Would you know a good decision if you saw one?

Abstract

Ever since the early publication by Grayson,1 we have seen an increasing interest in decision-analysis in the oil and gas industry. There have been numerous studies and publications discussing methods and models for rational decision-making. Given the inherent limitations of intuition and heuristics, one might expect decision-makers to be delighted with the more consistent approach provided by rational decision-making techniques. Modern decision models can help process large amounts of information without losing valuable pieces. They never suffer from distraction, fatigue, boredom or random error. They are consistent, week after week. Yet, in spite of these obvious advantages, people treat these with a nearly instinctive distaste. They are particularly resistant to the idea that simple models can validly make such subjective evaluations. For some, that resistance may stem simply from unfamiliarity with the statistics and probability involved. Many more, however, subscribe to the widespread assumption that human judgment is more discerning than a model. They are reluctant to believe that simple mathematical calculations can match the complexity of the human mind. "Take away an ordinary person's illusions," says Dr. Relling in Henrik Ibsen's Villanden, "and you take away happiness at the same time." A particularly interesting aspect of human judgment and decision-making are the traps we unknowingly step into. Many decision-makers believe that intuition, repeated experience and their general intelligence will see them through. Unfortunately, as will be discussed in the paper, intuition and repetition are unreliable teachers at best.