Decision Making Practice Exam

Question 1 Decision Making

What is the "inverted thinking" of Charlie Munger?

Adjust decision-making approach to context — not one style fits all. 5-day structured process from problem definition to tested prototype. "Tell me where I'll die, so I'll never go there" — work backward from failure to prevent it. First number or option presented becomes a reference point unduly shaping subsequent judgment.

Question 2 Decision Making

What is the "vanishing options" test?

Imagine the current options are unavailable — what else could you do? Surfaces hidden creativity. Accumulating cost of deferred decisions — eventually crowds out other work. Weighted blend of worst-case and best-case — α from 0 (pessimist) to 1 (optimist). Generalizes EV by replacing dollar values with utility (subjective satisfaction).

Question 3 Decision Making

What is the certainty effect?

Consensus requires everyone agrees; consent requires no one objects (sociocracy). Antonio Damasio's idea — bodily emotional signals guide decisions, especially under uncertainty. Outcomes seen as certain weighted more heavily than merely probable ones, even when expected values are equal. Don't remove a fence until you understand why it was built — applies to changing existing decisions.

Question 4 Decision Making

What is "decision regret"?

Too many options increase cognitive load and often make comparison slower and less clear. Predefined trigger for action — removes in-the-moment hesitation. Negative emotion comparing actual outcome to what could have been with other choices. The idea that people make decisions with limited time, information, and cognitive capacity rather than perfect logic.

Question 5 Decision Making

What is "decision documentation"?

Thoughtful dissent improves decisions by testing assumptions and reducing groupthink. Speed = swift action with adequate process. Haste = rushed action skipping process. Distinguish them. Capturing what was decided, by whom, why, and what was considered — prevents re-litigation. Devil's advocate, premortem, diverse composition, anonymous input, separate brainstorming from evaluation.

Question 6 Decision Making

What is "the Abilene paradox"?

Asking "and then what?" — anticipate consequences beyond the immediate effect. Dave Snowden's domains: Simple, Complicated, Complex, Chaotic, Disorder — guides decision approach per context. Group makes a decision no one actually wants because each member assumes others want it. Barry Schwartz — satisficers tend to be happier; maximizers tend to be more accomplished but less satisfied.

Question 7 Decision Making

What is a decision journal?

Outcomes seen as certain weighted more heavily than merely probable ones, even when expected values are equal. Group makes a decision no one actually wants because each member assumes others want it. Frank Knight — unmeasurable uncertainty (genuine unknowns) vs. quantifiable risk. A decision journal captures reasoning, predictions, and emotions at the time a choice is made.

Question 8 Decision Making

What is second-order thinking?

SDG Decision Quality — six elements: frame, alternatives, info, values, reasoning, commitment. Most decisions are reversible. Decide quickly, learn from outcomes, update. The few irreversible decisions deserve real care. Assigning importance scores to each criterion — surfaces tradeoffs and forces clarity. Thinking beyond the immediate effect of a choice to its likely downstream consequences.

Question 9 Decision Making

What is an escalation path in decisions?

The person accountable for making the call after gathering input. Using a small set of agreed principles to guide choices when situations are ambiguous. Better decisions compound over time, improving outcomes, team trust, and resource allocation. A predefined way to raise a decision to a higher authority when stakes, uncertainty, or conflict exceed local ownership.

Question 10 Decision Making

What is the DQ "decision frame"?

The boundary of what the decision is about and what's outside its scope. Small test → measure → adapt → larger test → adapt → scale only after validated. Breaking a problem into fundamental truths and reasoning up from them instead of copying existing assumptions. Fast decisions preserve momentum when the downside of being wrong is manageable.

Question 11 Decision Making

What is "the bias to inaction"?

Status quo bias — favors current state. Often misjudges that doing nothing has costs too. AHP — structured pairwise comparison technique deriving weights from stakeholder judgments. Risk you know exists but can't quantify; needs scenario planning. Frame the decision, share input, debate, decide (or commit to next step), document.

Question 12 Decision Making

What is "the design sprint"?

5-day structured process from problem definition to tested prototype. Clear cause-effect; best practices apply; sense-categorize-respond. Choose the option that minimizes the worst possible regret across outcomes. Run a minimum-cost test of your assumption before scaling the commitment.

Question 13 Decision Making

What is the role of dissent in decision making?

