THE ELEMENT OF EFFECTIVE THINKING

THE ELEMENT OF EFFECTIVE THINKING

What Matters More in Decisions: Analysis or Process?

We all make decisions. Some of them are large and many of them are small. Few of us understand that the process we use to make those decisions is more important than the analysis we put into the decision.

Think of the last major decision you made.

?Maybe it was an acquisition, a large purchase, or perhaps it was whether to launch a new product.

Odds are three things went into that decision:

(1) It probably relied on the insights of a few key executives;

(2) it involved some sort of fact-gathering and analysis; and

(3) it was likely enveloped in some sort of decision process—whether formal or informal—that translated the analysis into a decision.

?Now how would you rate the quality of your organization’s strategic decisions?

If you’re like most executives, the answer wouldn’t be positive:

?In a recent McKinsey Quarterly survey of 2,207 executives, only 28 percent said that the quality of strategic decisions in their companies was generally good, 60 percent thought that bad decisions were about as frequent as good ones, and the remaining 12 percent thought good decisions were altogether infrequent.

?How could it be otherwise? Product launches are frequently behind schedule and over budget. Strategic plans often ignore even the anticipated response of competitors. Mergers routinely fail to live up to the promises made in press releases.

?The persistence of problems across time and organizations, both large and small, indicates that we can make better decisions.

“I have no use whatsoever for projections or forecasts. They create an illusion of apparent precision. The more meticulous they are, the more concerned you should be. We never look at projections.”

— Warren Buffett The best place to start if we’re trying to improve the quality of our decisions is to look at how organizations make decisions. One interesting thing about bureaucracies is that they develop processes to limit the damage the worst people can do at every level. That is they come up with mechanisms to reduce the impact the worst people can have. Yes, this also limits the positive impact that people can have as well. When it comes to decisions, organizations default to gathering data and analyzing decisions.

?The widespread belief is that analysis reduces biases. But does it?

?Is putting your faith in analysis any better than using your gut? What does the evidence say? Is there a better way?

Dan Lovable and Olivier Sibson set to find out.

Lovable is a professor at the University of Sydney and Olivier is a director at McKinsey & Company. Together they studied 1,048 “major” business decisions over five years. The results are surprising.

Most business decisions were not made on “gut calls” but rather rigorous analysis. And yet they were poor decisions. In short, most people did the all the legwork we think we’re supposed to do: they delivered large quantities of detailed analysis.

?Yet this wasn’t enough. “Our research indicates that, contrary to what one might assume, good analysis in the hands of managers who have good judgment won’t naturally yield good decisions.”

[Projections] are put together by people who have an interest in a particular outcome, have a subconscious bias, and its apparent precision makes it fallacious. They remind me of Mark twain’s saying, ‘A mine is a hole in the ground owned by a liar.’ Projections in America are often a lie, although not an intentional one, but the worst kind because the forecaster often believes them himself.”

— Charlie Mugger

Lovell and Sibson didn’t only look at the analysis; they also asked executives about the process used to make decisions.

Did they, for example, “explicitly explore and discuss major uncertainties or discuss viewpoints that contradicted the senior leaders?”

So what matters more, process or analysis? After comparing the results they determined that “process mattered more than analysis—by a factor of six.”

?This finding does not mean that analysis is unimportant, as a closer look at the data reveals: almost no decisions in our sample made through a very strong process were backed by very poor analysis. Why? Because one of the things an unbiased decision-making process will do is ferret out poor analysis. The reverse is not true; superb analysis is useless unless the decision process gives it a fair hearing.

?To illustrate the weakness of how most organizations make decisions, Sibson used an interesting analogy: the legal system.

?Imagine walking into a courtroom where the trial consists of a prosecutor presenting PowerPoint slides. In 20 pretty compelling charts, he demonstrates why the defendant is guilty. The judge then challenges some of the facts of the presentation, but the prosecutor has a good answer to every objection. So the judge decides, and the accused man is sentenced.

?That wouldn’t be due process, right? So if you would find this process shocking in a courtroom, why is it acceptable when you make an investment decision? Now of course, this is an oversimplification, but this process is essentially the one most companies follow to make a decision. They have a team arguing only one side of the case. The team has a choice of what points it wants to make and what way it wants to make them. And it falls to the final decision maker to be both the challenger and the ultimate judge. Building a good decision-making process is largely ensuring that these flaws don’t happen.

?Simply understanding our cognitive biases doesn’t make you immune to them. It’s not enough.?A disciplined decision process is the best place to improve the quality of decisions and guard against common decision-making biases.

?Still curious? Read the ultimate guide to making smart decisions.

We can improve our lives in all areas just by improving the way we think. As the authors Michael Starboard and Edward Burger tells us: The 5 elements of effective thinking are to put simply, better-thinking habits. The 1st element is to do with striving for rock-solid understanding (earth), the 2nd element -making mistakes in order to gain insights (fire). The third element (air) is about constantly asking challenging questions, whilst the 4th element entails observing the flow of ideas (water). Finally, the 5th element involves embracing change through lifelong learning as well as improvement (quintessential element).

