflict is built into the
structure

21. Availability Bias
Focusing Illusion
Shows how easy it is to manipulate people simply by directing
their attention to one bit of information or another.
College students were asked – How happy are you with your life
in general? And How many dates did you have last month?
Rear View Mirror Effect
Illusory Correlation
We sometimes jump to conclusions about the relationship
between two variables when no relationship exists.

22. Questionable Cause / Casual Fallacies / Illusory
Correlation
Post hoc ergo propter hoc - after this, therefore because of this
First event doesn’t always cause the second event
If a new tenant moves into an apartment, and the furnace
suddenly breaks, it doesn’t mean that the new tenant broke the
furnace
Cum hoc ergo propter hoc - with this, therefore because of this
Correlation is not the same as causation

23. Fundamental Attribution Error
Bad events are the results of external factors, good events are a
result of our decisions
When making judgments, we tend to over-attribute personal
factors and under-attribute situational forces. People default to
the individual as cause, instead of the situation as cause.
Experiment with Priests at Yale Seminary

24. Prospect Theory
People are about twice as loss averse as they are desirous of
making gains. When in a losing situation we take more risks.
When in a winning situation, we are more cautious.
Experiment – Auction a $20 bill – Rule 1: Bids are to be made in
$1 increments; Rule 2 – The winner of the auction wins the $20
bill. The runner-up must still honor his or her bid, while receiving
nothing in return. The second best finishes last.

25. In a simple experiment, a group of people were told to imagine
that they had $300.
They were then given a choice between (a) receiving another
$100 or (b) tossing a coin, where if they won they got $200 and if
they lost they got nothing. Most of us, it turns out, prefer (a) to (b).
But then Kahneman and Tversky did a second experiment. They
told people to imagine that they had $500 and then asked them if
they would rather (c) give up $100 or (d) toss a coin and pay $200
if they lost and nothing at all if they won. Most of us now prefer (d)
to (c).
What is interesting about those four choices is that, from a
probabilistic standpoint, they are identical. Nonetheless, we have
strong preferences among them. Why? Because we’re more
willing to gamble when it comes to losses, but are risk averse
when it comes to our gains.

26. Munchausen Management Syndrome
The Delusion of Single Explanations
The Delusion of Rigorous Research
The Delusion of Organizational Physics
The Delusion of Absolute Performance
K-Mart v. WalMart

27. Ex-Post Facto Selection
Suppose we want to find out what leads to high blood pressure.
We’ll never find out if only examine patients who suffer from high
blood pressure; we’ll only know if we compare them to a sample
of people who don’t have high blood pressure.
Carryover Coalitions
Special Pleading
Involves someone attempting to cite something as an exemption
to a generally accepted rule, principle, etc. without justifying the
exemption.

28. Winner’s Curse
The winner overpays during bidding.
Oversimplification of Pareto’s Paradox
Representative Bias
This is the automatic tendency to compare something with what
you already know, even when it is not an appropriate analogy.
Unchecked Consistency Error
Planning Fallacy
The systemic tendency toward unrealistic optimism about the
time it takes to complete projects.

29. Illusion of Control
People think they’re more likely to win the lottery if they pick their
own numbers. They also think they’ll do better in a game of
chance if they throw the dice themselves. Air travel (no control) is
safer than driving (control).
One manifestation of that illusion occurs when an organization
experiences a period of improvement or failure and then readily
attributes it not to the myriad of circumstances constituting the
state of the organization as a whole and to luck but to the person
at the top.
Fallacy of the False Dilemma.

30. Self-Sealing Argument – No True Scotsman
The meaning of a term is redefined to make a desired assertion
about it true.
Regression Fallacy
Failing to account for natural fluctuations. Feel better after seeing
the doctor.
Status Quo Bias
Accepting the status quo or default option since it takes effort to
choose something other than the default. People think defaults
carry an implicit endorsement from the default setter.

32. Gambler’s Fallacy
The idea that the odds of an event with a fixed probability
increase or decrease depending on recent occurrences of the
event.
Sharpshooter Effect
Noticing cancer in an area and then defining the area.
Normal Accident Theory
In some complex organizations, accidents are unavoidable.

33. Non-Action Bias
In a study of hypothetical vaccination decisions, participants
expressed an unwillingness to vaccinate children against a
disease that was expected to kill 10 out of 10,000 children when
the vaccine itself would kill 5 out of 10,000 through side effects.
People would not accept any deaths from the “commission” of
vaccinating even when their decision would cause five
additional deaths.
Motivated Reasoning
Our tendency to accept what we wish to believe (what we are
motivated to believe) with much less scrutiny than what we don’t
want to believe.