Inability to decide due to overanalysis — usually a sign more analysis won't help. Thoughtful dissent improves decisions by testing assumptions and reducing groupthink. Outcomes seen as certain weighted more heavily than merely probable ones, even when expected values are equal. Imagining the decision has failed in 6 months; listing reasons why. Surfaces hidden risks.

Question 14 Decision Making

What is "widen your options"?

Assume all outcomes equally likely if no probabilities known; choose option with best average. Situation, Complication, Question, Answer — opens with context before recommendation. Generate more alternatives instead of binary choices — usually possible with effort. A decision whose effects materially shape many later outcomes, options, or constraints.

Question 15 Decision Making

What is a decision frame?

Frank Knight — unmeasurable uncertainty (genuine unknowns) vs. quantifiable risk. Antonio Damasio's idea — bodily emotional signals guide decisions, especially under uncertainty. A decision frame defines the problem, constraints, stakeholders, and success criteria before options are judged. Most decisions are reversible. Decide quickly, learn from outcomes, update. The few irreversible decisions deserve real care.

Question 16 Decision Making

What is "ooch"?

A decision criterion is a standard used to judge options, such as speed, cost, risk, or customer impact. No cause-effect relationships; novel practices; act-sense-respond. Heath brothers' term for small reversible experiments before big commitments. First number or option presented becomes a reference point unduly shaping subsequent judgment.

Question 17 Decision Making

What is the DQ "alternatives" quality?

A trade-off is the acceptance that gaining one benefit usually means giving up something else. Take many low-cost, reversible bets rather than few big irreversible ones. The boundary of what the decision is about and what's outside its scope. Have we generated meaningful, distinct alternatives — not just trivially different versions?

Question 18 Decision Making

What is the cost of delay?

Thoughtful dissent improves decisions by testing assumptions and reducing groupthink. Overweighting immediate outcomes vs. delayed ones — root of procrastination and overconsumption. The value lost by postponing a decision or action that could have created progress earlier. Multiple biases or pressures combine to produce extreme behavior.

Question 19 Decision Making

Why review past decisions?

Judging probability by ease of recall — vivid recent events feel more likely. Reviewing decisions improves judgment by comparing expected outcomes with what actually happened. The boundary of what the decision is about and what's outside its scope. Initial belief about a hypothesis before new evidence.

Question 20 Decision Making

What is "resulting" (Annie Duke)?

Cost of losing future flexibility — high for hard-to-reverse choices. Forecasting accuracy metric — average squared error between predicted probability and outcome. Know what you know and what you don't; decide within your competence; defer outside it. Confusing outcome quality with decision quality — a single bad outcome doesn't mean the decision was wrong.

Question 21 Decision Making

What is "expected value" (EV)?

Each person shares their view in turn — ensures quiet voices are heard. Imagining the decision has failed in 6 months; listing reasons why. Surfaces hidden risks. Cost of losing future flexibility — high for hard-to-reverse choices. Sum of outcome values weighted by probability — guides decisions under risk.

Question 22 Decision Making

What is analysis paralysis?

Delegation: assign authority while staying accountable. Abdication: hand off without follow-through. Is the organization aligned and able to execute the chosen option? Analysis paralysis is a delay caused by overthinking options or waiting for certainty that will never fully arrive. Confusing outcome quality with decision quality — a single bad outcome doesn't mean the decision was wrong.

Question 23 Decision Making

What's the Complex Cynefin domain?

Cause-effect only visible in retrospect; emergent practices; probe-sense-respond. Default options are disproportionately chosen — applies to organ donation, retirement plans, software. Anyone can decide, but must consult relevant experts and affected people; decision rests with the proposer. Cause-effect requires expert analysis; good practices apply; sense-analyze-respond.

Question 24 Decision Making

What is "Chesterton's fence"?

Don't remove a fence until you understand why it was built — applies to changing existing decisions. Overweighting immediate outcomes vs. delayed ones — root of procrastination and overconsumption. Assigning importance scores to each criterion — surfaces tradeoffs and forces clarity. Better decisions compound over time, improving outcomes, team trust, and resource allocation.

Question 25 Decision Making

What is the simplest decision-making advice?

Bezos's framing — pick the option you'd regret least when looking back from 80. ~80% of value comes from ~20% of decisions — focus accordingly. Treating reversible decisions as if they were irreversible — leads to slow execution and risk aversion. Most decisions are reversible. Decide quickly, learn from outcomes, update. The few irreversible decisions deserve real care.

