How to ensure robust decisionmaking

The Toyota Prius was a fascinating car from a marketing perspective. At the time of launch, it was the first mass marketed electric hybrid car. It was initially aimed at the green and eco-friendly crowd: people keen on minimizing their carbon footprint. As a result, the marketing leaned heavily into using the ethical angle. They deployed guilt to reach eco-hipsters.

It was like this for a few years, often with “manly man” types ridiculing both Priuses and their owners. Then, at one point, Uber took off in popularity. At the time, when we lived in London, it seemed that every time I hailed an Uber, the Prius was the most common car used. At first, I almost missed it. Eventually, I asked one of my drivers why he was driving a Prius. And he said:

The Prius appealed to these drivers on a completely different business level. If your livelihood depended on your cost structure, you became more competitive. To some extent, the typical London-based Uber customers may have preferred taking a Prius because of the original eco-hipster argument. A hybrid car was not only cheaper but also better for the environment. So in addition to the cost angle, there was an indirect marketing upside for the drivers.

This is an excellent example of promoting social change through rational arguments. For an ethical argument to go “mass-market”, an innovation needs to appeal to the pragmatists, as per Geoffrey Moore’s classic book Crossing the Chasm. For this to happen, it needs to overcome a lot of skepticism. And it needs to have clear practical implications, in order to be a “common sense” choice. Even for an ethically superior product, most buyers need a practical rationale. Only then, it can spread and stick among the majority of people.

For years, I was looking for something similar in the context of diversity. I’ve been looking for hard evidence of the benefits of diversity. As an idea, diversity itself always resonated with me. Especially as a bootstrapping serial immigrant, I often felt out of place and disadvantaged relative to my peers. I felt empathy for minorities and outsiders. And often including them benefitted everyone. Yes, I acknowledge I did have it easier — growing up in the US as a white male. There were lots of pressures related to skin color, which I never felt.

This year, #BlackLivesMatter and racial unrest in the US has sped up this social change. Other minorities have also made progress. Women, in particular, which have been a “minority” despite being half the population. The conversation has already shifted, and the denial has stopped.

I still believe these changes will be to everyone’s benefit. The main reason is that we all benefit from a clash of different perspectives. The more homogenous a group of people, the more they will be subject to bias and blind spots. The more variety you have, the greater the chance of reducing those distortions when making group decisions. It’s worth considering the impact of diversity. Include more perspectives and achieve a more robust outcome.

As a shorthand mental model, you can view diversity in organizations analogous to modern portfolio theory. In an investment context, owning a larger number of uncorrelated financial assets leads to better overall outcomes. There is a quantifiable benefit from this. The more stocks you have, the less you are exposed to company-specific risk. To some extent, the same is true with industries. If the travel sector gets hit hard by a pandemic, if you have some technology stocks, you’ll come out ok.

In a management decision making context, the same holds true for uncorrelated opinions. Having a number of uncorrelated opinions helps a group come up with a more robust view.

There are many ways to benefit from this. One way I’ve seen this done explicitly is using personality assessment tools like DISC, Myers-Briggs, or Kolbe. Everyone is different. You can baseline how much natural preferences might skew the team perspective. Different people notice different details. It’s worth being mindful of potentially missing yet complementary perspectives. For example, in IT there tend to be a lot of data-driven logical people. Having someone who is more relational or “heart-driven” participate can incorporate more intuition into a decision.

Also, personal background, race, or orientation can also provide useful angles which a homogenous group of proverbial old white men could miss. Many businesses started to serve minorities, which the “white establishment” thought wasn’t viable. For example, Black Entertainment Television. Or major podcasts aimed at the Latino community.

In the context of a specific company, we also often deal with people from different departments. They have different backgrounds, a different personal network, and often different goals. All of these would additionally influence their perspective. Converging onto a shared company-wide perspective helps create a common understanding of what best.

Often problems or challenges go unresolved, simply because we aren’t aware of them. Or we don’t see the full importance of resolving the problem, because we underestimate the full implications.

You can also go too far, according to the picture above. If you start to gather too many opinions, it stops adding that much extra value. The incremental value of a 201st opinion will be much smaller than a third one. You will have heard most of what’s worth taking into account much earlier than 201 interview earlier. There may be patterns in the data.

But you don’t have much risk of missing something obvious due to your own blind spots and “unknown unknowns”. With any decision, there will always be some risk which you can’t diversify away. Regardless of how many opinions you gather or who you ask, you still have to live with it. At minimum, you’ll achieve the main benefit of diversity in opinion: more robust outcomes. Ones that take into account all facts and which are less subjective.

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