2.1.1 Information Limits

The eight keys to making good decisions with limited information.

Art of War Quote: 

"Knowledge is victory.
No knowledge, no victory."

Sun Tzu's The Art of War 1:1:36-37 (Ancient Chinese Revealed Version.

Perspective: 

"Be willing to make decisions. That's the most important quality in a good leader."  General George S. Patton

General Principle: 

Strategic decisions are always made with limited information.

Situation: 

We must be realistic about the quality of competitive information. There is an infinite amount of information that may be relevant to our competitive position. Much of this information is not only unknown but unknowable. The chain that brings us information consists of weak links. Unexpected events continually come from unforeseen directions. Information about these events is always limited. Our impressions about what is happening is filtered through our expectations, which are too often wrong. Sensory information is limited, not only by our senses, but by our focus and attention. Our mental models can filter out the wrong information. Our words never clearly express our ideas. Information is lost in communication: what is said is not necessarily what is heard. More information is lost in interpretation: what is meant is not necessarily what others think is meant.

Opportunity: 

Despite the limitation of quality information, we must make decisions. The more quickly we make them, the better. We can gather only as much information as time allows. Many key decisions must be made in an instant. The time limits on making decisions is a key factor limiting our information about a situation (1.8.3 Cycle Time). While having better information than others is always beneficial, better information is seldom required to make better decisions than most people. All we need is better knowledge of what the key information is and a clearer focus on it than others (1.7.2 Goal Focus).

Key Methods: 

Since complete and accurate information is never going to be available, we have to look at information differently in order to make our decisions. Good strategic decisions can be made with limited information, but only if we know the appropriate methods. To use those methods, we must:

  1. We make good decisions with limited information by comparing the relative value of making a decision against that of making no decision. If we have nothing much to gain or nothing much to lose, we should avoid acting on information. Action is always costly. Just having information doesn't demand that we act upon it. We must ask ourselves, "Does a decision really need to be made now?" (4.2 Choosing Non-Action)
  2. We make good decisions with limited information by estimating the cost of making the wrong decision. The potential value of a decision is only half the equation. We make wrong decisions all the time because we don't have perfect information about the future. Wrong decisions are invaluable learning tools. We must ask ourselves, "Is any decision based on this information safe if the information is wrong?" (3.1 Strategic Economics)
  3. We make good decisions with limited information by ignoring information that doesn't impact the decision. In Sun Tzu's system, we use the five elements to give us a solid guide. A vast majority of information related to a decision or situation doesn't affect our decision one way or another. If information doesn't impact one of the five key elements, such information can be very interesting, even distracting, arousing our curiosity, but that doesn't make it relevant. When information does touch on one of the key elements, the first question we should ask is: "If this information were different, would it change my decision?" (1.3 Elemental Analysis)
  4. We make good decisions with limited information by weighing information based upon its relative importance to the decision. In competition, everything is a comparison. All the remaining information affects our decision, but not all of it is equal in its impact. We must ask, "Which information is most influencing my decision?" (1.3.1 Competitive Comparison)
  5. We make good decisions with limited information by testing information consistency against our situation awareness. People often are influenced by the worst and most inconsistent information simply because it demands attention. However, that characteristic doesn't make it true. We must ask ourselves, given all we know about the situation and its history, is this information likely to be true?" (6.1 Situation Recognition)
  6. We make good decisions with limited information by always suspecting that inconsistent information is wrong. Our information can be wrong because 1) it was garbled in communication, 2) events were misinterpreted, 3) people intentionally want to mislead us through secrecy or deception, or 4) the information has been outdated by more recent developments. We must ask ourselves, "How could this information be incorrect or how can it be quickly verified?" (2.1.3 Strategic Deception)
  7. We make good decisions with limited information by balancing the cost of collecting more information against value of quick action. Action might be the quickest and least costly way to get better information. Often, it is the only way to get better information. If reliable, relevant information can be gathered more quickly and easily without action, we should gather it, but decisions can always be avoided by using the excuse that more information must be gathered. We must ask ourselves, "Is action the fastest and least expensive way to find out the truth?" (3.1.2 Strategic Profitability)
  8. We make good decisions with limited information by having a prejudice toward acting to learn more.  The best way to get better information is often through action not passing inquiry. Situations always change. It is a fantasy to think that we can always gather enough information to always make the right decision. If action is the best decision now, it is best to act now before the situation changes. We must ask ourselves, "Why wait?" The answer must never be, "For more information." (5.3.1 Speed and Quickness)

Illustration: 

Let us use the example of gathering information about someone with who we are considering a serious relationship. The same rules work whether the relationship is personal or professional.

  1. We make good decisions with limited information by comparing the relative value of making a decision against that of making no decision. If we do not see a great deal of potential value in the relationship, we should generally avoid it.
  2. We make good decisions with limited information by estimating the cost of making the wrong decision. If rejecting the relationship is more costly than accepting it, we must consider that in our decision.  
  3. We make good decisions with limited information by ignoring information that doesn't impact the decision. Even if true, most past behavior in other relationships, good or bad, will have little impact on our future relationship.
  4. We make good decisions with limited information by weighing information based upon its relative importance to the decision. We must know what is important in the relationship and which information that we have relates most directly to our values.
  5. We make good decisions with limited information by testing information consistency against our situation awareness. Our picture of the person should come from all our information and, especially, from our direct, first-hand experiences. Most information should be consistent with a single picture. We must not fool ourselves, pretending that the general picture tells the story that we want to hear as opposed to the one we need to know.
  6. We make good decisions with limited information by always suspecting that inconsistent information is wrong. Information about a person that seems out-of-character from our first-hand experiences should be immediately suspect rather than immediately believed.
  7. We make good decisions with limited information by balancing the cost of collecting more information against value of quick action.  In some situations, a closer relationship will generate more information than outside research. In others, outside research is a least costly path.
  8. We make good decisions with limited information by having a prejudice toward acting to learn more.  If is always better to say either "Yes" or "No" to the relationship than have it linger in limbo. Either path allows us to move forward, while making no decision leaves us stuck.

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