Smart choices: a practical guide to making better life decisions by John S. Hammond & Ralph L. Keeney & Howard Raiffa

Author:John S. Hammond & Ralph L. Keeney & Howard Raiffa [Hammond, John H.]
Language: eng
Format: epub
Tags: General, Self-Help, Business & Economics, Finance, Education, Decision-Making & Problem Solving, Decision making
ISBN: 9780767908863
Publisher: New York : Broadway Books, 2002.
Published: 2002-01-15T18:37:16.320000+00:00

climatological data from the weather bureau to help her assess whether it will rain on a summer afternoon or evening.

· Collect new data. Sometimes the particular data you need may not be available off the shelfyou may need to collect them yourself. A food company might estimate the percentage of families who will buy a new brand of coffee by conducting a market trial or a telephone survey.

· Ask experts. For most uncertainties, there will probably be someone out there who knows more about it than you do. Seek out an expertyour doctor, lawyer, or accountant, an economistand elicit his or her judgment. In Janet's case, a local meteorologist would be an appropriate expert.

· Break uncertainties into their components. Sometimes dividing an uncertainty into its components, thinking about the components, and then combining the results will help in page_118

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establishing probabilities. An entrepreneur recognizes that the success of a new car wash in an area currently undergoing development will depend on the relative number of cars brought to the area by the different proposals for the adjoining site: a shopping mall or an office park. He can assign chances to various ranges of washes per day assuming the mall is built, and do likewise assuming the office park is constructed. He can then blend the results in proportion to the chances he assigns to the construction of a mall and of offices, to get an overall assessment of washes per day.

When expressing chances, qualitative terms may come first to mind. In casual conversation, people often describe chances using phrases such as "unlikely," "toss-up," "barely possible,"

"fairly likely,'' "pretty good chance," "almost sure," and so on. They do this not only because it's easy, but also because they think they're really communicating their judgments about likelihood.

But one person's "fairly likely" may or may not be the same as the next person's. Such subjective phrases may be sufficient for personal decisions that will not need to be justified to others, but they're not precise enough for most decisions. In most cases, therefore, you will want to express chances quantitatively, as actual probabilities, using either a decimal (0.2) or a percentage (20

percent). Using numbers reduces the likelihood of miscommunication and sharpens decisions.

If you are having trouble expressing your judgment quantitatively, or getting someone else to do so, zero in from the extremes. If you ask the hostess at a busy, no-reservations restaurant the chances of getting seated at 5:30 P.M. on Thursday, she might respond, "I haven't a clue; either you will or you won't." (Ah, frustration!) Countering with the question, "Is the chance better than 25 percent?" will very often elicit something more useful: page_119

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"Oh, much more than that." "More than 50 percent?" "Yes." "As much as 90 percent?" ''Too high." The range has been narrowed to between 50 percent and 90 percent; a few more questions might provide an even more precise range.

Pinpoint precision usually isn't required in assigning chances. Frequently, knowing that a chance falls within a certain range is sufficient for guiding a decision.

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