3 Ideas in 2 Minutes on Making Difficult Decisions
Scarcity Effect, Rubber Band Model & the McNamara Fallacy
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I. Scarcity Effect
Don’t be fooled by the Scarcity Effect. If something appears rare, we tend to be more likely to desire it. Why? Because we perceive products that are in limited supply as more valuable.
The psychological phenomenon is often used in advertising and marketing. To create a sense of urgency and encourage people to take action before the opportunity is gone.
For example, do not fall for this week’s paid subscription offer. You can now get a yearly subscription for $40 instead of $50. But only if you’re one of the first ten people to sign up. Quick, before the opportunity is gone!
II. Rubber Band Model
Some of the worst decision-making scenarios we can face are dilemmas. You’re torn between two choices and both seem equally desirable. The Rubber Band Model is a decision-making tool to tackle them. Just answer these two questions:
What is holding you?
What is pulling you?
The mental model is a variation of the good-old listing of pros and cons. Only it frames the questions positively. Should you go on holiday to New Zealand or Hawaii? Imagine two giant rubber bands pulling you to either destination. Then rejoice in how lucky you are that these are the problems you ponder.
Source: The Decision Book
III. McNamara Fallacy
The McNamara Fallacy occurs when a decision is based solely on quantitative data or metrics. Meanwhile, factors that cannot be easily measured or quantified are ignored. The logical error is named after former US Secretary of Defense Robert McNamara who was in charge during the Vietnam War.
Back then McNamara insisted on quantifying success, for example in terms of enemy body count. After all, such numbers are more easily understood by the public and can therefore be used to justify the continuation of war efforts.
The problem was that these metrics did not reflect the reality of the conflict. When gauging the success of American troops, the morale of North Vietnamese soldiers and public sentiment were equally important. But because they were hard to measure, they were ignored.
The McNamara Fallacy is similar to the Streetlight Effect. Both warn about only searching for evidence where it’s easy to find. 🐘
Have a great week,
Chris
themindcollection.com
P.S.: May I interest you in my recent article about DODAR, a decision-making tool pilots use during emergencies?