34. Cognitive Dissonance
The tension we feel when we realize that two or more of our beliefs
are in conflict.
Overconfidence Bias
The belief that past success will lead to future success.
Increases as people are more knowledgeable about a subject.
Firefighters who underwent error-based training showed improved
judgment and were able to think more adaptively than those who
underwent the error-free training; proof-reading / quality control
Signal-to-Noise Problem
Analysts are initially overreactive – set off false alarms – cause
fatigue on the part of other members – become underreactive

35. Reductionist Thinking
Can’t just look at the whole as the sum of its parts – the
interaction of the factors have properties of their own.
Herding / Self-Herding
Happens when we assume that something is good or bad on the
basis of other people’s previous behavior.
Diagnosis Bias
The moment we label a person or a situation, we put on blinders
to all evidence that contradicts our diagnosis.

36. Value Attribution
Tendency to imbue someone or something with certain qualities
based on perceived value rather than on objective data.
The Halo Effect
When we have positive feelings toward a given person in one
respect, we tend to automatically generalize that positive regard
to other traits.
Conjunction Fallacy
The first law of probability – the probability that two events will
both occur can never be greater than the probability that each will
occur individually.

37. Linda is thirty-one years old, single, outspoken, and very
bright. In college she majored in philosophy. While a
student she was deeply concerned with discrimination
and social justice and participated in antinuclear
demonstrations.
Which of the following statements is more probable?
Linda is a bank teller and is active in the feminist
movement.
Linda is a bank teller.

38. Premature Closure
People home in on an answer prematurely, long before they
evaluate all of the information
Survivorship Bias
Means that we remember what happened; we don’t remember
what didn’t happen – don’t read about people who were not
cured
Optimistic Bias
Psychologists have found that the optimistic bias seems stronger
in situations we can control; one study found drivers were more
optimistic than passengers when asked to rate their chances of
being involved in a car accident.

39. Hawthorne Effect
Says that people in an experiment change their behavior simply
because they know they are in an experiment.
Baker’s Law
People tend to explain their behavior by reporting circumstances
of lowest culpability compatible with credibility.
Inattentional Blindness
In this condition it is possible for a person to look directly at
something and still not see it. Our expectations and knowledge of
what’s in a scene influence what we see in a scene.

40. The Heisenberg Principle
If you look at a situation and announce and tell people about it, it
has an effect.
Shreckenberg’s Self-Destroying Prognosis
The correct prediction must take into account how people are
going to respond to the prediction.
Narrative Fallacy
The tendency to construct stories to explain events, even when
no story exists. (e.g. Michael Dell)

41. The Peltzman Effect / Risk Homeostasis / Risk
Compensation
A study in Finland that found that adding reflector posts to a
curved road resulted in higher speeds and more accidents than
when there were no posts.
Climbers on Mt. McKinley
Parachutists – using the rip cord
Pilots overshooting Minneapolis by 150 miles
Selective Recruitment
Those least at risk are most likely to adopt safety measures most
rapidly.
Hidden Agendas

42. Presumed Association Bias
Claims that when we are asked whether there is an association
between two things, we look for situations where there is an
association more than we look for situations where there is no
association. As a result, we can overestimate how associated the
two things are.
Reference Group Neglect
Competitors often fail to assess the strength of their competition
when deciding whether to enter a market.

43. Problems with Analogies
Staples – dry cleaners – same founders – both markets
fragmented, centralized model
Pete’s Wicked Ale – tried to go into specialty chocolate - different
customers, no excess capacity at larger chocolate producers
Enron had its templates – rewarded managers to find new markets
- only focused on similarities, not on dissimilarities

44. Enron’s Questions Were
Was the product a fungible commodity that could be divided into
indistinguishable units?
Did it have a complex and unique logistics system?
Were there many buyers and sellers that lacked market power?
Could one create standard contracts and product offerings?

45. Problems with Analogies
Quaker’s acquisition of Snapple.
In 1994, Quaker was led by CEO William D. Smithburg since
1981. Smithburg decided to acquire Snapple. The roots of this
decision went back to Smithburg’s experience in the successful
acquisition of Gatorade in 1983.
At Gatorade, the management team stayed with the business
after the deal. All but one of the top team at Snapple moved on,
at Gatorade, operations were in good shape.
Snapple relied on entrepreneurial distributors, while Gatorade
used a warehouse system.

46. Low Effort Syndrome
Failing to Recognize the Importance of Balanced Selection
Casual Benchmarking
Other companies benchmarking to GE’s A, B, C system of evaluating
employees
Paradox of Strategy
Self-Licensing
Once an individual discloses his potential conflicts or unveils a
hidden agenda, he is likely to push the envelope even further.

47. The Millionth Monkey Effect
Illusion of Precedential Value
Collective Action Problems
End-Game Effect
Fallacy of Power
The person on top wants it, so it must be good.
Exposure Anxiety
The fear of being exposed as weak.