?Here is a brief summary of each of the 5 elements of effective thinking.

?The 1st Element of Effective Thinking: EARTH Ground your thinking; Understand things deeply

?

?“Understand deeply” is great advice, but what does it really mean? The truth is that most of us never understand anything deeply. After not doing well on a test, students often tell us, “I knew it, but I couldn’t explain it … ” to which we respond, “If you can’t explain it, you don’t know it.”

Return to the basics ever so often. Think of a subject area that you think you know a lot about or are trying to master and write about it. If you can’t write a coherent description of the topic or are struggling with the big picture to connect the ideas, then take action. Consult external sources, study the material and add to what you wrote initially. Every time you work on the basics of a subject, you deepen your understanding of the topic.

?Periodically go back and refine your knowledge and understanding of the fundamental concepts. Going over the basics once just does not cut it. It may also appear to you that returning to the basics is a step backward. However, by truly strengthening the foundations of your understanding can you progress into greater depths on a chosen field?

?Choose depth over vagueness, when learning something new. If you are learning the piano, then instead of memorizing finger movements – understand the structure of the piece. In addition, you can study the chord progressions or even try to distinguish between notes by ear.

Admit what is uncertain. Admitting your own uncertainties is a powerful first step to gaining a solid understanding. If you have gaps in your knowledge or understanding of a subject: Admit it to yourself first, then work on filling those gaps.

?The 2nd Element of Effective Thinking: FIRE

Igniting Insights through Mistakes; Fail to Succeed

?“The typical attitude that mistakes should be avoided is patently wrong and has several detrimental consequences. The mindset that mistakes are poisonous often freezes us into inaction. If we have a healthier attitude that failure is a potent teacher… then we find ourselves liberated to move forward…”

Fail 9 times, succeed on the 10th. When attempting a daunting task, try this. Think to yourself that in order to resolve this issue, you need to fail 9 times, but on the tenth attempt you will be successful. By shifting your mindset in this manner, your energy diverts towards solving the task creatively rather than on fear of failing. Moreover, once you do fail; remind yourself that you are 10% done!

Don’t stare at a blank paper. Choose an issue or problem that you wish to solve, then start jotting down ideas on how you can solve it. The aim is to note down your stream of thoughts however bad, unorganized, inaccurate it may appear. That’s a start. Once you have formulated a bad first draft, focus on what’s wrong and improve it whilst uncovering the ideas that might be worth expanding further. By doing this, you are responding to a work that is already there rather than procrastinating in front of a blank screen.

?The 3rd Element of Effective Thinking: AIR

Generate questions out of thin air; be your own Socrates.?“Constantly formulating and raising questions is a mind-opening habit that forces you to have a deeper engagement with the world and a different inner experience.”

?Build a habit of asking questions. By doing so, you gain a better understanding of the nature of a problem.

Don’t build on vagueness or ambiguity, build on clarity. When you’re unsure about the basic things, admit it to yourself and ask a question. Confident leaders don’t shy away from asking the ‘stupid’ or ‘basic’ questions.

Re-frame questions. Instead of asking how can I ace my exam? Ask: how do I engage myself more with the course materials? Could I write a detailed outline for this course? Could I teach this course? What concepts do I have to focus on to deepen my understanding?

Ask Meta-Questions. Sometimes, we can reach better solutions by merely asking a better question. The main concept behind Meta-questions is: to question your own questions so as to improve them. For instance, the next time you are stuck in traffic, instead of asking yourself “how can I fix this?” a better question would be – “Since I’m going to be waiting here for an indefinite period, how I can spend the time more productively?”

?The 4th Element of Effective Thinking: WATER

See the flow of ideas. Look back, Look forward.

?“To understand current ideas through flow, first find easier elements that lead to what you want to understand. Then build bridges from those easier elements to the ideas you wish to master. To generate new ideas through flow, first, modify an existing idea within its own context and then apply that same idea in different settings. Then you can construct extensions, refinements, and variations.”

?Look back and observe the flow of ideas. A look back makes understanding advanced topics easier. Look back to see how you came about to where you are now in a given field. By understanding the basics and the flow of ideas can lead to clarity on the next steps which eventually lead to mastery.

?Extend ideas. Select an idea from any domain such as work or from your personal life (you do not have to be the one who came up with the idea). The goal is to engage with it and expand on it. Don’t wonder whether or not you can expand on the idea, you can. Your objective is to find it.

?“[Element 5]… builds on the previous 4 elements and is about practicing effective thinking so that you be a lifelong learner and are always striving for improvement.”

Adopt a habit of continuous improvement. Whether using any of the four elements or by any other methods. If you’re the type of person who embraces change, then you are liberated from worrying about weaknesses or defects, because you can adapt and improve.

