Labyrinth- the Art of Decision-Making

by Pawel Motyl

  What’s worse, sometimes even what our senses perceive and pass on to our rational thinking brains (and so to Kahneman’s system 2) can also be a delusion, leading to poor decisions. It’s bad enough when this concerns a simple experiment where subjects are asked to switch on a light signal that the researchers have delayed by a few milliseconds (which our senses cannot perceive), and then, after several repetitions, remove the delay, completely surprising the test subjects, because to them, the signal started appearing before they pressed the switch. 12 But it’s far worse when these types of delusion affect such a fundamental topic for some as... wine.

  One of the biggest scandals in the world of enology unfolded on May 24, 1976, in Paris. This was a period of unquestioned domination by French wines, which were considered the best—period. However, someone decided to question the unquestionable—a British man called Steven Spurrier. Spurrier devoted his whole life to wine and was a top connoisseur. In 1970, he began working at a renowned London wine bar, later moving to Paris, where he opened his own wine store and set up the Académie du Vin, which became the first serious sommelier training school. Spurrier decided to test the quality of the wines from the New World that were ever more boldly marching onto the market in a blind-tasting comparison to which he invited leading French wine tasters. The test took place in Paris, and the jury consisted of nine leading French restaurateurs and sommeliers. Spurrier told the experts that they were going to taste ten well-known red and white wines, but that the bottles would be covered up, so as to conceal which wine was in their glasses. This was to enable them to focus exclusively on the wine and preclude the eventuality of favoritism or dislike in relation to specific producers. In both of the two tastings, four bottles contained French wine, the remaining six were Californian. Among the producers of red wines in the test were renowned French names from Burgundy and Bordeaux: Château Mouton-Rothschild, Château Montrose, Château Haut-Brion, and Château Leoville Las Cases. California was represented by Stag’s Leap Wine Cellars, Ridge Vineyards Monte Bello, Heitz Wine Cellars Martha’s Vineyard, Clos Du Val Winery, Mayacamas Vineyards, and Freemark Abbey Winery.

  The results of the tests were shocking (especially for the French), as the expert ranking looked like this:

  Stag’s Leap Wine Cellars (California)

  Château Mouton-Rothschild (France)

  Château Montrose (France)

  Château Haut-Brion (France)

  Ridge Vineyards Monte Bello (California)

  Château Léoville-Las Cases (France)

  Heitz Wine Cellars Martha’s Vineyard (California)

  Clos Du Val Winery (California)

  Mayacamas Vineyards (California)

  Freemark Abbey Winery (California)

  For white wine, the battle involved Domaine Roulot Charmes, Meursault, Beaune Clos des Mouches, Joseph Drouhin, Bâtard-Montrachet, Ramonet-Prudhon, and Puligny-Montrachet, Domaine Leflaive les Pucelles, representing France; while Chateau Montelena, Chalone Vineyard, Spring Mountain Vineyard, Freemark Abbey Winery, Veedercrest Vineyards, and David Bruce Winery represented California. In this case, the puzzlement of the experts and observers was even greater, when the post-test ranking shaped up as follows:

  Chateau Montelena (California)

  Roulot, Meursault Charmes (France)

  Chalone Vineyard (California)

  Spring Mountain Vineyard (California)

  Beaune Clos des Mouches Joseph Drouhin (France)

  Freemark Abbey Winery (California)

  Batard-Montrachet Ramonet-Prudhon (France)

  Puligny-Montrachet Les Pucelles Domaine Leflaive (France)

  Veedercrest Vineyards (California)

  David Bruce Winery (California)

  This famous Paris experiment ended less than positively both for the jurors and Spurrier. While only one journalist, from Time, had been present at the tasting—because wine enthusiasts throughout France claimed it wasn’t worth bothering with anything so exotic as wine from the USA—the article he published provoked a storm. The French, who were totally unable to come to terms with the defeat (it would have been bad enough if their competitors had been from Tuscany or Ribera del Duero—but the USA!), treated the entire incident as a conspiracy, the Briton was declared persona non grata, and they questioned everything connected with the testing. The jurors were subjected to a barrage of criticism—one of the restaurateurs, for example, found some of his regular customers were boycotting his restaurant. And FYI, similar tests have been repeated many times since then. Spurrier himself, in collaboration with the wine magazine Decanter, carried out an identical duel in 2006, on the thirtieth anniversary of the Judgment of Paris, as the test came to be known.

