Playing chess is a classic example of performing under critically insufficient data. Each move is to be made based on assumptions and data obtained in the past. The winner will most likely be the one who uses this data and decides his moves; the loser is the one who has made an error in judgment!
Insufficient data and decision-making go hand in hand in our day-to-day activities. Every morning, when we start from home to reach the office by 9 AM, we make a decision based on insufficient data. The main reason for this is that the probability of the traffic density is unpredictable; there is uncertainty.
We rarely encounter situations where we have all the data and the decisions are right; there is always insufficient data, which is why they say, “The world is not perfect.” While classical physics is proposed to be perfect if there is enough data, modern physics (Quantum Physics) debunks this since there is never complete data, and nature seems uncertain!
But making decisions about a business proposition is a different ballgame. How do you ‘decide’ even when you have insufficient data? Are you wise enough, or must you wear the Critical Thinking Hat?
Table of Contents
What will you do? Think Critically!
Consider this scenario:
You have planned a long weekend trip with family. On Friday, the weather forecast says there is a 60% chance of rain with a slight thunderstorm during the weekend!
This is a classic situation of insufficient data when it is difficult to decide either way. These Ambiguous situations can lead to stress if our TOA (Tolerance to Ambiguity) is low!
Clearly, we need that extra bit of intuition and experience to decide. We finally take a chance and go ahead with the trip! And we enjoy the trip. What we just did is a quick application of CRITICAL THINKING.
Note that 60% of the data has virtually no significance in decision-making here; hence, we cannot make data-driven decisions.
Though this scenario is not something that we lose sleep over, it provides a glimpse of the extra bit that we need to dig up from within and make a decision. Critical Thinking is at play when our decisions are plausible!
Critical thinking is the ability to think clearly, rationally, and independently while evaluating information and making judgments. Critical thinking is essential for problem-solving, decision-making, and effective communication.
It involves analyzing:
- Collecting Facts
- Analyzing
- Assessing
- Drawing reasoned conclusions
- Solution to problem
What are situations of insufficient data?
When a decision-maker has:
- Insufficient time to research thoroughly.
- Deciding to hire a fresher.
- Making policy decisions during public health emergencies.
- The situation is new and complex, and there is insufficient data.
- Taking a call during the COVID-19 pandemic.
- Launching a Startup
- Mergers & Acquisitions
- Changing scenario (just like our weekend trip example) where data is bound to change.
- Social Media trends
- Financial Markets
These situations are undoubtedly challenging when it comes to taking a call.
So, how do we address such scenarios?
Can an AI engine provide foolproof answers? No, AI technology is not yet ripe for such data-deficit situations.
It boils down to humans making decisions since a component called wisdom (you may want to call it intuition) is invariably needed to take the quantum leap over the ‘gap’ created by lack of data.
Though wisdom is a must, other steps must be ticked off before wisdom is applied.
Here are some of them:
Step 1: Accept the risk of making a decision.
After all, the chances of some risk are always there, even if we have all the data in the world!
Deciding on one or the other path will only reduce that risk.
Example: During a Startup financial planning, the founder decides to scale his business, accepting the risk of the current market situation.
Step 2: Adopt Structured scientific decision-making
There is no substitute for rational and logical thinking.
Tools such as Decision Tree/SWOT Analysis help provide direction.
At least, it will not be guesswork.
Example: This entrepreneurial mindset always kicks in to evaluate one’s potential and make decisions.
Step 3: Trust your Intuition
In earlier times, it would be like saying, “Take the decision and leave the rest to GOD!”
Here, it is not quite so. It goes further into:
- Experience from earlier such situations
- Quick thinking derived from critical thinking
- Pattern recognition is based on past inputs.
When such decisions are taken, one has to trust it.
Example: There are situations where a gut feeling makes a hiring manager decide on a candidate.
Step 4: Balanced Action and Analysis
Avoiding ‘Analysis Paralysis’ is a must in such a situation of ambiguity.
Taking small iterative steps in making decisions helps by providing more time.
Or, using the 70% rule, too, helps. Having 70% and not waiting any further to make decisions helps capture the market without delaying a product’s launch.
Example: During the COVID-19 pandemic, India decided to manufacture without much analysis since immediate action was needed for a better future. It turned out well!
Step 5: Learn and Pivot
Not all decisions go as expected, but courage is needed to learn from failures by adapting, pivoting, and charging ahead.
- Mistakes need to be stepping stones.
- Reviews and feedback need to be frequent.
Conclusion
The best way is to embrace these situations (Ambiguous Situations) as a necessary evil since nothing in this universe is perfect. There will always be something lacking. The need of the hour is to build Tolerance Of Ambiguity (TOA). By doing so, the stress or anxiety that these situations bring are well handled.
Overall, one needs to:
- Critical Thinking!
- Have clear, achievable goals.
- Ask an expert to aid your decision-making
- Stay alert with Critical thinking
- Evaluate the situation with a probabilistic mindset
