Developing Decisionmaking Skills For Business

DEVELOPING DECISIONMAKING SKILLS FOR BUSINESS This page intentionally left blank DEVELOPING DECISIONMAKING SKILLS FOR BUSINESS Julian L. Simon M.E. Sharpe Armonk, New York London, England Julian L. Simon Copyright © 2000 by M. E. Sharpe, Inc. All rights reserved. No part of this book may be reproduced in any form without written permission from the publisher, M. E. Sharpe, Inc., 80 Business Park Drive, Armonk, New York 10504. Library of Congress Cataloging-in-Publication Data Simon, Julian Lincoln, 1932– Developing decision-making skills for business / Julian L. Simon. p. cm. Includes bibliographical references and index. ISBN 0-7656-0676-3 (alk. paper) 1. Decision-making. 2. Corporate culture. 3. Psychology, Industrial. I. Title. HD30.23 .S556 2001 158.7—dc21 00-030118 Printed in the United States of America The paper used in this publication meets the minimum requirements of American National Standard for Information Sciences Permanence of Paper for Printed Library Materials, ANSI Z 39.48-1984. ~ BM (c) 10 9 8 7 6 5 4 3 2 1 Contents Preface Overview of Business Psychology Part I: Wants, Abilities, and Goals 1. Tastes, Preferences, Wants, and Values 2. Assessing Your Resources 3. Choosing Goals and Criteria of Success Part II: Introduction to Evaluative Thinking 4. 5. 6. 7. 8. 9. Evaluating Simple Alternatives Weighing Present Versus Future Benefits (and Costs) How to Think About Cost Allowing for Uncertainty Dealing With Risks Reconciling Multiple Goals Part III: Getting Useful Ideas and Knowledge 10. 11. 12. 13. Getting and Eliminating Ideas Experts, Expert Systems, and Libraries Using Scientific Discipline to Obtain Information Assessing Consequences and Likelihoods vii xi 3 5 19 24 29 39 51 64 74 85 92 99 105 124 136 147 Part IV: Working With Information and Knowledge 163 14. Pitfalls That Entrap Our Thinking 15. My Favorite Worst Sources of Errors 165 180 2 • WHAT IF CHINA DOESN’T DEMOCRATIZE? 16. Good Judgment 17. Self-Discipline and Habits of Thought 18. Dealing With People, and Managing Them 198 203 213 Index About the Author 221 229 Preface Some Personal Reflections on Writing This Book No one could write with authority about all the topics in a book that ranges as widely as this one does. Even to attempt to do so requires chutzpah. Yet I believe the attempt is worth making even if the book is not wholly successful in knitting together these disparate subjects into a common framework and a single volume. In such a venture, new ideas inevitably arise about the kinship (and lack of it) among various kinds of thinking, and about the similarities and differences among them. As Eudora Welty put it about writing fiction: “In writing, as in life, the connections of all sorts of relationships and kinds lie in wait of discovery, and give out their signals to the Geiger counter of the charged imagination, once it is drawn into the right field.” This axiom has made it worthwhile for me, and I hope for you, too. And if someone with a peculiar background like mine doesn’t try, who will? The Author’s Qualifications to Write a Book Like This One Such as they are, these are my qualifications: First and foremost, the book is mainly about “how to,” in both the broad and the narrow senses— such as how to choose the problems a scientific laboratory should study, and how to decide whether to rent or buy a large computer. Many of my early books also have been about “how to”—how to do research in social science, a very broad topic; how to make business decisions, also rather broad; the very specific How to Start and Operate a Mail-