  When it comes to wine, it’s a case of de gustibus non est disputandum (in matters of taste, there can be no disputes), but the experiment demonstrated a very interesting phenomenon from the point of view of decision-making. Our brains create a representativeness heuristic in order to help us negotiate a highly complex world, simplifying it somewhat by suggesting, for example:

  French wine = better wine

  Such a simplification can often lead us astray, and when we try to bypass the heuristic (by covering up the bottle), the effect can be surprising. 13

  Another classic heuristic, affecting not only wine, is the unconscious assumption that a more expensive product is a better one. It’s been tested repeatedly, and the results are the same every time. One test subject was wine: in one classic version of the experiment, the subjects were told that they were to taste two wines, one costing a dozen dollars or so, the other several times that amount. Of course, the majority proclaimed that the second one tasted better, even though it was precisely the same drink as the first one. More shocking, though, were the results of the experiment when the subjects were placed in an MRI scanner and their brain activity measured while they tasted the wine. It turned out that while they were drinking the purportedly more expensive wine, there was more activity in the orbitofrontal cortex region (OFC). That’s the region responsible for, among other things, experiencing pleasure. What does this mean? Well, it means the subjects were being truthful. It wasn’t their wine snobbery telling them to praise the more expensive wine. No, that wine really did taste better, because their brain responded more positively to the taste of the “more expensive” wine.

  Each of these things means that even if we think we’re behaving rationally and logically, thoroughly analyzing the pros and cons when we’re trying to come to a decision, oftentimes we remain under the influence of things that effectively render our choices less than optimal. The world around us is certainly to some degree an illusion, something we discover quite painfully only after we’ve made up our minds.

  Even if we operate entirely on a rational level and don’t succumb to any of these misapprehensions, we still remain under the influence of yet another powerful force—our social motives. Though the subject is not a new one and has been thoroughly researched, it is rarely considered in the context of decision-making, which is surprising, bearing in mind the enormous influence motives have on our choices. Research into social motives was conducted in the second half of the twentieth century by an American psychologist and lecturer at Harvard and Boston University named David McClelland. McClelland carried out a series of studies on personality and behavioral competencies, together with their application in business, but his key accomplishment was the book Human Motivation. While the history of research into social motives dates back to the work of Henry Murray, who worked out, among other things, the Thematic Apperception Test (TAT), which examines projected motives, McClelland was the first to go a step further and apply the results of the research to leadership and decision-making.

  There are three kinds of social motives. The first, called the need for achievement—more commonly referred to as the achievement motive—appears in the unconscious search for challenges, ind
ividual tasks presenting difficulties, which, when overcome, give someone a strong feeling of internal power and satisfaction. People with a high need for achievement will therefore try to take up new activities and aim to break records to do things better than anyone has done them before, to compete with those regarded as the best. McClelland’s research showed that the achievement motive relates to success, especially in specialist and expert roles (I want to be the best in a given field, to overcome barriers, to constantly improve). One project also demonstrated a correlation between the popularity of this motive in society and overall levels of wealth.

  The need for affiliation, or affiliation motive, is expressed through participating in social activities and joining groups characterized by harmony and good relations. Affiliative types are highly empathetic; they also unconsciously choose situations and tasks where they will have occasion to feel needed, liked, and accepted. In business, which as a rule isn’t a very friendly environment for affiliative types, they can be found in roles connected with addressing customer needs and satisfaction, or as business partners improving cooperation with outside companies.

  The need for power, or power motive, is displayed by those who feel a strong need to influence and control the world around them. People with a strong power motive will try to dominate, to deal the cards, all while creating an image of themselves as an important, influential, and high-ranking individual. While many people may regard the power motive as somewhat aggressive or unattractive, in business it is of enormous significance. People with a power motive usually develop excellent managerial skills, especially in difficult circumstances involving change. McClelland himself repeatedly stressed the importance of the power motive, in, for example, an article with the unambiguous title “Power Is a Great Motivator,” published in the Harvard Business Review.

  Every mentally healthy person harbors all these motives, but we vary in the degree to which we are driven by them. For some of us, affiliation will come first, power a little lower, and achievement last. Others will put achievement first, affiliation second, and power third. Yet others may have a strong need for power combined with relatively low levels of achievement and affiliation. What matters are the consequences that arise from which of the motives dominates in our personality, as this will quite strongly condition our actions toward those that will bring us the best motivational returns for our efforts.

  The dominant social motive relates not only to our effectiveness in particular business roles, but also to our attitudes when decision-making. Each of the three motives exerts positive and negative influences on our choices.

  People with a high achievement motive will look favorably at difficult but realistic scenarios and will make bold decisions that give them an opportunity to test themselves. A negative of the need for achievement is having a relatively low ability to engage others in the decision-making process, as the achievement motive also relates to a high degree of individualism. In business, managers with a high achievement motive don’t cope well with delegating responsibilities and empowering others to make decisions, as they assume (often correctly) that they themselves would make a better choice.

