This is yet another topic on the series of topics on decision making. In this, I focus my attention on knowing that we do not know it all and operate within our bounded rationality.

We may be out of our depth in the decision making process due to our limited rationality, information, time or emotional pressure we may be operating on.

I have heard a number of my friends talk over a BBQ about the way country should be run, however they still can’t do a good BBQ ( so I wonder what will happen if they were running the country).

We all have limited amount of intellectual ability, resources, information and time to handle our decisions. We are unable to comprehend what lies in the future. This impacts our decision making process

The term Bounded Rationality was coined in the 1950s by Herbert A. Simon . We can only make decisions on the information we have and with that information we also want to balance the intrinsic conflict to ensure our vested interest dominate over common interest or public good.

In organisations, with multiple levels of hierarchy information that is available is different ( due to filteration) which impacts the quality of decisions made. Hence the term MBWA (management by wandering around) was invented to ensure managers assimilate with different levels or hierarchy for effective decisions and can cut through information arbitrage.

Fast forward to Information Age, we now tend to brainstorm to ensure we may not be completely ignoring a scenario due to our bounded rationality.

My boss, in one of my very early roles, who I still consider a true leader, always asked my colleges and me for our perspective on a situation before he made a decision. This helped him make quick and effective decisions that was usually accepted by all creating buy in at the same time.

Our bounded rationality leads to information arbitrage. Being aware and managing it well helps us take advantage and reap the rewards.

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Sameer Babbar

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Making Decisions: knowing that you don't know it all.