48. Rational Ignorance
Where we choose not to know something relevant to our
interests.
Perceptual Narrowing
Panic narrows one’s thoughts. It reduces awareness to the most
essential facts, the most basic instincts. This means that when
one is being chased by a fire, all he can think about is running
from the fire.
Probability Neglect
Overestimating the odds of the things we dread the most actually
occurring, and underestimating the odds of the things we dread
less.

49. Sunk Cost Effect
The tendency for people to escalate commitment to a course of
action in which they have made substantial prior investments of
time, money, or other resources.
Supercomputer innovator Seymour Cray annually built and
burned a sailboat, a reminder to routinely abandon last year’s
model.
The Fallacy of Positive Transparency
Self-Negating Prophecies
As soon as you figure out what your enemy is doing
and move to stop him, he simply shifts to something
else.

50. Probabilistic Contamination
Presupposition that statistics must be true
Sample Sizes
Initial Experiments are Not Representative
Dramatic examples coupled to big numbers
Experience vs. Exposure
Pyschophysical Numbing
Identifiable Victim Effect
Prosecutor’s Fallacy

51. Determining Value
Storytelling vs. Probability and the Conjunctive Error
of Statistics
Severity and Frequency
In general, the worse things are, the less common they are.
Look for dramatic examples coupled to big numbers.
Blunders
Numbers that seem surprisingly large – or surprisingly small.
Conflating relative and absolute risk.
25% (increase) risk of heart disease due to second hand smoke
Population – incidence of heart disease among non-smokers – 4%
Enhanced risk of heart disease among non-smokers due to second hand smoke –
5% (4% + 25%*4%)
Non-smokers do not have a 25% risk of contracting heart disease
Numbers that seem hard to produce - how could anyone calculate
that?

52. Determining Value
Storytelling vs. Probability and the Conjunctive Error
of Statistics
Domain expansion
Definitions grow broader, so as to encompass a wider range of
phenomena
Surveys sponsored by advocates
Survey results that aren’t accompanied by the text of the
questions asked
Wording of questions that seems to encourage particular
responses
Convenient (e.g. very short) time frames

53. Determining Value
Storytelling vs. Probability and the Conjunctive Error
of Statistics
Whether sampling a different group would make a
difference |
Use of superlatives – e.g. highest, number one
Any time there is a wide variation in numbers-such as
those for income or wealth-the median usually gives a
more accurate “average” than the mean
We can basically ignore stories that report relative risks
elevated by less than 200%. If you read about A increasing
the risk of B by, say, 37 – or any number less than 200 –
percent, the relationship isn’t very interesting

54. Determining Value
Storytelling vs. Probability and the Conjunctive Error
of Statistics
Flawed comparison
Officials are fond of reminding the public that they face a greater risk
from drowning in the bathtub, which kills 320 Americans per year,
than from a new peril like mad cow disease, which has so far killed
no one in the United States. The fact is, anyone over six years old
and under eighty years old which is to say the vast majority of the
U.S. population faces little appreciable risk at all in the tub. For
most of us, the apples of drowning and the oranges of mad cow
don’t line up in any useful way.
You stand a greater risk from dying while skydiving than you do from
some pesticide. Well if you don’t skydive, your risk is zero. The
choices have to come from the menu of things individuals really do
every day.

55. Storytelling vs.
Storytelling vs. Probability and the Conjunctive Error
Probabilistic Confusion
Benjamin Booksby is best described as a meek,
unassertive person. He wears big glasses with thick
lenses. He was bullied in school because he preferred
reading in the library to playing sports. His favorite
website is Amazon.com. He enjoys reading much more
than socializing.
He’s either a salesman or a librarian.
Which one do you think he is?

56. Storytelling vs.
Storytelling vs. Probability and the Conjunctive Error
Probabilistic Confusion
Ratio of salesmen to male librarians – 100 to 1
Percentage of salesmen that match Benjamin’s
description – 10%
Percentage of librarians that match Benjamin’s
description – 90%
Number of men that meet description:
Salesmen – 10 (100 x 10%)
Librarians – 1 (1 x 90%)
Conclusion – Benjamin is (more than) 10 times
more likely to be a salesman than a librarian

57. Storytelling vs.
Storytelling vs. Probability and the Conjunctive Error
Probabilistic Confusion
Prosecutor’s Fallacy
O.J. Simpson Case
Defense said “4 million women are battered annually
by husbands and boyfriends in the US. A total of
1,432, or 1 in 2,500, were killed by their husbands or
boyfriends.”
The relevant number is not the probability that a man
who batters his wife will go on to kill her (1 in 2,500)
but rather the probability that a battered wife who was
murdered was murdered by her abuser.

