This document provides an overview of a workshop on decision making that seeks to introduce and compare the work of Malcolm Gladwell and Daniel Kahneman, explore how knowledge is used in rapid cognition, and generate ideas to improve organizational decision making. It outlines Gladwell and Kahneman's research on fast and slow thinking as well as Gary Klein's work on naturalistic decision making. The document also discusses biases, heuristics, and conditions that influence decision quality. Tools, models, and strategies for decision making are presented along with examples of good and bad decisions.

1. KM Think Tank
Tapping into Fast and Slow Thinking
David Williams Dr Kate Andrews
Lange Consulting & Software Knowable
www.langeconsulting.com.au www.knowlable.com.au

2. KM Think Tank
Research, analysis
and creative
thinking on a topic
for the good of the
broader
community

3. Objective
This workshop seeks to:
1. introduce and compare the work by Malcolm
Gladwell (Blink, The Tipping Pont and Outliers)
and Daniel Kahneman (Thinking Fast and Slow),
2. explore with the group how knowledge is used
during rapid cognition, and
3. Generate ideas to improve the decision making
process for ourselves and our organisations

4. How well does your organisations
make decisions?
• Understanding?
• Demand?
• Champions?
• Policy?
• Procedures?
• Tools?
• Templates?
• SMEs?

5. Malcolm Gladwell
• Staff writer with The New Yorker
• One of Time Magazine's 100 Most Influential
People in 2005
• author of four books:
o The Tipping Point: How Little Things Make a
Big Difference
o Blink: The Power of Thinking Without
Thinking
o Outliers: The Story of Success
o What the Dog Saw

6. Blink: The Power of Thinking Without Thinking
• Rapid cognition, the kind of thinking that happens
in a blink of an eye.
• Those instant conclusions that we reach are really
powerful and really important and, occasionally,
really good.
• Not intuition – those emotional reactions, gut
feelings, thoughts and impressions that don't
seem entirely rational.
• When are snap judgments good and when are
they not?
• What kinds of things can we do to make our
powers of rapid cognition better?

7. Thin Slicing

8. Daniel Kahneman
• 1979 paper with Amos Tversky, on why we
make "wrong" decisions.
• prospect theory of economic risk
• how most real people, consistently, make a
less-rational choice.
• Established the field of behavioural
economics
• Awarded the Nobel Memorial prize in 2002

9. Prospect theory
People have an irrational tendency to be less
willing to gamble with profits than with losses.
This means selling quickly when we earn profits
but not selling if we are running losses

10. Thinking, Fast and Slow
System 1 is fast, instinctive and emotional
System 2 is slower, more deliberative, and more
logical
There are cognitive biases associated with each
type

11. Gary A. Klein
o Ph.D. in Experimental Psychology
o Assistant Professor of Psychology at Oakland
University
o Research psychologist for the U.S. Air Force
o Senior Scientist at MacroCognition
• Naturalistic Decision Making framework
• Recognition-Primed Decision (RPD) making

12. Recognition-Primed Decision (RPD)
o Variation 1 - situation recognized as typical, act
o Variation 2 - unknown situation, model
options
o Variation 3 - proper course of action unknown.
Conduct mental trial and error simulation and
apply the first course of action which appears
appropriate to the situation.

13. Thinking Fast
Rapid Cognition Thinking
System 1 Thinking
Naturalistic decision making/Recognition Primed Decision
o Thinking with the subconscious
o Uses Intuition and based on ‘patterns’
o Multiple decisions, multiple inputs, multiple options
o Effortless
o Dynamic
o Fast
o Processes automatically
o Emotive
o Decisive
o Can be primed or misled

14. Priming to influence rapid cognition

15. Thinking Slow
System 2 thinking
• Thinking with the conscious part of our brain
• Uses logic and reasoning
• One issue at a time
• Requires effort and is tiring
• Slow and deliberate
• Follows rules and processes
• Explores possibilities and probabilities
• Less decisive
• Invites compromise and is risk averse

