Book Review: Decisions, Decisions...

Fall 2005 -- BOOK REVIEW: David R. Henderson and Charles L. Hooper, Making Great Decisions in Business and Life (Chicago Park Press, 2006), 287 pages, $28.50.

An effective self-help guide lies in scope and universality somewhere between Aristotle’s Nicomachean Ethics and a plumbing manual.

Abstract ethics is a good place to start in figuring out how to get along better in life. But then one comes to the chore of actually getting through the day. It’s fine, for example, to determine to be rational, attend to facts, and the like. But when a jumbled passel of facts drops in your lap, each of them petulantly demanding your immediate and entire attention, with alternative courses of action proliferating in all directions, whaddya do now? Clearly, decisions must be made.

It is lucky, then, that the book under review is Making Great Decisions in Business and Life, by David R. Henderson and Charles L. Hooper, which outlines techniques on how to think more reasonably and make choices more expeditiously. The authors are economists, but they are also businessmen—thinkers who believe that theory and practice can actually be related. They also understand that one ought to strive not for Platonically Ideal decisions but for good-enough and better-than decisions. (Time is money, of course. But time is also, er, time. And we get only twenty-four hours per day.)

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Henderson and Hooper report that “thinking works.” (Good news.)

Henderson and Hooper report that “thinking works.” (Good news.) They endorse philosopher David Kelley’s observation that we don’t “have to” do anything, but rather should think in terms of goals we want to pursue and suit our means accordingly. They teach us how to assess value and risk, boil the alternatives confronting us down to essentials, create better alternatives when available ones don’t suffice, and zero in on what’s important. With respect to this last point, they come up with new applications (new to me, anyway) of the famous 80-20 rule—about how twenty percent of what we do yields eighty percent of the results (a.k.a., “twenty percent of the inputs cause eighty percent of the outputs”). The question, then, is how to spend as much time as possible doing the high-yield things and as little as possible on the low-yield things.

We should learn to “think on the margin”: i.e., to recognize when small decisions can make a big difference, and in that case treat the small thing as if it were the big thing it actually is. On the other hand, we should spend about “one percent of the value of a decision analyzing the decision.” That’s a minute or less for many decisions people too often spend way too much time on. If the payoff of a decision isn’t much, you can afford to spend very little time making it.

Risk, arbitrage, and causality are among the topics usefully covered. And there are plenty of entertaining anecdotes to illustrate the well-conceived advice.

Many of the notions, as briefly laid out, may seem obvious, but the authors flesh out the implications in often-novel ways. I got a little lost in a few sections of the book, where some of their more academic economic thinking comes into play. I couldn’t understand what a “util” is, for example. It’s defined as a unit of utility, but I don’t know what that is. Then I thought maybe I would try to figure it out. But then I realized...

Minute’s up.

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