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Making Complex Decisions: Special Exigencies, with Lawrence Summers, Former Director, White House United States National Economic Council
I tend to be skeptical of what are called non-scientific approaches. There certainly are situations – think about hiring a person where one has to go with intuition and judgment – but in my experience at least it’s useful to try to understand the basis for one’s intuition and judgment as accurately as possible and to try to keep track of how good one’s intuition and judgment is over time. So one needs to recognize the special exigencies of any given situation, but I think one needs to try to apply systematic methods as much as is possible.
I think one also needs very importantly to be aware of one’s own biases. We all have some tendency to conflate what we believe with what we hope to be true. And so when a decision involves taking a position that very much goes with what we hope will be true, that’s a reason to look at the decision you want to make with particular care and particular suspicion.
And sometimes one has to be cold blooded about recognizing that ideas one had have turned out to be wrong. So the most successful trainers in financial markets are people who, when they expect the stock to go up and a stock goes down, are able to do a hardheaded reassessment of whether there was some aspect of the situation they hadn’t thought through right and really they’d made a mistake, or whether they had a sound basis for their judgment and the market just hasn’t come to it yet. And so the fact that the stock has gone down represents an even greater opportunity to buy it. But it’s important to try to be tough minded with oneself and tough minded with a group of people one is working with in making decisions.