Sources of Power
One of the most important things we do as humans and as investors is to make decisions, and yet decision-making is not a subject matter that is commonly found in coursework at schools. That doesn’t mean it is completely mysterious or inaccessible, however. Quite to the contrary, Gary Klein, does a brilliant job of weaving the lessons of extreme professions such as firefighting, aviation and the armed forces with the insights of academic research to create a pioneering study of decision making. This book is special both because it is so unique and because it is so useful.
A key feature of Sources of Power is that it relates decision making to the real world conditions in which we all operate. There are other books on decision making and The Harvard Business Review always has articles with various advice and frameworks for making decisions. None of these address so directly the challenges of making decisions under the real-life conditions of "time pressure, high stakes, inadequate information, ill-defined goals, and dynamic conditions." By examining such extremes in decision making environments, Klein goes a long way in converting these insights into practical advice.
In the story of the HMS Gloucester (there are many great stories), Klein documents the decision making of the ship's air defense officer. As depicted, near the end of the Persian Gulf War, the HMS Gloucester had a Silkworm missile fired at it. Despite the distraction of having U.S. Navy planes flying in the area, and despite the lack of confirming identification from location or radar, and only receiving altitude information late into the incident, the officer issued orders to fire. In so doing, he saved the ship from getting hit and suffering numerous casualties. Subsequent analysis revealed that the officer's ability to run a mental simulation of Iraqi Silkworm operators and his ability to infer the altitude of the missile from the distance from the coast where the first radar blip was seen were keys to his correct assessment. Expertise indeed!
A recurring theme and key conclusion of the book is that, “Most poor decisions may result from having inadequate knowledge and expertise.” The implication is straightforward whether in regards to investing or some other endeavor: If you want to make good decisions, make sure you have access to expertise.
by David Robertson, CFA
A key feature of Sources of Power is that it relates decision making to the real world conditions in which we all operate. There are other books on decision making and The Harvard Business Review always has articles with various advice and frameworks for making decisions. None of these address so directly the challenges of making decisions under the real-life conditions of "time pressure, high stakes, inadequate information, ill-defined goals, and dynamic conditions." By examining such extremes in decision making environments, Klein goes a long way in converting these insights into practical advice.
In the story of the HMS Gloucester (there are many great stories), Klein documents the decision making of the ship's air defense officer. As depicted, near the end of the Persian Gulf War, the HMS Gloucester had a Silkworm missile fired at it. Despite the distraction of having U.S. Navy planes flying in the area, and despite the lack of confirming identification from location or radar, and only receiving altitude information late into the incident, the officer issued orders to fire. In so doing, he saved the ship from getting hit and suffering numerous casualties. Subsequent analysis revealed that the officer's ability to run a mental simulation of Iraqi Silkworm operators and his ability to infer the altitude of the missile from the distance from the coast where the first radar blip was seen were keys to his correct assessment. Expertise indeed!
A recurring theme and key conclusion of the book is that, “Most poor decisions may result from having inadequate knowledge and expertise.” The implication is straightforward whether in regards to investing or some other endeavor: If you want to make good decisions, make sure you have access to expertise.
by David Robertson, CFA
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