modules/module04.txt

MODULE NAME:
Module 04 – Wise Decisions

LEARNING OBJECTIVES:
- Define the concepts of game theory and neo-classical rationality
- Apply the prisoners' dilemma to your lived experience
- Distinguish between good decisions and good outcomes
- List the eight steps of a high-quality deliberative decision process
- Use Ben Franklin's Pro-Con method to make an important go/no-go decision
- Calculate the best choice using a Decision Matrix

KEY POINTS:
• Neo-classical Rationality: Making consistent, logic-based decisions to maximize utility. Assumes perfect information and logical thinking. Real people often satisfice (choose first acceptable option) due to bounded rationality.
• Satisficing: Choosing the first option that meets an acceptable threshold rather than finding the optimal solution. Rational when information is incomplete, search costs are high, or time is limited.
• Game Theory: Models strategic interactions where outcomes depend on multiple actors' choices. Players must anticipate others' moves.
• Prisoner's Dilemma: When two players act selfishly, both end up worse off. Cooperation (often through reputation, rules, or trust) can improve outcomes for everyone. Common in business: price wars, resource sharing, industry standards.
• Incentives & Conflicts of Interest: Principals (owners) and agents (managers) often have different goals. Good governance aligns incentives through monitoring, compensation, and accountability.
• Bayes' Theorem: Formula for updating beliefs as new evidence appears. Start with base rate (prior probability), add new evidence (likelihood), calculate updated belief (posterior). Using outside view (base rates, historical data) is often more accurate than inside view (personal experience, intuition).
• Decision Quality vs. Outcome: High-quality decision = good reasoning process, regardless of result. Outcome bias = judging decisions only by results. Chance and external factors affect outcomes, so focus on improving process quality.
• Pro-Con Method (Ben Franklin's Moral Algebra): List pros and cons, assign weights to each, cancel equal weights, see which side is heavier. Slows impulsive choices. Only works for binary (yes/no, go/no-go) decisions.
• Decision Matrix: Compare multiple options across weighted criteria. For each option: score it on each criterion (e.g., 1-5), multiply score by criterion weight, sum across all criteria. Higher total = better choice. Reduces bias, clarifies trade-offs, documents reasoning.
• Eight Steps of Deliberative Decision Process: (1) Identify the problem (2) Define objectives (3) Generate alternative options (4) Gather relevant data (5) Evaluate options against objectives (6) Choose the best option (7) Implement the decision (8) Review and learn from results.
• Mindfulness in Decisions: Being fully present, aware of thoughts/feelings without judgment. Slows automatic reactions, creates space for reflection, reduces bias, improves judgment quality.