A632.1.4.RB Multistage Decision Making - Lindsey Wilson

Hoch, Chapter 3 discusses the power of everyday reasoning in multistage decision-making. The text discusses the way that researchers solve multistage problems through the application of formulas (dynamic programming models) that provide the most significant chances of success. Critically think about your own decision-making process and reflect on the process you use in relation to the decision making process recommendations outlined in the article. How would you apply optimal dynamic decision analysis to predict the future impact of today's decision? Additionally, would the conclusions reached on pages 57ff. of the text improve your decision-making? How and why?

 

A week before Christmas in 2013 my husband and I packed all of our belongings in a semi-truck put our three cats with some of our luggage in our SUV and started our long drive from western Washington to my husband’s new duty station in Maryland. I had decided before we left Washington that teaching wasn’t working for me professionally for a variety of reasons, and this was my opportunity to start over professionally. After getting settled in Maryland I started the exhausting process of job hunting. Six months later I was getting desperate. My savings was running thin due to my student loans and car payment; I was extremely discouraged personally and professionally and as a family we had to make a lot of sacrifices living off of one income. Finally, I had two interviews in the same week. One paid $17/hour working for a non-profit healthcare company that advocated and lobbied for elderly healthcare facilities. The other job was only part-time at $10/hour working for the USO which is a non-profit that supports active-duty military and their families. The problem was, the USO offered me the job, but the healthcare company told me that they were deciding between me and one other candidate and they were not going to make their final decision for another two weeks. The problem was: Do I turn down the USO job and gamble that I will receive the healthcare job that paid more money? Or do I take the USO job that pays substantially less, but is guaranteed money in my pocket?

To solve this problem like the one mentioned above I looked at all of the personal and factual variables involved:

Mathematically I looked at the money variable of this problem as:

100% guarantee that I would receive $10/hr for 30 hours/week

50% chance that I would make $17/hr full-time with benefits

50% chance that I would walk away empty handed if I chose the healthcare position

In a way, I also used the concepts outlined in Bernoulli’s equation that Dan Gilbert described in his Ted Talk video (July 2005). I thought of the expected value of each choice, the odds of my choice leading me to the expected value and the benefit of each choice. However, for me there were major financial and emotional risks too.

With regards multi-stage decision making Hoch says, “There is…a right way to structure [a] problem so that we can define our own best answer.” (2001, p.40). He goes on to explain that one must define the goal and in addition to this, one must consider how each answer leading to the goal will inform future decisions (Hoch, 2001). My goal was to make enough money to cover my bills and to work in a job that was intrinsically rewarding and less stressful than teaching. As far as looking at the future implications each possible decision, I looked at the best case scenarios that each job could offer me in the future. In choosing the healthcare job I would receive the highest paying salary thus far in my career and I would receive great benefits. However, the job was 100% administrative, and although I would also gain more understanding of the healthcare industry which could open more doors in the future professionally, I did not have a desire to work in the healthcare industry or lobbying. In other words, there was a high value to this decision in the immediate future, but not the long term future.  The USO job on the other hand was only part-time; I would receive a low wage with no benefits, but the job would allow me to be hands on in creating programs and services to support the military and their families. Looking into the future implications of this choice I would gain more experience working with the military, which as a military spouse would be beneficial. I would also be able to build my management skills as well as my administrative skills which would be more personally gratifying and still help build my resume for future employment with a variety of jobs. So the USO job was a low value in the immediate future, but high value in the long term future.

If I were to look at this dynamic decision in terms of mathematical probability and future income earnings, I probably would have made the gamble and decided to place my bets on the healthcare job. However, emotionally for me at that time the risk of me losing out on both jobs was too high. I would have been emotionally devastated if I had to start applying for more jobs. In addition to this, I followed my intuition, or gut feeling that the USO job would be the better option for me in the long-run despite the extremely low wage. In the end, I made the correct decision. Although I would have made more money in the long run had I worked for the healthcare company, but personally I would have missed out on so much more by not working for the USO. After only two years I had worked my way up to full-time and making over $18/hour with the USO and received a management position. In addition to this, I worked an extremely rewarding job that I was passionate about. Since my goal was never to make the most money possible, but to make enough money to pay my bills and to be intrinsically rewarded through my job that was less stressful than teaching, I actually exceeded my goal.

As Hoch (2001) concludes with regards to dynamic decision making, our intuition has a surprising ability to lead us in the right direction. In my case, it served me very well. However, although intuition has a high rate of success, “the temptation is to conclude that our intuitions will be sufficient to all dynamic decision problems – but we would be severely mistaken. Eventually, we will all face decision where the stakes are high and our intuitions are misleading.” (Hoch, 2001, p. 57). I rely heavily on my intuition, but I also try to back my gut feeling up with information before I act. In addition to this, due to my personal circumstances it is difficult for me to see more than 3-4 years into the future. All of my adult life has been subdivided into 3-4 years. High school was four years, college was 4 ½ years, and I know that every military duty station will last only 3-4 years before we move. As a result, there are many decisions that I have intentionally not made due to the fact that the future beyond 4 years is abstract to me. In order to make better dynamic decisions future I will need to get past this mental block. I will also have to explore the choices that are possible despite this constraint.

The major learning for me with regards to dynamic-decision making is to check my assumptions about the future. Nosich (2012) informs us that when critically thinking through a problem our assumptions are the background theory that we take for granted. As a result, it is critical for me to be able to identify my assumptions when thinking through a problem. Hoch (2001) echoes this explaining that we are often not aware of our assumptions, and that just because something was true in the past, doesn’t mean it will hold true in the future, and as a result we have difficulty making multistep decisions with long term implications.

A major question that I have been asking myself throughout my readings has been: What are the implications of the preserved choices with regards to decision making? For example, Hoch (2001) gives the example of an experiment where students were given the simulation of purchasing earthquake insurance based off of ambiguous feedback. The results showed that students selected to purchase more insurance despite the fact that the data showed that the earthquake insurance was ineffective. My question is: Did the students perceive not purchasing insurance as an option/choice? I think that what we perceive as our choices will inform our ultimate decisions. For example, in Sheena Iyengar’s Ted Talk video the Art of Choosing (July 2010) she explains that when shown 7 different flavors of soda to participants in western democratic societies they perceived that they had 7 different choices. However, participants that were going through the transition from communist Eastern Europe to a capitalist society only saw two choices: soda or no soda. As a result, I wonder what the relationship is between what we perceive as our possible choices, and the impact they have on our final decision.

 

References:

Hoch, Steven J., Kunreuther, Howard C., (2001) Wharton on Making Decisions. Hoboken, NJ: Wiley.

Iyengar, Sheena. (July 2010). The Art Of Choosing. TedGlobal. Retrieved from https://www.ted.com/talks/sheena_iyengar_on_the_art_of_choosing?language=en.

Gilbert, Dan. (July 2005). Why we make bad decisions. TedGlobal. Retrieved from  https://www.ted.com/talks/dan_gilbert_researches_happiness.

Nosich, Gerald M., (2012). Learning to Think Things Through 4^th ed. Boston, MA: Pearson.