16. Categories of decisions
Subconscious decisions System 1 decides
System 2 agrees
Anchored decisions System 1 sets the agenda
System 2 thinks about it
Rational decisions No input from System 1
System 2 is on its own
Cognitive dissonance Input from system 1
overruled

17. When can we trust System 1?
Successful rapid-cognition judgement involves
pattern recognition. This requires:
• an environment with sufficient statistical
regularity for patterns to exist; and
• an opportunity to learn these regularities
through prolonged practice
Intuition is reliable in sports, medicine, firefighting,
warfighting (complexity)
Intuition is not reliable in the absence of stable
regularities i.e. stock picking, political forecasts
(chaos)

18. System 1 vs System 2
A bat and ball together $1.10
If the bat costs $1.00 more than the ball,
how much does the ball cost?

19. Why Good Leaders Make Bad Decisions
• make decisions largely through unconscious
pattern recognition and emotional tagging.
• can be distorted by self-interest, emotional
attachments, or misleading memories.
Need to find systematic ways to recognize the
sources of bias and then design safeguards that
introduce more analysis, greater debate, or
stronger governance.
Campbell and Whitehead

20. The Warren Harding Error:
Why we fall for tall, dark handsome men

21. Why do we make bad decisions?

23. Bad Business Decisions
• IBM pays Microsoft a one-off fee to develop PC-
DOS without the IP
• Western Union knocks back Bell’s telephone
“What use could this company make of an
electrical toy?”
• Decca reject the Beatles
• Henry Ford refuses to update the Model T
• Ross Perot knocks back an offer to buy Microsoft
for $40 million 1979
• Wang tries to develop it’s own OS
• NBC turns down the Cosby Show

24. Good Decisions
• Theodore Roosevelt funds digging of the
Panama Canal
• Packer sells Channel 9 to Bond and buys it
back for 300m less
• Gen. Attaturk converts Turkey to Greek
alphabet
• Steve Jobs returns to Apple

25. Decision making in the Military
o Tactical
o Operational
o Strategic

26. Political
Bad military strategic decisions
o France invades Russia
o Germany invades Russia
o Japan bombs Pearl Harbour
o Bay of Pigs Invasion
o US invades Vietnam
o Russia invades Afghanistan
o Argentina invades Falkland Islands
o Iraq invades Kuwait
o Gulf War 2 – US invades Iraq
o NATO+ invades Afghanistan

29. Decision theory
o a body of knowledge and related analytical techniques
designed to help a decision maker choose among a set
of alternatives in light of their possible consequences.
o Decision theory can apply to conditions of certainty,
risk, or uncertainty.
o Decisions under certainty, preferences are simulated by
a scoring single-attribute or multi-attributes to rank the
alternatives.
o Decisions for risk conditions is based on the concept of
utility for given consequences and probabilities.
o Decisions under uncertainty can use game theory or
simulation

30. Types Of Decision Making
Environments (Decision theory)
o Type 1: Decision Making under Certainty. Decision maker know
for sure (that is, with certainty) outcome or consequence of every
decision alternative.
o Type 2: Decision Making under Uncertainty. Decision maker has
no information at all about various outcomes or states of nature.
o The Expected Payoff (ER) rule dictates that the action with the
highest expected payoff should be chosen
o The Expected Loss (EL) rule dictates that the action with the
smallest expected loss should be chosen
o Type 3: Decision Making under Risk. Decision maker has
some knowledge regarding probability of occurrence of each
outcome or state of nature.