58. Storytelling vs.
Storytelling vs. Probability and the Conjunctive Error
Probabilistic Confusion
For every 100 million miles that are driven in vehicles in the
United States, there are 1.3 deaths.
If you drive an average of 15.500 miles per year, as many
Americans do, there is a roughly 1 in 100 chance you’ll die
in a fatal car crash over a lifetime of 50 years of driving.
To most people, the first statistic sounds a whole lot better
than the second. Each trip taken is incredibly safe. On an
average drive to work or the mall, you’d have 1 in 100
million chance of dying in a car crash. Over a lifetime of
trips, however, it doesn’t sound as good: 1 in 100.

59. Decision Making Team
Better decisions will be made if there is an intact team
Have insiders and outsiders
Use balanced selection in temperament and personalities
Some members should be charged with carrying out decision, other
should not be charged with carrying out decision
Are influencers / advisors loyal to the decision maker?
How closely is accountability tied to decision makers / advisors?
Secrecy is a problem. No accountability.
More foxes than hedgehogs
Hedgehogs aggressively extend the explanatory reach of that one big thing into
new domains.
Hedgehog personalities were generally very eager, too eager, for closure. They
stuck with one big idea precisely because they wanted to know it completely, to
have the sensation of reaching a total and final understanding.

60. Decision Making Team
Some should have sunk costs, some should not
Some should have been in industry over long periods of time and
seen different stages in the cycles
Some should have positive frames and some should have negative
frames

61. Techniques to Find Problems
Anne Mulcahy – Xerox – direct contact with employees and
customers – top 500 customers were assigned to one member each
of the executive team – all Xerox executives were involved – CMO,
CFO, HR, etc.
Customer Officer of the Day Program – One of 20 very senior
executives are in charge of customer service for the day – they must
listen to the customer, resolve the problem and assume responsibility
for resolving the underlying problem

62. Techniques to Find Problems
Helena Foulkes – SVP – Marketing, CVS – Customer Comment of
the Day Program – someone selects one customer call and forwards
the call to many senior executives; other senior executives have to
handle these calls
David Tacelli – LTX – rotate people who assess customer satisfaction
– account managers may become too complacent

63. Be prepared to catch ideas on the fly
Albert Einstein often cut himself shaving, because he became so
excited with the ideas that came to him while shaving
John Fabel, combined the structure of a suspension bridge with
the components of a traditional backpack—and invented a new,
easier-to-tote, and now popular pack called the Ecotrek.
Georges de Mestral noticed how burrs stuck to his dog’s fur and,
reasoning metaphorically, came up with the idea for Velcro.

64. Adobe encourages small groups of engineers to develop
ideas in a process run by the Corporate Development
Group. The seed idea has to find sponsorship from a
senior executive who helps clear away internal process
constraints. In this way, Adobe can test cool ideas
without overinvesting in them too early.
The discussions on the Google idea board exhibit “geek
machismo”: employees vie for the honor of being the
person who delivers the smartest electronic “zaps” that
support, modify, or even kill an idea. If an idea gets
enough support on the Web board, its originator wins a
face-to-face meeting during “office hours” with Ms.
Mayer.

65. Brainstorming
Write down as many different uses that you can think of for the
following objects:
a brick
a blanket
This is an example of what’s called a “divergence test”
(as opposed to a test like the Raven’s, which asks you
to sort through a list of possibilities and converge on the
right answer). It requires you to use your imagination
and take your mind in as many different directions as
possible. What the test giver is looking for are the
number and the uniqueness of your responses..

66. Brainstorming
Go for Quantity. Good ideas emerge from lots of ideas. Set a
numerical goal —say, a total of one hundred ideas.
Encourage Wild Ideas. Extremism is a virtue. The right idea
often flows from what initially seems outlandish.
Be Visual. Pictures unlock creativity.
Defer Judgment. There’s no such thing as a bad idea, so banish
the naysayers. Think creatively first and critically later.

67. Understand the resistance to ideas
Assign idea and credit to a more powerful person
Give competitor credit for your innovation
Say rival will implement the innovation and then gain a
competitive advantage
Make the idea have a benefit for powerful people at your firm
Selling state assets in Russia
Allow an outsider to break the news – don’t release ideas
anonymously

68. TEAM Hitting Pitching Fielding
Boston Red Sox 1 4 2
Washington Nationals 2 1 4
Chicago Cubs 4 2 1
New York Mets 3 3 3

69. Scenario 1 Round 1 Washington (w) v. New York
Round 2 Chicago (w) v. Boston
Round 3 Washington (w) v. Chicago
Scenario 2 Round 1 Chicago (w) v. New York
Round 2 Boston (w) v. Washington
Round 3 Chicago (w) v. Boston
Scenario Round 1 New York v. Boston (w)
Round 2 Chicago v. Washington (w)
Round 3 Boston (w) v. Washington

70. Must agree on what the target / goal is.
Information Gathering:
Problems with less than first hand information
Filtered
Lack emotional content
All senses are activated
Time lag
Have skip-level meetings a la Starbucks
Make clear that the meeting is not about the middle manager

71. Information Gathering:
Must know how to interpret results from focus groups
Was one person dominating the discussion
People respond much better to what was familiar – TV shows
How effectively were results from feedback dials used – what did
people dislike, where they so engaged that they forgot to turn up
their dials?
Is the (taste) test executed in the same way that people consume
the product?

