How to make better decisions
By Next Big Idea Club | Published: 2025-10-27 09:00:00 | Source: Fast Company – leadership
Below, co-authors Barry Schwartz and Richard Schuldenfrey share five key takeaways from their new book, Choose Wisely: Rationality, Ethics, and the Art of Decision Making.
Barry spent 45 years teaching psychology at Swarthmore College. He now holds a visiting position at the Haas School of Business, University of California, Berkeley. Richard had a similarly long tenure at Swarthmore College, for 42 years, as professor of philosophy.
What’s the big idea?
There is no such thing as a life decision calculator. Doing our best to measure, calculate, and calculate in search of the “right” choice, is simply not how a wise decision is made. Qualitative judgment and consideration of preferences and values are required when determining the best option before us.
Listen to the audio version of this Book Bite – read by Barry – below, or in the Next Big Idea app.
1. Sorting the possibilities
Imagine waking up on a beautiful Saturday morning and asking yourself: What should I do today? You consider the possibilities: Get some exercise, go for a walk, go to a beautiful park with a serious book under your arm, catch up on work, enjoy your vegetables, or watch sports on TV. Or maybe instead of thinking about what? You You might do, think about what we You might do.
What social activities might you participate in? Reach out to your friends, visit your mom in the nursing home, or help your adult daughter pack to move into her apartment. Lots of possibilities. Is there a right way to think about your options for the day? Is there a correct way to choose which of these things to do?
2. Rational choice theory
In economics, according to Rational choice theoryThere is a rational way to make decisions, which requires thinking about two things:
- How important are the options you choose between?
- How likely is it that the option you choose will be as good as you expect?
We live in an uncertain world, so you evaluate the value and probability of your options, and then double down on them. What you get is§ Expected benefit. The rational choice should be the one that provides the greatest expected utility.
This framework compares the decisions we make in life to the decisions you might make in a casino. What is the best strategy in blackjack? What are the odds and wins at a roulette table? In such situations, it only matters how much you can win and how likely you are to win. Rational choice theory suggests that we should think about most of our decisions in this way.
To know how good it will be if you choose this option, and how good it is likely to be, you must determine the relevant information. Create a spreadsheet listing all the factors that may be important when making a choice. List how good a particular option is with respect to all of these factors, and then enter a value for both how good it is and how likely it is. Fill out the spreadsheet with all the options, hit the button that does the calculations, and you’ve made a rational decision.
“This framework likens the decisions we make in life to the decisions you would make in a casino.”
Rational decisions are quantitative. You need to attach quantities and volumes to both the value of the options and the probability of realizing that value. Rational choice theory has nothing to tell us about your preferences among options, what your values should be, or what set of options you should consider. In this economic framework, you have whatever values you have, your choices are whatever choices the world offers, you create a spreadsheet, do the math, and choose the best option. This is the model of rational decision making.
3. Frame the options
Are we acting as rational decision makers? Absolutely not. About 50 years ago, psychologists Daniel Kahneman and Amos Tversky began studying how people make decisions. They did some beautiful and very important research, but unfortunately, Tversky died prematurely. Kahneman survived to win the Nobel Prize in Economics and publish a book called Thinking fast and slowwhich has been on the bestseller lists for nearly 10 years. His work helped create the field of behavioral economics.
Behavioral economics research has demonstrated the ways in which people fail to meet the criteria of rational choice theory. People are bad at thinking about possibilities. People are strongly influenced by the way choices are framed. People divide their decisions into different calculations, and often do not collect the possible consequences of those decisions into one large calculation. People are greatly affected by Anchors. A $500 suit looks inexpensive on a rack full of $1,000 suits, but it looks expensive on a rack of $200 suits. These aspects of decision-making lead us to the right place to some extent, but they can also lead us seriously astray.
The way Kahneman came to look at human decision making is that there are two processes that occur:
- Conscious process:Â Think about the pros and cons of different options when asking yourself which choice you should make. This is stressful, slow and demanding.
- Automatic process:Â This system provides answers to you even before you formulate the question. It’s fast, efficient and works whether you want it to or not.
These two systems interact, and sometimes the automated system misleads the more deliberate and rational system. Even if we end up making rational decisions, it is not through the processes that rational choice theory tells us we should follow.
4. Not everything can or should be accounted for
Rational choice theory is a terrible model of what it means to be a rational decision maker. Are most of our decisions really similar to casino gambles? Can everything that matters in a decision be measured? What’s good about doing strenuous exercise while hiking? What’s good about helping your daughter pack her bags? What is the common measure of value?
“Can everything that matters in a decision be measured?”
If you are choosing a job, you may be interested in knowing the salary and benefits, who your colleagues will be, whether the work is interesting, the location, opportunities for advancement, and other relevant details. It’s unreasonable to attach numbers to all these factors and then use those numbers in a spreadsheet to figure out which job is best for you. Likewise, if you’re deciding where to go to college, you might be interested in quantifiable things like graduation rate and average post-graduation salary, but what about the qualitative attributes of education, social life, food, and housing? Can these things be arranged in a spreadsheet using a common scale to assign value?
When you follow rational choice theory, instead of thinking about decisions, you calculate. Calculation replaces judgment. In some areas of life, this can be a good thing, but in many others, shutting down your ability to self-reflect will lead to worse, poorer, and more difficult decisions to be made.
5. A rational decision requires rational judgment
Rational choice theory is dangerous as a normative criterion. It narrows our thinking by encouraging us to invent quantitative measurements for things that cannot be quantified.
During the Vietnam War, the United States government was facing opposition from citizens and wondering how to generate popular support for the war. It has been found that if the general public sees that the United States is winning, more people will prefer to participate. But it was a guerrilla war, so can anyone know who won? It was decided to use the number of bodies and injuries as an indicator. If the enemy has more wounded and killed than we do, we must win. This affected our combat strategy. Instead of seeking strategic gain, we made decisions aimed at maximizing casualties, because that meant we could tell people at home that the United States was winning the war. As a result, we did not win the war, and thousands of people died needlessly.
“A rational decision requires rational judgment, not mere counting.”
You can see the gravity of rational choice theory decisions, like where to go to college, too. People are strongly influenced by ratings US News and World ReportSo universities have learned how to manipulate these rankings by making themselves look good on the dimensions that U.S. News cares about. Does this make them better institutions? Maybe sometimes, but mostly not.
Rational choice theory forces us to focus on the things that can be easily compared and measured while leaving out the rest. A rational decision requires rational judgment, not mere counting. We do not want our capacity for rational thinking and judgment to atrophy because we believe that the rational approach to decision making is essentially mechanical and algorithmic.
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this condition Originally appeared on Next Big Idea Club Magazine and reprinted with permission.
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(tags for translation) Decision making
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