This is part of the “virtual book club” discussing readings for the symposium at the University of Missouri on October 7:  Moving Negotiation Theory from the Tower of Babel Toward a World of Mutual Understanding.

John:  Sanda, you suggested the books by Schelling, Raiffa, and Kahneman because they reflect a “decision-making” perspective.  I will post conversations about each of their books later, but for now, would you explain what this means and how it differs from other approaches as one might assume that every negotiation involves decision-making?  Does this mean focusing on negotiators’ conscious calculations (as opposed to less conscious and calculating processes)?

Sanda:  Schelling and Raiffa are from a time when in their respective professions, math proficiency and dry language did not pose problems or if they did it was not the authors’ concern.   As well, their thinking is rooted in classical economics theory and game theory, so those for whom that is not their cup of tea can miss stuff just because of the medium.  That is a pity because their (strategic) way of thinking is still valuable.  In fact, those who came after them preserved this approach and insight while not surfacing the thinking behind it or giving credit where it was due.  Many probably think they invented it all… (I have news for them…)

The decision-analytic perspective is prescriptive rather than descriptive or normative.  That is, it doesn’t say claim this is how people think; nor does it say what is right, moral etc.  It is based on the notion that if this is what you choose to pursue, here is the best way to attain it given what you know or can find out.

Both Herbert Simon and Daniel Kahneman seemingly ran counter this prescriptive approach rooted in decision analysis when they came up with our cognitive limits.  If there was an assumption that decision makers had the information needed to make the best decision given the circumstances, Simon pointed out the limits of information gathering (whence “satisficing,” i.e., accepting what’s “good enough,” instead of optimizing).

Kahneman and Tversky (and their numerous followers in the realm of cognitive biases) showed how our thinking, especially in its “fast” mode, has certain flaws that prevent people from adhering to decision prescriptions.  However, this does not invalidate the decision-analytic approach, nor did Kahneman and Tversky mean to do that.  In fact, they told us there are cognitive pitfalls and here is how to mitigate some of them. In essence, they improved the previous prescriptive approach.  (That is my perspective!  I am not saying here that everyone shares my view.  But I think at least the likes of David Lax and Jim Sebenius do, so I feel in great company.)

My reading list didn’t contain Dörner’s Logic of Failure, but along with Schelling and Raiffa, he is in my pantheon!  Maybe you should check him out too, at least parts of his book.  He reveals practical effects of our cognitive limits on our decision making in ways that I find better than the plethora of articles on experiments revealing tons of cognitive biases one by one.  Dörner observed that our decisions often fail miserably when we deal with complex systems (for example when making policy decisions).

Dörner links together several cognitive biases with predictable and socially costly consequences, especially in situations of low feedback in time.  When biases are considered one by one, we rarely get a sense of their consequences in real situations.  Low feedback characterizes environmental (and other) policies.  It is treacherous and got us in trouble in many a long-term policy.

One last note: Kahneman talks about System 1 (fast) and System 2 (slow) thinking (it’s great!!! 🙂  ).   System 1 is the intuitive, cognitively biased but often effective way of thinking quickly.   System 2 kicks in when it’s complicated, consequential, and we don’t have cognitively canned reactions.  As he points out, we don’t need system 2 all the time.  It’s mentally taxing and likely not necessary in many situations.  However, when applied to high stakes situations system 1 leads us astray and we should consciously switch to system 2.

Back to Raiffa and Schelling – pure system 2 dudes!