Judgment in Managerial Decision Making | Max H. Bazerman

Summary of: Judgment in Managerial Decision Making
By: Max H. Bazerman

Introduction

In this summarized version of Max H. Bazerman’s ‘Judgment in Managerial Decision Making,’ readers can expect to explore the intricacies of decision making in the corporate world. The book dissects cognitive biases and flawed thinking processes, shedding light on crucial topics such as self-serving bias, System 1 and System 2 thinking, and heuristics. With a host of real-life examples and practical advice, readers will gain insight into the flaws of intuition, availability, and representative heuristics, as well as the impact of emotional and ethical decision making. Furthermore, the book presents six strategies to improve decision-making and limit systematic decision-making errors.

Biases in Decision Making

This book summary explores the various biases and flawed heuristics that color people’s viewpoints and lead to poor decision making. The book details the distinction between System 1 thinking, which is intuitive and immediate, and System 2 thinking, which is a formal process of decision making. It also discusses the use of heuristics, which are common sense guides for weighing alternatives but can often result in flawed thinking. The summary highlights different types of heuristics and how they lead to biases such as the availability heuristic, representative heuristic, and affect heuristic. The importance of closely examining premises, framing, and wording, as well as factoring in emotions and conflicting selves, is also emphasized. The author stresses the need to hold oneself accountable for decisions and avoid self-serving bias.

Flawed Decision Making

Humans are prone to making flawed decisions due to various biases and illogical thinking. The “non-rational escalation of commitment” is a common problem where people persist with a failing decision due to the fear of losing already invested resources. Social equity, fairness, and bounded ethicality further affect decision making. Negotiations require preparation, trust-building, and alternative options. In investments, people often fall for the trap of predicting future market trends. To minimize risks, individuals should rely on long-term balanced retirement plans and avoid expensive financial advisers.

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