72. Information Gathering
Questions to ask
What are the odds, if you were a betting man / woman
Would you bet $1,000 of your own money
What data would cause you to change your mind?
“What has changed since the last time we looked at this issue?”
Fundamental Paradox of Intelligence Gathering
Sometimes information gathered through environmental scanning
and analysis seems too sensitive to be shared broadly within an
organization.

73. Information Gathering
Evaluating answers to questions
Answers that reflects wishful thinking – I hope so, I am encouraged
by signs that, promising developments include
What relevant experience do you have to make such a
recommendation?
Misdirecting answers
Dead experts (or experts that are unavailable)
Equivocating
There is an enormous problem with research that relies on
recollection by the parties involved in a project, as so much
management research does when it seeks out keys to subsequent
success.

74. Assessing information
“Tell me what you know. Then tell me what you don’t know, and only
then can you tell me what you think.” – Colin Powell
List in three separate columns what is known, unclear and presumed
When considering analogies, write down likenesses and differences;
successes and failures
When finalizing options, write a few sentences that explain why the
option is best
E.g. Selling generic products is the best method to enhance
revenues because….
The UK government requires planners to augment their estimates for
budgets associated with large transport projects by a factor known as
the “optimism bias uplift.”

75. Anonymous surveys
Group leader knows that such surveys can happen at any time,
which tends to keep him honest, and, if he is overly optimistic,
management will probably know.
Rumor contests
Research should be presented in prose not Powerpoint –
assumptions fall apart – e.g. cross-selling - these
documents should be read first – before the presentation –
because the presenter might be naturally very persuasive

76. After the Bay of Pigs fiasco – President Kennedy did not
attend initial meetings where new issues were raised for the
first time – there would be less true give and take with the
President in the room.
Dialectical Inquiry - Kennedy would also break his executive
committee into two subgroups – each would work
independently on a policy decision and reconvene for
debate and cross-examination

77. Must encourage everyone to speak about all issues – must
not rely completely on experts.
Must define the problem first – make a decision – and then
implement the decision – be careful not to worry about
consensus too early in the process

78. “Multi-voting” techniques can be employed to winnow down
the alternatives to the best few. In multi-voting, members of
the group are given a limited number of votes to cast in
favor of specific alternatives. They do not have to advocate
for a single alternative at this point, but rather can support
their top few choices. The least supported alternatives can
be eliminated, and debate can continue.
Visualize solutions in multiple permutations
Review past decisions by comparing decisions – less focus
on situational elements, more focus on broad principles

79. L’Oréal managers have the “right to make an error.” But if
they make the same mistake twice, it suggests an inability
to learn – and their career is at risk.
It is common for managers to be required to bring the
acquisition proposal to the board on three occasions: to
alert the board that managers are considering a target; to
get the board’s approval to indicate a price range for the
business; and to get approve the final terms.

80. Do not average a third valuation analysts’ conclusions with
the initial two, since averaging could provide undue
influence to an outlier conclusion
Better to average the third valuation analyst’s conclusion
with that closest to his own. The first two valuation
professionals should know that this will be done at the
outset. No one desires to the be author of an outlier
conclusion.
Maybe best yet, have the third valuation analyst chose
which of the initial two appraisals are most reasonable. The
two valuation analysts would be inclined to reach similar
conclusions. The initial valuation analysts would not want to
have their assessments be unaccepted.

81. How to Get Organizations to Share Information
Intellipedia allows 37,000 officials at the CIA, FBI, NSA and 13 other
intelligence agencies share information and even rate one another in
accuracy in password protected wikis.
Preoccupation with failure
Do not dismiss small deviations, each small mistake is viewed as
potentially becoming more serious, scenario plan for mistakes,
failures
Mountain climbers, aircraft carriers, Toyota wants managers to bring
problems to management meetings
Failures are viewed as a window on the vulnerability on the entire
system, not localizing failures – there is no such thing as an isolated
failure

82. A strong dissent is extremely important.
Forces people to think harder about the issues.
Sometimes the other decision makers shift their opinions.
A strong dissent makes the other person take account of the point.
Dissents put arguments on the record, force others to respond to
them, and provide a springboard for the creation of new laws.
Even those on the side of the majority have to take into account the
opinions in response to the points raised by the dissenters.
Hitler – assassination attempts were not successful,
however they caused Hitler to doubt his own generals and
sabotage his own military campaigns