?Do it differently. In order to become more skillful in any task, try thinking in terms of ‘what you do’ rather than ‘how well you do it.’ Similarly, instead of thinking ‘Do it better,’ think – ‘Do it differently.’

Mastery is a continuum. It’s not that all the puzzles fall into place in the 10,000th hour of practice but rather from the accumulated flow of incremental progress.

?“A wondrously romantic belief is that brilliant students are born brilliant and brilliant thinkers magically produce brilliant ideas: A+, the star student aces the exam; click, Edison invents the light bulb. Liftoff, the Wright brothers soar into the sky. Abracadabra, J. K. Rowling apparatus Harry Potter. Yea, the Founding Fathers resolve the Bill of Rights; whoosh, Ralph Lauren turns heads on fashion’s runways. Eureka, Einstein teases his hair and relativity falls out.

?We can all marvel at these fanciful visions of leaps of genius, but it should not fool us into believing that they’re real. Brilliant students and brilliant innovators create their own victories by practicing habits of thinking that inevitably carry them step-by-step to works of greatness.

?RAISE QUESTIONS

One of the greatest philosophers the world has ever known was a man named Socrates. In fact, it is said that the Oracle of Delphi had pronounced him the wisest of the Greeks.

Despite that, Socrates never claimed to have wisdom, but only to seek it lovingly. This was the cornerstone of his modest philosophy:

“One thing only I know, and that is that I know nothing.”– Socrates

If there was one thing he was really good at, it was his ability to ask questions. He always asked more than he answered. And by asking questions, he would prove to other people that they didn’t know what they thought they knew.

That’s where the Socratic Method comes from: always ask questions about everything. If there’s something you don’t understand, ask questions. If there’s something you don’t know, ask questions.

Asking and answering questions stimulates critical thinking. That’s very helpful because it often leads to ideas and conclusions that help you deeply understand a subject matter.

Be curious about everything (that’s one of the things we should learn from kids, by the way).

But let’s take it a step further. This also means that we should always question our strongly held beliefs.

“Philosophy begins when one learns to doubt — particularly to doubt one’s cherished beliefs, one’s dogmas and one’s axioms. Who knows how these cherished beliefs became certainties with us, and whether some secret wish did not furtively beget them, clothing desire in the dress of thought?

There is no real philosophy until the mind turns round and examines itself.

?Socrates: Know thyself.”– Will Durant

If you have a strong conviction about something, question it, doubt it.

Ask yourself: Is it really so? What evidence do I have in order to support my belief?

One of the best things you can do is to always search for disconfirming evidence. It will help you get to the core of the issue and you’ll be so much more likely to discover the truth.

In synthesis:

Never pretend to know more than you do. Don’t build on ambiguity and ignorance. When you don’t know something, admit it as quickly as possible and immediately take action — ask a question.

?FOLLOW THE FLOW OF IDEAS

Everything great that has ever happened to humanity has begun with an idea in someone’s mind. So in order to create something, you need a constant flow of ideas.

Everything, whether it’s a physical product, a concept, or an idea that came from someplace, it has arrived at where it is now and is going to change in the future. It’s a constant evolution.

Here’s what the authors are saying:

Look back to see where ideas came from and then look ahead to discover where those ideas may lead. A new idea is a beginning, not an end. Ideas are rare — milk them. Following the consequences of small ideas can result in big payoffs.

There’s a Latin metaphor that goes like this: nanas gigantism humorist incidents. In English that means,

“Standing on the shoulders of giants.” And it expresses the meaning of “discovering the truth by building on previous discoveries.”

?A more familiar interpretation belongs to Isaac Newton:

If I have seen further, it is by standing on the shoulders of giants.

That’s one of the basic principles of innovation. In order to innovate, you should make connections between varieties of ideas, from different fields, until you manage to connect the dots between them.

Thomas Edison was supremely successful at inventing product after product, exploiting the maxim that every new idea has utility beyond its original intent, for he wrote, “I start where the last man left off.”

More poignantly he noted that “many of life’s failures are people who didn’t realize how close they were to success when they gave up.”

With better information and better ideas, you can make better decisions. That’s why I would encourage you to take a multidisciplinary approach to learn. Don’t study just one field. Get a grasp of the fundamental ideas from a variety of fields: history, biology, physics, philosophy, economics, psychology, etc. You’ll be able to make so much better connections between ideas and you’ll be that much more innovative.

Conclusion

To summarize, here are the 5 elements that will help improve your thinking:

Understand deeply

Make mistakes

Raise questions

Follow the flow of ideas

Change

Let me remind you that you don’t need to be a genius or be born with a high IQ in order to master these strategies of thought. All you need is a continuous appetite for learning and a burning desire to grow and improve on a daily basis. Begin by choosing one strategy and try to implement it in your life by following the ideas described in this article. As long as the article has considerable information that is nominal and basic information, however, my aim is not going to stop presenting here,?as it has enormous parameters to identify, so as we can have a redefined wider approach rather knowing the same common static.?