Assignment 2

Businesses are highly dependent on the warehousing and analysis of data to make a majority of their strategic decisions. Although this information is highly valued, the concept of systematic irrationality may actually decrease the significance of the charts and graphs derived from the data so carefully collected everyday. Systematic irrationality introduces the idea that although humans are rational beings and are expected to use that gift to make daily decisions, other factors come into play such as the emotions that making certain decisions might evoke. In addition, a person may choose differently based on relative rather than actual data.


In The Mind of the Market—Compassionate Apes, Competitive Humans and Other Tales From Evolutionary Economic, Micheal Shermer studies the economic impact of such irrationality. Adding emotions and other unforeseen factors into decision making means businesses need to reevaluate the data they collect. Drawing linear conclusions using concrete statistics is not enough to make decisions, because many people are not actually choosing the most rational (mathematical) method to make their decisions.


As a society, we need to recognize the importance of constantly reevaluating the data we keep, and try to capture the less obvious information as well as the obvious. Recording and managing trends, while helpful, will be difficult as new environmental factors will constantly come into play. We must steer away from making assumptions that something that has worked in the past will always work. Dan Ariely touches on this concept when he talks about the nurse who insisted that removing the bandage quickly was the best way because that is the we she has always done it and that is how she was taught to do it. If she were to take a step back and discover for herself the best way, she would have brought more comfort to her patients. What was more comfortable for Dan may not be comfortable for every patient, and it is important to reevaluate each situation. For each new patient, she can draw on past experiences to help make decisions, but keep an open mind.


Businesses can apply this same concept to assist in making better decisions. By involving historical data and observing the current environment, thereby incorporating both rational and irrational decision making; businesses will enhance their ability to make strategic decisions.