83. Listen to Propaganda
They know the truth
They want to manage expectation of their constituents.
The more accurate the weapons, the better intelligence you
need ► mail campaign – can reach specific people with
certain (characteristics), need to find such people.
Prepare mental imagery and simulation in order to assess a
situation and conjure up possible alternatives
When you warn management of a problem, that problem
should be accompanied by a proposed solution

84. By focusing first on reaching consensus on “the problem”
and then on its root causes, this technique makes the need
for action harder to dispute. Likewise, agreement on
objective criteria for evaluating options makes it difficult for
special-interest groups to argue for their own narrow
political agendas. By the end of such a process, people
may be willing to accept outcomes they never would have
accepted at the beginning.

85. Don’t make a decision unless there is disagreement
The Persians deliberated on decisions when they drunk and
when they were sober
Dissent forces the participants to expose their opinions to a wide
range of counter arguments.
Diverse and well-founded arguments can reframe a problem so
that everyone sees it in a new way.
A unique solution can emerge that no one had considered before.
Get an understanding of issue history
Reduces impact of advocacy and hidden agendas
“Don’t ask what’s the problem?” rather say, “Tell me the story.”
– Avram Goldberg, Stop and Shop

86. Try to understand the political dynamics occurring your
counterparty’s organization
Kennedy reading into the two cables sent by Khrushchev
Make contingency plans if plan does not track to goals
In times when intense concentration is needed, embrace
habits so that you do not have to divert your thinking –
Poker players do this effectively
State opinions in testable form so that you can
continually monitor your forecasting performance

87. Always weigh benefits against costs
Imagine that your decisions may be spot-checked
Write the problem down
Use radical metaphors – such as your business problem
as a sports, military or family issue
Utilize an “outside view”. That is, instead of working on
the decision for yourself, imagine that you are a
consultant with Top Global, hired to analyze the problem
and make recommendations.

88. Give yourself time to think about the problem
Forcing numerical scrutiny slows down the irrational part
of the brain
One antidote to hindsight basis is to make notes of why
you are making decisions as you make them
People in good moods are significantly better at solving
hard problems that require insight than people who are
cranky and depressed.

89. List alternatives can improve the reliability of reasoning
Discuss probabilities of being right and wrong
Change the scope of the problem
Reframe the issue in terms of time (lots of time to find a
solution vs. need to find a solution in the near term)
Reframe the question
Activate different parts of the brain

90. Consider how someone else would have solved the
problem
Respect dreams because they present uncertainty
Make a point of deferring your decision – until you have
had time to consider it on more occasions, when you are
experiencing different moods.
The more original your idea is, the less good advice
other people will be able to give you.

91. Entertain and test multiple hypotheses
Argue the other side
Publish your views
Do you have twenty years of experience or one year of
experience repeated twenty times?

92. Methods to combat the anchoring bias
Be aware of the anchoring bias
Provide a range first, not a single point value
Work with multiple anchors
Avoid only considering incremental scenarios
Remain open to new data
Does research try to disprove or confirm a hypothesis?
Testing Gut Checks
When you lack conclusive evidence, a good technique for making
a difficult decision is to flip a coin and then see if the result makes
you wish it was best of three instead.

93. An organization that eradicates emotion from every
decision may ultimately pay an even stiffer price by
eroding employee loyalty and public perception.
When processing information, we are inherently prone
to give more weight to that which is more concrete and
vivid at the expense of that which is more intangible and
ambiguous.
Target the most influential decision makers
Usually those whose decisions impact the longest time horizon

94. Many employees’ role is to provide input, not to veto
recommendations. (They are still a part of the decision-
making process.)
Limit the number of people with veto power in the initial
rounds
When the short-run financial payoffs are slim or uncertain, it
is particularly important to ask, Will we learn something, by
taking this action, which will help us make better decisions in
the future? Or conversely, Will we limit our future option by
taking this action now? Considerations of the future provide
an excellent tiebreaker.

95. Strategic Learning and Teaching
Consideration Index – When there is little emotional pain of losing,
there is little learning. When there is a lot of emotional pain of losing
(losing a big account to a competitor), there is a lot of reflection and
learning.
Change Index - The attraction of past strategies is the manager’s
perception of how rapidly the environment is changing. Rapid
industry change makes it hard to learn what worked. Industry stability
makes it easier to determine what works.
Commitment Index – Addressed how quickly managers should
embrace a strategy. If a strategy delivers consistent payoffs and the
industry is stable, continue with the same strategy.