  People with a high need for affiliation face a different problem: they tend to avoid making decisions that in their opinion will upset or hurt others. Such difficult, but often essential decisions, like firing an ineffective employee, are a nightmare for an affiliative manager, which they will—more or less consciously—avoid by deciding to give the employee one more (last) chance. On the other hand, affiliative types are natural supporters of an inquiry approach, as they promote teamwork and always try to involve others in discussions. Even if they do so unconsciously, acting not so much to improve the analysis of a situation but to keep others happy by asking for their opinions, the positive influence on the decision-making process is unarguable.

  The power motive, in turn, is useful when making tough decisions in a crisis or period of change management. Decision-makers with a high need for power will, and most often quite autocratically, promote radical solutions that they directly control. There are two huge minuses here: The first is the same as for those with a high achievement need, in that they will bypass other people’s opinions, which occasionally makes it difficult to view a problem objectively. The second is their tendency to use their position to force through certain decisions, even if they are not the best ones. It’s no accident that many charismatic leaders have a high power motive. Just how dangerous that can be was discussed in Chapter 3.

  The emerging picture is not reassuring. In everyday life, we assume that the reasons for bad decisions are scattered in the world around us. We blame others, who gave us crappy information; we curse our competitors, who got their new product right when we didn’t; we criticize those who persuaded us to change our minds. Alas, we seem oblivious to the fact that we are our own greatest enemy—or more precisely, we are hostages to the highly volatile combination of our senses filtered through a fantastic and intricate thought-processing machine that controls our behavior: our brain.

  We understand better and better how our brains work, how our emotions are not only created but also affect our decision-making. Conscious of our fallibility, we try to create systems and tools that will eliminate cognitive errors and improve the decisions we make. Hundreds of tests are in progress using MRI scanners, but in the case of some decisions, even they are helpless.

  Maybe in the future, a solution will appear to protect us even against these errors.

  9

  Peering Through the Looking Glass

  Bearing in mind how dangerous the world of black swans is, and how easy it is to succumb to turkey syndrome, any-one trying to predict how things might develop should go about it with a large dose of humility. There have already been innumerable predictions devised by professional analysts that turned out to be totally wide of the mark. For example, in 1964, the RAND Corporation, a think tank specializing in creating scientifically supported short-, medium-, and long-term scenarios, set up a group containing a dozen or so renowned experts from a variety of fields whom they asked to estimate when certain technologies might appear and when specific breakthrough events for humankind might occur. As far as landing on the Moon went, the experts got it pretty much on the nose, because, just like President Kennedy said, they assessed that it would happen by 1970 at the latest. However, they also reckoned that there would be a permanent lunar base there a mere five years later. Also, by 1975, we were supposed to have 100 percent accurate weather forecasts, and by 1985, at the latest, there was supposed to be a manned mission to Mars. Humans as a species were also supposed to become entirely resistant to disease by 1997. 1

  The fact is that foreseeing the direction in which things will go in response to the appearance of new technologies and how people will utilize them is a minefield. Remembering how easy it is to under- or overestimate an event or trend, it’s certainly worth looking at forces that not only have an enormous impact on the way we currently make decisions but will increasingly influence us in our decision-making.

  The Polish science fiction author Stanisław Lem, when asked by a journalist in 2004 about how he envisioned the future of the world, replied in his inimitable style, “It will be the same, only more so.” For me, this encapsulates what the main driving force behind decision-making in business will be in the years to come.

  Although we have at our disposal the fantastic instrument that is our brain (despite its weaknesses), we are functioning in a world that is accelerating exponentially. We have less and less time to analyze data and apply a thorough inquiry approach, and the number of decisions demanding our attention is constantly increasing. The good news is that we have gained a natural ally in this crazy world, which—if we use it wisely—may provide decision-makers with very valuable support. Because, while the amount of information around us is increasing dramatically, so too are the technological capabilities to analyze that data.

 
Today, we are able to gather practically limitless amounts of data, which provides the foundation for business intelligence and tools supporting human decision-making. This is thanks to the technological revolution, which has drastically cut the price of digital memory. The cost of a 1 GB hard drive has dropped equally exponentially: in 1980, it cost an average of $440,000, though it could be even more expensive (e.g., Apple charged $3, 500 for its 5 MB hard drive, so the cost of a gigabyte would amount to $700,000). Ten years later, the average cost of a gigabyte had dropped to just $11,000, and by 1995 that figure was 10 percent of that. In 2000, 1 GB of hard drive space cost a touch over $11.00, in 2005 that fell to $1.00, and five years after that it was calculated in cents (9 cents per GB on average). For example, the Seagate Barra-Cuda disk, with a capacity of 1.5 TB was priced in June 2010 at $89.00, or less than 7 cents per gigabyte. In 2017, the price of the latest version of the same disk was half that price, but by then cloud computing and the attendant cloud storage had arrived, so it really didn’t matter anymore. Storing almost limitless data had become both absurdly simple and ridiculously cheap.