Before I began this class, if asked if I made good decisions, I would have said that I make fairly sound decisions. I attempt not to make decisions suddenly and think about each option. I try to prepare research for large or unfamiliar decisions. I believe I use logistics when making decisions in order to produce the best outcome. But less than a week into the class, I realized that I do not always make the best decisions. I would not consider myself a horrible decision maker, but the writings of Hoch, Kunreuther, & Gunther (2001) have made me realize that there are steps that can be taken which may result in a more successful choice. After reflecting on my decisions, I determined that a multistage decision-making process will be helpful in any future decisions. I have a tendency to sometimes make decisions based on the present and occasionally misinterpret future consequences when making choices.
I consider myself a preparer when making decisions as I think about various options when trying to make short term decisions. While doing school work, I attempt to mark out any future occurrences that may hinder my educational progress. One thing I dislike to the extreme is being rushed, so I make my decisions to do my schoolwork based on the idea of not being hasty and making sure everything is turned in promptly. I follow the same routine for work. I make a decision to complete any reports that must be delivered to the State of Florida on time and attempt to track any roadblocks. So, I make good multistage decisions, right? Well not exactly. These decisions are not long term or complex multistage decisions. According to Hoch, Kunreuther, & Gamble (2001), an effective method to making multi-stage decisions is known as dynamic programming which “exploits the idea that even though a decision problem may involve a large number of stages…one need not enumerate and take expectancies of all possible contingent future realizations to arrive at an optimum decision policy” (p. 42). So if not all stages and options need to be taken into account while making a decision, what is the best method? Hoch, Kunreuther, & Gamble (2001) offered a solution called backward induction or looking at the final product starting in the infancy of the decision-making process. Nosich (2012) argued that conclusions and interpretations must be considered in critical thinking, which follows the same lines as backward inclusion.
This is one area in which I sometimes fail while making complex long-term decisions. One example I can think is saving for retirement. As an accountant who has a B.S. in Banking and Finance, I know the positives that will come from starting early in saving for retirement. I do not need the Charles Schwab commercials reminding me to talk to Chuck to tell me how important that decision would be. But, I have not made the decision to make a plan and continue to invest monthly. I have not decided to pick a retirement fund, determine the volatility that I would like to be exposed to, or determined the amount of money I would like to contribute yearly in order to be comfortable when I decide to hang up my calculator.
According to Hoch, Kunreuther, & Gamble (2001), dynamic programming consists of two fundamental assumptions including (a) complete forward planning and (b) optimal learning. In regards to forward planning, I know that I could one day be injured and not be able to work, may eventually change jobs, in turn, losing my great retirement benefits, or that social security may be cut hindering a portion of my retirement, but I still do not make a choice to begin saving for retirement. Optimal learning suggests that decision makers should look to the past to make future decisions. This is one area that thwarts my decision to save for retirement. I have not made the choice to retire, therefore have no post experiences. Planning for retirement is one choice where I could definitely benefit in the advice, formulas, and applications offered by Hoch, Kunreuther, & Gamble (2001). Making the decision to utilize backward inclusion could have a great impact in the planning of my retirement. If I were to be able to determine a final product (or amount) and begin working toward that product in the infancy of the plan then I could see success.
Hoch, Kunreuther, & Gamble (2001) also discussed how heuristics (using experiences) could help us to make multi-stage decisions. Experience is one factor that I do use to help make decisions and it is not always my personal experiences that drive my decisions. When we first moved to Florida, my girlfriend sold Aflac for a short time period. She came home one day and told me about an individual who once had cancer coverage and not long after they canceled the coverage they were diagnosed with a form of cancer. The individual was explaining that the bills were going to be astronomical. According to Elkins (2015), the average cost of chemotherapy alone is approximately $102,000 per year. After a discussion, we both decided that we will never be as young or healthy as we are that day and signed up for cancer policies. I have been fortunate not to have to file any claims under this policy, but feel comfortable with the decision to create a safety net just in case. In this example, I utilized optimal dynamic decision analysis, backward induction, and heuristics to make this decision. If I were ever to, unfortunately, file a claim then I would have help to cover the medical bills and if I am fortunate enough to never have to file a claim then I still have the feeling of comfort. I saw the possible final product and made the decision to develop a plan to help soften the blow in that ill-fated event.
I believe the ideas offered by Hoch, Kunreuther, & Gamble (2001) could offer an improvement in the success of my future decisions. I must now make sure the ideas and concepts are utilized in my future decisions.
References
Elkins, C. (2015, October 07). How much cancer costs. Retrieved from https://www.drugwatch.com/2015/10/07/cost-of-cancer/
Hoch, S., Kunreuther, H., & Gunther, R. (2001). Wharton on making decisions. John Wiley & Sons, Inc.
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