The book we've been looking at in Book Briefs this month is Thinking, Fast and Slow, by Daniel Kahneman.

The book explores what’s happening inside our minds when we make choices. In particular, it explores why we make poor choices so often and what we can do about it.

It's a really important book for agency leaders, people making important decisions every day that affect both their business, and the lives and livelihoods of the staff and teammates in the business.

Our review of it in Radar Reads looks at big ideas in the book, and also explores the key points in good detail. But it also looks at the practical impacts for agency leaders, and offers three suggestions of how to take the ideas in the book and turn them into concrete practices and usable actions.

I'm going to outline one of those in this blog — keeping a decision journal.

20–20 Hindsight is Actually Harmful

In part 3 of Thinking, Fast and Slow, Kahneman examines the issue of overconfidence.

Kahneman believes overconfidence is the cognitive flaw with the most potential for damage. This makes it a theme that should be of particular interest to agency leaders. Kahneman looks in detail at the undue confidence we often have in what we believe we know. We often overestimate what we know or understand and, in particular, underestimate the role of chance or luck in events.

One of the most significant insights from this book on the issue of overconfidence is the dominance and problematic consequences of an important cognitive bias known as hindsight bias, or the knew-it-all-along phenomenon.

Hindsight bias is our tendency to look back at an unpredictable event and think that it was, in fact, easily predictable.

We see hindsight bias every day, in sport and current affairs especially, when pundits look back at events and point out how obvious it was that something different should've been done, that it was clear how things were going to turn out and different choices should've been made — but in the middle of events, where the play of things is unpredictable, it's very hard to know what is the right or best thing to do.

Hindsight is inevitable, because the mind is a sense-making organ. It tries to take chaotic, random or unpredictable events and create some sort of sense from them — order from disorder.

Hindsight, though, is harmful for decision-making people for several reasons:

  • It hides how much you were surprised by past events, and inevitably underestimate the extent to which you were surprised;
  • It damages your evaluations — it leads people to determine the quality of a decision not by whether the process was sound but by whether the outcome was good or bad;
  • It can be unkind to decision-makers — we are prone to blame people who make good decisions that worked out badly, and to give them too little credit for successful moves that only appear that way after-the-fact. There is an outcome bias.
  • This can bring undeserved credit to irresponsible risk takers — people who took a crazy gamble and won. Hindsight removes the luck or chance involved, and recasts it as inevitable.

Taking Action

All is not lost, though.

There are a number of things that can be done to mitigate the worst effects of hindsight bias. We discuss three them in the Book Briefs summary of Thinking, Fast and Slow, and I'm going to outline one here.

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Keeping a Decision Journal

A decision journal can help you to move towards consistently making better decisions.

It is a simple technique to identify and reflect on the decision-making process from beginning to end.

The point of a decision journal is to prevent the problems that arise from hindsight bias — evaluating the outcomes of decisions, rather than how a decision was made — and so unleashing our ability to learn and improve the choices we make as agency leaders.

A decision journal is simply that — a diary that acts as an indelible record of what you decided.

At a bare minimum, a decision journal should record:

  • What you decided;
  • Why you decided as you did;
  • What you expected to happen (or not to happen) and why.

Those three things are the basic contents. You should also leave a space at the end for:

  • The outcome

… which you should use to return to when you come back to review your decision.

Read the full article for more suggestions about what your decision journal should contain.

There is something important in the act of writing here. When you write things down about the choices you have to make, the holes become more apparent — it helps to point things out, and show where you need to go back and revise things.

And don't forget to create a rhythm of reviewing your decision journal — every six months or so, make some time to look back on the decisions you made previously — it probably doesn't need to be more frequently than that, because it will likely take a while to see the impact of the decisions you've made and to be able to examine the actual outcomes against your predicted outcomes.

However, when you're able to give a proper comparison between your actual outcomes with your predicted ones, your review will help you to see where you make mistakes, and how you make them. It will show you which kind of decisions you’re good at and which you’re bad at. These reviews are the kinds of things that could work well with a coach or business mentor.

It’s important to reiterate, your focus should be on the process of making decisions more than on the outcomes. Good decision-making processes can still lead to bad outcomes — that’s often just bad luck. But a better process for making decisions will increase the likelihood of sidestepping the problems.

Don't use it for everything

Although this technique is called a 'decision journal' this is not for every choice you have to make — this is a way to keep hold of the big decisions, the important ones that have a consequence on the business and your team, the ones that you need to deliberate over, where you need to consult, to investigate options and to take recommendations.

Don't let it become a burdensome task that slows you down … but do use it as technique to help you get better at the big things, the decisions that really matter.