Question 26 Decision Making

What is the "Laplace criterion"?

Default options are disproportionately chosen — applies to organ donation, retirement plans, software. Fast decisions preserve momentum when the downside of being wrong is manageable. Group makes a decision no one actually wants because each member assumes others want it. Assume all outcomes equally likely if no probabilities known; choose option with best average.

Question 27 Decision Making

What is the "issue tree"?

More options can decrease satisfaction through regret, decision fatigue, and inflated expectations. Cause-effect requires expert analysis; good practices apply; sense-analyze-respond. Outcomes seen as certain weighted more heavily than merely probable ones, even when expected values are equal. Hierarchical decomposition of a decision into sub-questions — common in consulting.

Question 28 Decision Making

What is the "Buridan's ass" paradox?

Overemphasizing specific case features while ignoring how common the condition is. Group makes a decision no one actually wants because each member assumes others want it. Inability to decide due to overanalysis — usually a sign more analysis won't help. Donkey starves between two equal hay bales — paralysis from inability to choose. Real decisions rarely require true optimality.

Question 29 Decision Making

What is the cognitive reflection test?

Three short questions designed to surface System 1 errors when correct answer requires System 2. Would you spend a real dollar on this? — checks if stated priorities match revealed preferences. Devil's advocate, premortem, diverse composition, anonymous input, separate brainstorming from evaluation. Set decision deadline; commit to choosing among options visible by then; accept residual uncertainty.

Question 30 Decision Making

Why is decision quality important?

Pre-set signal triggering reassessment — "if metric X drops below Y, we revisit." Better decisions compound over time, improving outcomes, team trust, and resource allocation. Unclear which domain you're in — first task is to identify. Each person shares their view in turn — ensures quiet voices are heard.

Question 31 Decision Making

What is the post-mortem?

Are we using sound logic appropriate to the uncertainty? A positive test with 99% accuracy can still mean low probability of disease if disease is rare. After-the-fact review of what happened, why, and lessons learned. Pre-experiencing regret to inform decision — useful in moderation, paralyzing in excess.

Question 32 Decision Making

What is the consent-based decision?

Picking the strongest from a weak set instead of generating better options. Finding solutions that combine apparent opposites — often unlocks better outcomes. Opportunity cost is the value of the best alternative you give up when choosing something else. Move forward when no one has principled objection; faster than seeking unanimity.

Question 33 Decision Making

What is "the 70% rule" (Bezos)?

Satisficing accepts "good enough"; optimizing seeks "the best." Have we generated meaningful, distinct alternatives — not just trivially different versions? Treating a multi-option situation as a binary one — narrows judgment artificially. If you wait for 90% information, you're probably too slow — most good decisions are made with ~70%.

Question 34 Decision Making

What is the "calendar test" for priorities?

If your calendar doesn't show what you say is important, your real priorities are what your calendar shows. 5-day structured process from problem definition to tested prototype. Dave Snowden's domains: Simple, Complicated, Complex, Chaotic, Disorder — guides decision approach per context. Choose the option whose worst outcome is the best — risk-averse decision under uncertainty.

Question 35 Decision Making

What is "Pascal's wager" structure?

Sum of outcome values weighted by probability — guides decisions under risk. When potential loss is huge and probability nonzero, even unlikely catastrophes warrant precaution. Combination of evidence weighing, calibrated probability estimates, and updating when new info arrives. Decide based on what a clear target user would value, not the loudest voice in the room.

Question 36 Decision Making

What is consensus vs. consent?

Consensus requires everyone agrees; consent requires no one objects (sociocracy). Future rewards heavily discounted; steep early decay leads to short-term bias. Move forward when no one has principled objection; faster than seeking unanimity. Small test → measure → adapt → larger test → adapt → scale only after validated.

Question 37 Decision Making

What is the default effect?

A single decision-maker is named — avoids paralysis when group can't agree. Have we generated meaningful, distinct alternatives — not just trivially different versions? Default options are disproportionately chosen — applies to organ donation, retirement plans, software. AHP — structured pairwise comparison technique deriving weights from stakeholder judgments.

Question 38 Decision Making

What is "decision asymmetry"?

