Professor Ed Jaye
Chapter 1 Summary
The Anatomy of Decisions
• In the real world managers are paid to make decisions on a daily basis, on how your firm’s resources are controlled to meet goals that have been set by higher managers or by yourself. • There are some essential characteristics that manager’s share when making a decision; they are usually made with someone else’s money and need to be justified, they build on one another, the outcome is important to other people, and they are also forgettable. • Decisions with other people’s money: As a manager and not being a self-financed entrepreneur, your job is to make decisions with the money of others, therefore a justification has to be provided to the financers. I believe this puts a pressure on the managers to make sure they make the right decision, since they are not using their own money. That is the reason why managers tend to make their decisions based on instinctive judgment. Previous experiences can save managers from telling their shareholders that they lost money based on the rational and analytically defendable decision. • Decisions that build on each other: Previous experience can be very influential at the time of making the right decision. Managers are asked to “do their homework” before making an important decision, therefore they look back into previous decisions that have led them to the actual one and analyze what would benefit the firm the most according to previous decisions. Each decision is taken as more information becomes available. • Decisions that matter: Every decision made weather is a good one or a bad one is valid and it matters. Bad decisions are the ones that push managers and the world to become better and keep working to make the right decision on future opportunities, in other words bad decisions are ways to keep progressing. • Decisions that will be forgotten: The way memory works is very beneficial to managers...
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