96. Be Aware of Satisficing - We don’t get to deeper thinking
until we run out of filling-in actions.
A new chief executive, one of the youngest in his nation’s history,
is being sworn into office on a bleak, cold, cloudy day in January.
The new chief executive was raised as a Catholic. He rose to his
new position in part because of his vibrant charisma. He is
revered by the people and will play a crucial role in a military
crisis that will face his nation. His name will become legendary.
Spinoza’s idea was that “all information is initially accepted
during comprehension and false information unaccepted only
later.”

97. Take more time when making the most important
decisions
Tell yourself to be rational in your decision making
If the same coalitions keep forming, people may be
breaking the no carryover rule
One antidote to hindsight basis is to make notes of why
you are making decisions as you make them
Study art – as an observational tool – NYPD and
medical students

98. In developing measures, it is usually wasteful to develop
detailed information beyond what is necessary to make
correct decisions. Such attempts can create a false
sense of confidence.
Before doing marginal analysis we must optimize the
current state.
For example, when considering an expansion, it is wrong to
conclude that because we already have excess people we don’t
need to include the expense of adding any. The economics
should be done with the excess people removed from the base
case and added to the extent required in the expansion case.

99. Best practices must be sought wherever they are, both
inside and outside the company and industry.
When Southwest Airlines sought ways to decrease the time it
took to refuel, disembark and board passengers, and unload
baggage, it studied NASCAR pit crews and drivers. Today, other
airlines benchmark themselves against Southwest.
Only demonstrated success in decision-making reveals
an individual’s decision-making ability, and then, only for
that type of decision.
No mitigated speech

100. Use different tools when making decisions – pens,
computers, drawing
Put a process in place for reviewing past decisions
Track and calibrate your decisions
Why are weather forecasters so well calibrated when the rest of
us aren’t? The answer involves one of the best cures for
overconfidence: quick, corrective feedback.
Berkshire’s them, allowing them to learn from their mistakes.
Prod others with multiple reminders about avoiding risk,
not one big lecture

101. Kleiner Perkins – Each partner evaluates a different
aspect of the company seeking funding. All partners
must agree that the company warrants an investment.
It’s been shown that incentives can actually inhibit
decision making. One way this happens is that people
become self conscious about an activity that should be
automatic.

102. eBay CEO Meg Whitman attributes much of eBay’s
success to the fact that management spends less time
on strategic analysis and more time trying and tweaking
things that seem like they might work. As she said in
March 2005, “This is a completely new business, so
there’s only so much analysis you can do.”

103. Avoid pocket vetoes
Get a commitment in public to ensure this doesn’t happen
Be able to explain your decision – you will increase
respect for it – especially important if decision was made
from the gut
Guard against the Priority Zero Rule
The very act of creating lists of priorities keeps them from being
accomplished. After the lists are drawn, people tend to effectively
dedicate themselves to one task (often the one they suggested –
and why not, it’s on the priority list!), others to different ones.
Everyone will feel good, working away on priority issues, but
none will get done.

104. Inspire colleagues to feel accountable for the entire
effort by making them responsible for something nobody
else is doing. Then add some specific deadlines for their
parts of the project. When competing priorities intrude,
your colleagues will be much more likely to keep
working on your idea than on projects that have no
deadlines and where their contributions – or lack thereof
– will go unnoticed. (Similar to assigning various people
to bring things to a party.)

105. Remove people from power who could block decision
Jack Welch at GE when he chose a successor
Paul Allaire at Xerox, chose a successor, he remained chairman,
other contenders for CEO joined the board as vice-chairmen
Objective shouldn’t be consensus, which often becomes
an obstacle to action, but buy in.

106. Be Resolute Once a Decision is Made
Those with the permanent colostomies were happier than those
who could ultimately reverse them, “hope impedes adaptation.”
Upon being stuck with a decision, we suddenly feel it’s not so
bad. Voters, for instance, have been shown to recognize the
strengths of a candidate they opposed once that candidate is
elected. And high school students become acutely aware of a
college’s weaknesses upon learning that it has rejected them.
College students, likewise, come to appreciate how biased
standardized tests are after failing one.

107. Despite the tremendous accuracy that predictive markets are capable
of delivering, there are many concerns associated with predictive
markets. These concerns include:
Lawyers have many concerns about establishing predictive
markets. For instance, they want to ensure that such activity does
not become gambling. Also, publicly-traded companies must
ensure that participation in predictive markets does not run afoul of
insider trading regulations.
Participants in predictive markets could game the markets by low-
balling estimates. For instance, betting that products will be
shipped later would allow the team members to slack off and still
meet the collective predictions.

108. Middle managers are often resistant to predictive markets because
they believe such markets undermine their authority. Forecasters
are also resistant to such markets for fear of being displaced.
Sometimes there are questions that are better left unanswered.
Also, getting a prediction means publicizing a prediction which is
not always wise.

