Apply Prospect Theory to decision-making. Prospect Theory explains the psychology of decision-making. If the human mind is actually a machine for jumping to conclusions, which double-checking techniques improve judgment?
Decisions often balance factors that overload the brain's working memory. Seventy percent of the human brain is devoted to vision, so why not exploit the brain's strengths, rather than exhaust the brain's weaknesses? Pictures often help reduce cognitive load to visualize the relationships between the following factors:
- Benefits (blue color in following diagram)
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Let's apply the approach to a subject you may be unfamilar with. Run/walk to the store for groceries, buy an electric bicycle or a gas-powered, 100+ mpg Honda scooter. The two mile trip to my grocery store traverses a gravel fire road between 5% and 10% grades (i.e., steep), a grass field crossing ten street curbs and suburban streets (i.e., bumby). The steepest road section is an 18% grade for about 300 yards. Few public roads are above 20% grade. Switchbacks are much more common than 20% grades. One notices the drone from cars on 10% grade hills. My bias is towards a mountain bike with full suspension to carry 30+ pounds of groceries back from my local grocery store. A friend replaced his electric bicycle with a Honda FSX150 gas-powered scooter, which sells for about the same price as the electric bicycle.
Each factor in the previous table was scored on a scale from 1 to 5. An electric bicycle provides the greatest benefit (i.e., 4.8) and is most Risky for my situation. Walking groceries from the store has the highest Cost-Benefit ratio (i.e., 2.9). The Scooter provides the greatest Ease benefit.
In all cases, my Bias is equally high. I decided to continue walking groceries home because the Cost-Benefit ratio is twice that of an electric bicycle. An electric bicycle is the likely choice next year, as I expect the costs to drop significantly.
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