Assigning someone to attack the proposed decision — surfaces flaws cheaply before commitment. When error costs differ — pay more for the less reversible direction. Consensus requires everyone agrees; consent requires no one objects (sociocracy). Risk you know exists but can't quantify; needs scenario planning.

Question 39 Decision Making

Why use a decision journal?

Designated dissenter testing the strength of a proposed decision. Forecasting accuracy metric — average squared error between predicted probability and outcome. Weighted blend of worst-case and best-case — α from 0 (pessimist) to 1 (optimist). Combats hindsight bias; reveals patterns in your judgment; calibrates confidence.

Question 40 Decision Making

What is "the dollar test" for priorities?

Mutually Exclusive, Collectively Exhaustive — categorize options without overlap or gaps. Would you spend a real dollar on this? — checks if stated priorities match revealed preferences. Responsible does the work; Accountable owns the outcome and decides. Break a problem down to fundamental truths and build up from there — avoids analogical reasoning's blind spots.

Question 41 Decision Making

What is "red-teaming a decision"?

Choose from autocratic, consultative, or group decision modes based on situation features (quality, acceptance, time). Designated dissenter testing the strength of a proposed decision. What you lose by not deciding — often invisible but real. Assigning someone to attack the proposed decision — surfaces flaws cheaply before commitment.

Question 42 Decision Making

What is the inside vs. outside view?

Inside view: project-specific reasoning. Outside view: typical outcomes for similar projects. Use both. Situation, Complication, Question, Answer — opens with context before recommendation. Urgent/important grid for prioritizing tasks — do, schedule, delegate, eliminate. Trusting only what's measurable; ignoring immeasurable factors leads to bad decisions.

Question 43 Decision Making

What is the "weighted scorecard" approach?

Explicit factors used to evaluate options — should be set before considering alternatives. Trusting only what's measurable; ignoring immeasurable factors leads to bad decisions. Outcomes seen as certain weighted more heavily than merely probable ones, even when expected values are equal. Multiply criterion score by weight; sum per option; compare totals. Lightweight MCDA.

Question 44 Decision Making

What is local optimization?

Local optimization improves one part of a system while accidentally harming the larger whole. Searching for the best possible option — costly when alternatives are many or evaluation is expensive. Anyone can decide, but must consult relevant experts and affected people; decision rests with the proposer. A short written document that states the choice, context, options, evidence, and rationale.

Question 45 Decision Making

What is the disjunction fallacy?

It surfaces hidden risks early, before the team becomes emotionally attached to a plan. Underestimating the probability that one of multiple events happens. Cost of losing future flexibility — high for hard-to-reverse choices. "When a measure becomes a target, it ceases to be a good measure."

Question 46 Decision Making

What is the Pareto principle in decisions?

Confusing outcome quality with decision quality — a single bad outcome doesn't mean the decision was wrong. Reviewing decisions improves judgment by comparing expected outcomes with what actually happened. Kahneman & Tversky's model showing how people actually evaluate gains and losses, departing from expected utility theory. ~80% of value comes from ~20% of decisions — focus accordingly.

Question 47 Decision Making

What is "the one-page brief"?

A single page covering issue, options, recommendation, ask — for executive consumption. Inability to decide due to overanalysis — usually a sign more analysis won't help. Same information leads to different choices based on how it's presented (gain vs. loss framing). Reviewing decisions improves judgment by comparing expected outcomes with what actually happened.

Question 48 Decision Making

What is the "yes/no decision" technique?

Is the organization aligned and able to execute the chosen option? Frame as binary, then test by saying "yes" to each option mentally and noticing your reaction. When error costs differ — pay more for the less reversible direction. Bent Flyvbjerg's technique — anchor on the distribution of similar past projects, not your specific plan.

Question 49 Decision Making

What is "consider the opposite" technique?

Studying how past decisions were made to learn from them — usually surfaces invisible influences. Tripwires, premortems, and reversibility — assume your plan won't survive contact with reality. Actively construct the case against your current preference — counters confirmation bias. Clear cause-effect; best practices apply; sense-categorize-respond.

Question 50 Decision Making

What is a "decision sprint"?

Time-boxed intensive process aimed at a specific decision — popularized by Google Ventures. Quality of decisions degrades with the number of decisions made — especially late in the day. Group prioritizes harmony over critical evaluation, leading to poor collective decisions. Imagine the current options are unavailable — what else could you do? Surfaces hidden creativity.