Making Better Decisions in Three Steps

This is not your fault. Covid-19 has damaged your brain. Now, we’re not declaring the virus kills brain cells. We mean everyone in our society has seen a decline in their decision-making ability due to stress caused by the Covid-19 epidemic. Simply put, stress makes you stupid. In this blog, we’d like to unpack the increase in stress, what it does to decision-making, and what you can do to avoid a decline in your mental state.

Stress is Up

We are indeed stressed. Google trends show a steady increase in searches related to “Anxiety” in the United States. A Lexus-Nexus search of major newspapers shows an increase in the use of the word “fear.” This stress is part of a long-term trend in the U.S., which started well before the epidemic.

Three Steps

Google Search Frequency; “Anxiety”

The trends are somewhat different around the world. Dartmouth scholars recently published a report about America’s press coverage which is far more negative than the rest of the word: “Why is All Covid-19 News Bad News?”  So, the United States may have more press-induced stress. But the rest of the world has plenty too. Desperation to find vaccines, epidemic surges in India and other nations, all create different kinds of fear and stress, regardless of whether the press is overly gloomy or cheerful.

Stress Makes You Stupid Physical exercise, like resistance training, is a type of stress that definitely makes you stronger. The Marines have a saying, “Pain is the sensation of weakness leaving your body.” So it’s a common mistake to think other kinds of stress also make us stronger. Long before Kelly Clarkson sang it, we heard, “What doesn’t kill you makes you stronger.” This statement was made popular by Nietzsche in Die Götzen-Dämmerung – Twilight of the Idols. But this premise goes back long before Nietzsche; just ask the Spartans. But, like many old sayings, it’s just not true. The advent of Mathematical Psychology created a means to quantitatively measure behavior and performance. What we have learned in the past 50 years is that:

  • Different personalities have measurably different predispositions to stress and anxiety.
  • Activated anxiety creates measurable changes in your body.
  • Anxiety increases pessimistic risk appraisals.
  • Stress and anxiety degrade both our decision-making and our accuracy of risk assessments.

If you’re a decision-maker in 2021, your reasoning has probably declined since 2019. Because… Stress makes you stupid.

Making Better Decisions – Three Steps

Generally, there are three components of making good decisions. We need these guidelines now, more than ever.

#1 – We need some humility about what we know. In 2019 you might have thought you understood risks to your supply chain, or your parent’s health, or how safe your job was. Everyone has discovered there are risks we didn’t consider. Humility is a form of wisdom, which accepts things we don’t know or can’t do. Being stressed about these limitations won’t make you any stronger or wiser. In contrast, humility will remind us about how misplaced our 2019 confidence was. Most of us are overconfident about our ability to judge risks, and now we have even less right to our over-inflated self-assessment. Admitting our limitations is the first step toward making better decisions. If we stick to our gut feelings in 2021, we can’t expect good outcomes. The world has changed. Your gut was calibrated in a different world. For example, we currently have a semiconductor crisis that’s been brewing for a while. Last year Apple had to delay the launch of the iPhone 12. That should have been a warning to everyone, but few noticed. Beyond humility about what we don’t know, we need to challenge what we know. We might think we are rational about our new concerns. For example, MRI scans show us that fear is subconsciously contagious. In 2019, you were wrong about how good things were. Now, you might be wrong about how bad things are. Our gut (and our subconscious) is not calibrated for this reality, and they aren’t telling us the truth as often as we’d like.

#2 – We need to focus on what we can do rather than worry about all the things we can’t do. If lockdowns still limit your choices, don’t waste time wishing for what you don’t have or can’t do. Everyone has some sense of loss. But focusing on our losses accomplishes nothing but prolonging the stress and anxiety. Being aware of limitations in our knowledge and our options is important. Still, it’s also important to not allow this to fester by focusing on limitations rather than what we can do.

#3 – We need to focus on what we know to be true and work to expand our knowledge. We make better decisions from facts and truth. The truth is, the future is uncertain. And it always has been. Interestingly though, benchmarking found the most common error in the analysis was ignoring uncertainty. That’s not a surprise – humans really aren’t very good at dealing with uncertainty. Quite frankly, other species are better than us.

A Case Study in Uncertainty – Transportation in an Uncertain World How long will it take to ship your product from Haiphong to Houston? We are uncertain. In the past, Maersk has been a typical shipper, with transit times ranging from 32 to 57 days. In 2019, we might have wanted to take some risk on supply chain stocking levels and use a typical 41 days. But in 2021, we should expect more uncertainty. We probably need to think carefully about a buffer in our stocking levels and our schedules. We should expect variability in transit times for a while. This is a challenge for history-based AI and Machine Learning methods. In 2018, DHL announced a machine learning-based tool for routing and transit time estimation. When we checked on it for this blog, we got a 404 broken link. A reasonable guess would be a deterministic model, based on pre-2020 history, isn’t worth bragging about in 2021. What’s true is the uncertainty we all face. At Lone Star, our work embraces uncertainty:

Lone Star is not afraid of being Uncertain. We will help our clients cope in 2021 and make better decisions, despite our human limitations.