Matt Heusser’s Blog
Testing at the Edge of Chaos
How we make decisions
Last week, Apple announced it’s iPad. If you haven’t heard the annoucement, you can go watch the eight-minute YouTube advertisement, or Steve Job’s 30-minute public announcement. It’s okay. It’s worth it, and I can wait.
… time passes …
Now, I didn’t come away from that video wanting to buy an iPad – it’s for consumers, people who surf the web, watch video, listen to tunes, etc. My focus is less on consuming and more on putting out new material. So it’s designed to support an entirely different group of people.
No, what I wanted to do was to buy shares of Apple Computer Corporation.
Which brings me to the topic of today’s blog post – how we make decisions. You see, we like to think that we make decisions rationally, in a sort of cold, hard, unemotional way. Line up the pros and cons, evaluate each one, and off we go.
But it’s not like that all. Sure, we may use facts to guide our decision making, but even then, as my friend Michael Bolton likes to point out, we tend to decide on how we feel about those facts. For example: Tell any executive that you expect 80% of your paying “members” to renew next year, or that you expect 20% to not renew, and you’ll likely get two different reactions.
So here are the facts I responded to about the iPad:
(1) Apple computer has a history of integrating it’s hardware and software offerings – the iTunes store, for example, has both music and video. Downloadable books seem like the next logical step.
(2) Amazon’s Kindle product has proved the market for a book-reading device. I also have some confidence that Apple can do it better; after all, they’ve been a hardware/sw company from year one. (There is even an old “kindle 3″ parody, worried about the dumbing-down of society that ends with tag line “It plays movies instead of books”)
(3) Apple has a history of innovation, new products, and even new categories. The iPod, for example, has sold 250 million copies – and Apple is incredibly good with price points and using new technology, to get users to upgrade every two to four years. The have a fan base so strong that, as another parody claimed “I’ll buy almost anything that is shiny and made by Apple.”
Sounds like strong reasons to invest right?
Well, there is another side. About a year ago I got another device – a netbook. It was shiny, small, a neat. It was also slow and hard to sync my files back and forth from different devices. Within a few months, I realized that I had a thin, small, cheap laptop. It wasn’t a category killer at all.
Moreover, Apple has been hyped lately; it’s trading very close to it’s 52-week high, which could mean it’s over-priced. If the iPad doesn’t take off, it might just be time for Apple’s stock to a hit. And Apple does have misses, or at least near misses – remember the MacBook Air?
If I wanted to, I could easily line up a set of facts against Apple just as strong as the reasons for investing it. On some level, investing is a bet that involves prediction, and telling the future accurately is probably best left to the weather guy on channel eight … but don’t go out past a couple days; then things start to get fuzzy.
But there is one more trick to decision making: If you know the value system or the culture and a little basic information, the decision they will reach is often predictable. I won’t say it’s entirely satisfying, but I have said to senior managers and executives things like “when nine months go by and this software hasn’t shipped, you can always call me” or “If this software doesn’t exist by February, just ask me and I can build something that can ship in a month.” (Both of those organizations had cultures that led to analysis paralysis.)
Most of us gather information in a way that leans toward Organic or Mechanic. When we have enough information to make a decision, the additional facts don’t matter – we rationalize them to fit the decision we have already made.
In that case, gathering additional facts is a kind of waste.
And that knowledge helps me make my own decision.
So, if you’ll excuse me, I’m off to purchase some stock in Apple Computer.
Comments (1)
at February 2, 2010, 1:11 pm:
“When we have enough information to make a decision, the additional facts don’t matter – we rationalize them to fit the decision we have already made. In that case, gathering additional facts is a kind of waste. And that knowledge helps me make my own decision.”
There’s a lot truth in that. It’s important to recognise that there’s a point beyond which analysis and fact-finding is delaying a decision rather than aiding it. It’s also important to accept that applying a cut-off may lead to a less than perfect decision, but that over the long run a series of decisions based on less than perfect or complete evidence is ultimately more beneficial than a pattern of delay and inaction whilst decisions are made on a slightly better basis.
When I left university I went to work for a life assurance company as a trainee investment analyst. A manager asked me to look at a brewery, assess its prospects and make a recommendation about whether we should invest. I spent a few days gathering as much information as I could and produced a paper recommending that we invest.
The manager looked it over and told me it was fine, but it had too much detail. He said that there were usually no more than about three factors to take account of before any decision is taken. The rest is a distraction, time-wasting detail. You would need to know about these things if you’re actively managing the situation, but not for the big initial decisions.
It’s advice I’ve always borne in mind, though I’ve never regarded it as 100% reliable. Incidentally, the manager went on to have a stellar career, with a reputation for ruthless decisiveness, even risk taking. He rose to become chief executive of one of Britain’s biggest companies. He left it a couple of years before it went bust, some would say in large part because of the decisions he’d taken. Hmmm.
[That is fascinating. I have a friend who is collecting a book of 'stories about testing'; maybe I can introduce you? Or maybe you could be in the "Testers At Work" book I am working on?]