Tag Archives: Daniel Kahneman

Anticipating the Worst

People make dumb decisions.

Sometimes the decision isn’t really a decision at all, but simply a momentary loss of focus, like locking yourself out of the house when you take the dog for a walk. Sometimes what happens is more of an actual decision, but it’s impulsive, like deciding to pass a slow-moving truck on a two-lane road without first checking to see if there is oncoming traffic. Sometimes the dumb decision results from the stubborn refusal to recognize changing circumstances, like insisting on climbing to the summit of a mountain despite a blizzard, plummeting temperatures, and the approach of sunset.

Corporations make dumb decisions all the time, too. Coca Cola famously altered its 99-year-old recipe in 1985, introducing a sweeter “New Coke” – a decision they rescinded 71 days later. (Oops!) Some of the greatest business missteps involve corporate takeovers. One company absorbs a second, only to find out afterwards that it has also taken on ownership of toxic waste sites, or hopeless amounts of debt, or law suits relating to faulty products. In the heat of the moment, the advocates for the takeover ruled the day, while the possible negative outcomes seem not to have been seriously considered.

Nonprofits make decisions as well, of course, and a healthy share of them are ill-considered. Continue reading

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Naming the Number

A few years ago I was the chair of a nonprofit organization that was urgently raising money for a new building.

As part of that effort I called an affluent donor and close friend named Bill. I explained the need, and I noted that the building was to be named after a man we both deeply admired. Bill said that he of course would like to help. Then he added, “And what magnitude of gift, may I ask, would appropriately signify my affection for you, my respect for the honoree, and my support for the program?”

I told Bill that a number with five digits would suffice. And a check for $10,000 arrived two days later. Continue reading

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