This document discusses improving decision making through an improved decision process. It notes that humans have both fast, intuitive decision making (System I) and slower, more deliberate decision making (System II). While mining typically requires System II decisions due to their size, even these can fall prey to cognitive biases. To avoid this, the document recommends focusing on strengthening the decision process itself. A good process helps eliminate biases by considering alternative options, disconfirming evidence, minimizing short-term emotions, and preparing for multiple outcomes. Questions are also provided to help build these protections directly into the decision process.

1. Making Decisions for Growth & Improved Performance
5th Annual American Mining Summit
Omni Interlocken Resort – Broomfield, CO
June 8, 2015
Ken Taylor, VP Corporate Development, Intrepid Potash

2. Safety Share
A Bad Safety Decision Can Hurt for a Long Time!
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Lift with your Legs, not your Back!

3. Introduction
Applying the Latest in Decision Research to Mining
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Going to Stanford – A decision that has led me here

4. System I – Fast, Automatic
“The normal state of our mind is we
have intuitive feelings and opinions
about almost everything that comes
our way.”
We take cognitive shortcuts that
lead to biases
Blink, Malcom Gladwell
System II – Slow, Logical, Deliberate
Exerting cognitive effort on a
problem e.g. when doing math.
Systematically working through a
problem.
This is a scarce resource, we simply
don’t have the energy to engage
system II for every decision we make
Decision Making Psychology
Humans Thinking Can be Fast or Slow
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Spotlight – We see what is immediately before us, based on our experience
Thinking Fast and Slow, Daniel Kahneman

5. System I Example
Quaker Made a Couple System I Decisions and…
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“We should have had a couple people arguing the “no” side of the
equation.” William Smithburg, former CEO of Quaker
Purchased for
$220mm in 1983
Purchased for $1,800mm
in 1994
Sold for $300mm in 1997

6. Decision II History
System II Analysis is Often Applied to Big Decisions
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Most companies use an AFE form to spur System II Analysis
1700’s Pros vs. Cons, or moral
algebra
Modern era, Decision trees with
risk weightings and financial
analysis

7. Typical Mining Decisions
• Life of Mine Decisions
– Long lead times
– Large capital outlays
• Acquisition decisions
• Major Opportunity projects
• Sustaining capital budget
• Equipment selection and changes
Typical Process
• Approval For Expenditure (“AFE”)
– Injects “effort” into the decision process
– If designed well, can help eliminate bias
• One option or “inside the fence” options dominant and receives
lots of focus
Typical Decisions in Mining
Mining Decisions Typically Require System Processing
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Big Decisions – Mean mining companies need good decision processes

8. – Hiring: A study of 20,000 executive searches found that 40%
of senior level executives are pushed out, fail or quit within
18 months.
– Career Choice: An American Bar Association survey found
that 44% of lawyers would not recommend a career in law
– M&A: According to one study, 83% of corporate mergers
and acquisitions failed to create any value for shareholders.
– “There are two main causes of poor decision making:
insufficient motivation and cognitive bias.” HBR May 2015
Decision Struggles
Data Indicates Bad Decisions Abound Even When Using System II
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System II is not full-proof. It can fail due to lack of effort or cognitive bias

9. Dan Lovallo, professor at Univ of Sydney and Olivier
Sibony, director of McKinsey & Company investigated
1,048 decision over five years. They found that,
“Process mattered more than analysis – by a factor of
six”
A good process led to better analysis, by ferreting out
faulty logic.
The Decision Process is What matters
Process Needs More Emphasis than the Analysis
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Focus on the right process and better decisions will follow

10. Narrow Framing
Why the Bad Decisions?
The Four Villains of Decision May Cause System II Failures
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We often frame decisions around what we know or own

11. Confirmation Bias
Why the Bad Decisions?
The Four Villains of Decision May Cause System II Failures
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12. Short Term Emotions
Why the Bad Decisions?
The Four Villains of Decision May Cause System II Failures
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Emotions tempt us to make a decision based on the moment

13. Why the Bad Decisions?
The Four Villains of Decision May Cause System II Failures
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14. Widen your options – overcomes a narrow frame
Reality test your assumptions – avoids confirmation
bias
Attain distance before deciding – minimizes the
impact of short term emotions
Prepare to be Wrong – Mitigates overconfidence
Overcoming the 4 Decision Villains
The Heath Brothers Propose a WRAP Process to Avoid Biases
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It’s the System, not the Analysis, that will make your decision process

15. – Avoid a narrow frame – what else could we
do?
– Multitrack – consider several options
simultaneously
– Find Someone who has solved your problem –
internal or external
Widen Your Options
Overcome Narrow Framing by Widening Your Options
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Mining companies often frame in terms of what they own or know

16. – Consider the Opposite – disconfirming
evidence
– Zoom out, Zoom in – trust the averages
– Ooch – small tests avoid big risks
Reality Test Your Assumptions
Avoid Confirmation Bias by Reality Testing Your Assumptions
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Greenfield projects face a stiff base rate test

17. – Overcome short-term emotions
• 10/10/10
• What would a successor do?
– Honor your core priorities
Attain Distance Before Deciding
Minimize the Impacts of Emotions by Attaining Distance
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Emotion alters our analysis, manage the politics of a decision

18. – Bookend the Future – prepare for both success
and failure.
– Set a tripwire – to remind you that you have a
choice
– Trust the process – bargaining takes time but leads
to better results
Prepare to Be Wrong
Mitigate Overconfidence by Preparing to Be Wrong
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Gatorade, it turns out, is quite different than Snapple

19. – Study on experts making predictions that used 284 experts
making predictions in their field of expertise
– Study conducted by Phil Tetlock, Professor of Psychology
and Management at the University of Pennsylvania.
“… it is impossible to find any domain which
humans clearly outperformed crude extrapolation
algorithms.”
Example of Overconfidence
Experts Aren’t Really Good at Predicting…
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Ask an expert or build a regression?

20. In other words, the trend line is a better predictor
than experts.
Overconfidence Example
Trend will likely Predict Better than My Opinion
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Trends are base rates – Experts are good at predicting base rates
 Experts in the media… worse than non-media experts
 Some good news, Experts… usually better than novices
 Extra education… does not boost prediction accuracy

21. 1. If the option you’re currently proposing were to vanish as
a feasible alternative, What else could we do?
2. Imagine that the proposed alternative will actually turn
out to be a terrible decision. Where could you go looking
for the proof of that right now?
3. How can we dip a toe in this decision without diving in
headfirst?
4. If you were replaced tomorrow, what would your
successor propose?
5. Six months from now, what evidence would make us
retreat from this decision? What would make us double-
down?
Cliff Notes for your Process
Add These Heath Brother Questions to your Decision Process
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Protect your decisions from decision villains with a stronger process

22. – We naturally have fast and slow cognitive decision
tools, both are needed
– Mining typically requires an effortful decision
process, but can still get nailed by decision villains
– Build protections against villains into the decision
process
– For more understanding of the protective
measures you can take, read Decisive by Chip and
Dan Heath
Conclusion
Improving Decisions Starts with Improving the Decision Process
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Protect your decisions from decision villains with a stronger process

23. Supplying a Growing America®
®
Appendix
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Supplying a Growing America®
Questions