109. If and when such concerns are overcome, there are
many challenges of establishing predictive markets such
as:
Participation in such predictions must be fair and non-
discriminatory.
Terms about what is predicted must be tightly defined.
Awards must be promoted, paid for and distributed, all of which
add to the expense and work commitments of running such
markets.
The markets must be liquid and it is hard to motivate (especially
busy) people to participate in such markets.

110. Conditions for wise crowds:
Diversity of opinion, each person should have some private
information
Independence – each person’s ideas are not mirroring the ideas of
others
Decentralization – people can specialize and draw on local
knowledge
Aggregation – a mechanism exists for turning private judgments into
a collective decision
Anonymity and incentives – encourage honest, unbiased information
The averaging of multiple opinions – produces smooth, accurate
signals
Feedback – enables participants to evaluate past performance and
learn how to weigh information and produce better results

111. What is it?
A disinterested / objective party tries to detect
weaknesses in a strategic plan.
Occurs after a strategic plan has been developed. No
gotcha gambits during planning.
Why is a Devil’s Advocate Program necessary?
Every decision maker makes mistakes in the way they
make decisions.

112. Benefits of Devil’s Advocate Program
Costly mistakes will be avoided
More ideas / solutions can be explored
The review process itself causes planners to be more
prudent
Better decision making processes will be put in place
Those charged with execution will resent not having
such a program

113. Concerns with Devil’s Advocate Programs
May not be sufficient time
Costly
Not popular
Be careful that Devil’s Advocate is not being overly
critical, not unnecessarily dampening enthusiasm

114. Who should not be a Devil’s Advocate
Friends due to schadenfreude issue
Anyone involved in developing the strategic plan
Anyone who could be impacted the acceptance or rejection of the
strategic plan
People with deep subject matter expertise
People that are overly empathetic
Employees who may suffer career or political consequences
When the officer playing the red team (American forces) chose
tactics that exposed weaknesses in the battle plan, the umpire,
Admiral Yamamoto’s chief of staff, ruled against them.

115. Who could be a Devil’s Advocate:
A semi-retired partner – knowledgeable about the business but
politically disinterested
An outsider

116. Fundamental Attribution Error
When making judgments, we tend to over-attribute personal
factors and under-attribute situational forces. People default to
the individual as cause, instead of the situation as cause.
Priests final right of passage
Salesforce
Boomerang Effect
If you want to nudge people into socially desirable behavior, do
not let them know that their current actions are better than the
social norm
Electricity consumption research

117. Trial Balloons
Be careful about seeking advice from someone you intend to do
business with once you implement your idea. No matter how
close you think you are to your business associates, approaching
them with a tentative business idea will shake their confidence in
you and may cost you their existing business in addition to their
future business.
Experiments
Experiments should be designed to yield usable results. They
should test the feasibility of an idea on a representative sample.

118. Collaborative filtering – e.g. Netflix – you use the
judgments of other people who share your tastes to filter
through books or movies available

119. You must terminate two employees? Who do you terminate?
Name Tenure Job Skill Age Family Situation Comp.
(Yrs.) $
Adam 10 Average 37 Single 60K
John 7 Average 38 Sole supporter of wife, 2 kids 52K
Mary 8 Poor 43 Single mother, 3 kids 49K
Bob 2 Excellent 28 Single 55K
Jane 9 Good 37 Married, husband works, 0 kids 57K
Frank 3 Excellent 38 Married, wife works, 3 kids 41K
Susan 6 Average 29 Sole supporter of husband, 1 kid 52K
Timothy 3 Excellent 42 Divorced, supports 2 kids 55K
Peter 2 Good 55 Married with 2 grown kids 38K
Nancy 1 Average 44 Married, no kids 37K

120. Your company is beginning to sell goods in a foreign
market, and you are faced with the problem of choosing
a distributor. The first choice is a long-term contract with
a firm with whom you have done business in the past,
and whose distribution system reaches 50 percent of all
potential customers. At the last moment, however, a
colleague suggests that you consider signing a one-year
contract with another distributor. Although a year ago
their coverage reached only 25 percent of customers,
they claim they invested heavily in distribution resources
and now expect to be able to reach 75 percent of
customers.

121. A man buys a $78 necklace at a jewelry store, and he
gives the jeweler a check for $100. because the jeweler
does not have the $22 change on hand, she goes to
another merchant next door. There she exchanges the
man’s check for $100 in cash. She returns to her store
and gives the man the necklace and the change.
Later the check is returned by the bank due to
insufficient funds in the buyer’s account, and the jeweler
must then give the other merchant $100. The jeweler
originally paid $39 for the necklace.

122. Thank You!!
To have David Wanetick run a
training session or speak at
your event, please contact:
dwanetick@incrementaladvantage.com
www.incrementaladvantage.com