How We Really Make Decisions

post # 160 — August 11, 2006 — a Careers, Client Relations, Managing, Strategy post

Bob Sutton, co-author (with Jeff Pfeffer) of the terrific book Hard Facts, Dangerous Half-Truths & Total Nonsense, had a fascinating post a few days ago about “Lovaglia’s Law.”

Michael Lovaglia, (a professor at the University of Iowa) proposed Lovaglia’s Law: The more important the outcome of a decision, the more people will resist using evidence to make it. Bob discusses this, and agrees that, the more consequential the outcome, the more power, greed, stress and irrationality come into play in influencing how people react and how individual and collective decisions are made.

I think there is something very important here. I have always been fascinated by the fact that (in spite of what they teach us in school) logic, reason, rationality and sensible analysis seem to play so little part in human affairs – at the office, in our home lives, and elsewhere.

It sometimes seems as if, for all of us, nearly all the time, rhetoric triumphs over reason, personality over substance, politics over merits, neuroses over facts.

I’m not saying this as a complaint. I’m saying that it’s a more accurate critique of human affairs than the misleading interpretation we sometimes fool ourselves with – that our smarts (logic, reason and rationality) are what drive the world.

Tom Davenport (author of Thinking for a Living) recently published an article in the Harvard Business Review arguing that there is a huge competitive advantage to be gained by companies if they were to develop a more analytical approach to business, using advanced analytical abilities. It’s a great article, but its truth and its power comes from the fact that so few of us, as individuals or as institutions, in our work lives or in our personal lives, actually do make our decisions primarily through logic and analysis.

That’s why it can be a competitive advantage for anyone who can escape Lovaglia’s Law.