31. Decision Support Tools
o Manufacturing Resource Planning (MRPII)
o Affinity Charting o Marketing, 4Ps of
o Analytical Hierarchy Process o Materials Requirements Planning (MRP)
o Balanced Scorecard (Kaplan and Norton) o Matrices
o Benchmarking o Matrix 2x2
o Boston Plot (see also Product life cycle model below) o Media for Communication
o Brainstorming o Mintzberg's 5 Ps for Strategy
o Capabilities and Competences o P-R
o Capability and Maturity - Hayes and Wheelwright's Four Stages o Pareto Principle
o Cause and Effect Diagram, Fishbone, Ishikawa Diagram o Polar charts, Radar charts
o Check Sheets and Check Lists o Porter's 5 Forces
o Clustering Processes o Porter's Generic Competitive Strategies (ways of competing)
o Conflict Analysis o Porter's Value Chain
o Control Charts o 4 Ps of marketing
o Corporate Strategy o Product Life Cycle (See Boston Plot above)
o Cost / Benefit / Risk Analysis o Programme Evaluation and Review Technique (PERT)
o Criteria Rating Form, Weighted Ranking o Quality Framework
o Critical Path Analysis (CPA, CPM) o Quality Function Deployment (QFD)
o Customer Surveys and Interviews o Quality Organisations and awards
o D-F o Quality, Time, Cost & Flexibility
o Data Sources (including links to some www sources) o Quality - TQM Tools
o Decision Trees o Quantitative Decision Making
o Deming Cycle (Plan, do, check, act) o Robustness Analysis
o Deming's 14 points o S-U
o Drawing Packages o Sensitivity Analysis
o Finite Capacity Scheduling o Scatter Plots
o Flexibility Framework o Strategic Options Development and Analysis (SODA)
o Flow Charts o Soft Systems Methodology
o Force field Analysis o Spreadsheets and databases
o From/to Chart o Statistical Process Control
o G-I o Statistical Software
o Gap Analysis o Strategic Assessment Model
o Graphs, Gantt, Histograms and Bar charts o Strategic Assumptions Surfacing and Testing
o Hewlett-Packard Return Map o Strategic Choice Approach
o Histogram or Bar Graph o SWOT (Strengths, Weaknesses, Opportunities, Threats)
o Importance / Performance Matrix o Time Framework
o Innovation Funnel o TQM (Total Quality Management) Tools
o J-L o Trade-off Models
o JIT (Just-In-Time) o V-Z
o Kanban o Value Chain (Porter's)
o M-O o Vroom's expectancy theory
o Manufacturing Decision Areas

32. How the decision models overlay on the Cynefin model
Decision Making under Decision Making under
Risk Certainty
Type 2 decision making Multiple Attribute
RPD V3 RPD V2
Analyze
Game theory
Decision Making under
Decision Making under Certainty
Uncertainty Single Attribute
Gut feeling / instinct
Type 1 decision making
Compare
RPD V1

33. Initial observations
o Never go against your gut instinct
o Reflect on what is driving your decisions
o Look outside the box to expand your options
o Never let generalists (or politicians) make
rapid-cognition decisions in areas where they
are not experts

34. Activity

35. What are the barriers
to good decision
making?

36. What environmental
conditions would be
conducive to good
decision making?

37. What are the
attributes of a
good decision
maker?
Using Organisational Zoo Cards

38. What enablers could be
put in place to enhance
good decision making?

39. Should decision
making fit into a
KM framework?

41. Where to from here?
Collaborative creation of a paper on how to
make good decisions?

42. Bibliography
• Daniel Kahneman http://www.princeton.edu/~kahneman/index.html
• Malcolm Gladwell http://www.gladwell.com/bio.html
• Gary Klein http://en.wikipedia.org/wiki/Gary_A._Klein
• Decision Theory http://pespmc1.vub.ac.be/ASC/DECISI_THEOR.html
• Modelling and Decision Support Tools http://www2.ifm.eng.cam.ac.uk/dstools/
• Why Good Leaders Make Bad Decisions by Andrew Campbell, Jo
Whitehead, http://hbr.org/2009/02/why-good-leaders-make-bad-decisions/ar/1
• Two system Thinking
http://timreidpartnership.com/Site/An_introduction_to_2_system_thinking.html
• The Power of Intuition: How to Use Your Gut Feelings to Make Better Decisions at
Work by Gary Klein http://www.amazon.com/s?search-alias=stripbooks&field-
isbn=0385502893
• Sources of Power: How People Make Decisions by Gary Klein
http://www.amazon.com/Sources-Power-People-Make-
Decisions/dp/0262611465/ref=pd_rhf_se_p_t_1