To what extent do decision skills matter in real live? Do these skills actually lead to better decision outcomes and fewer unpleasant life events?

Or, more specifically: do people who perform better on hypothetical decision tasks also make better real-world decisions, to the extent that they experience better outcomes over the course of their lives?

Let’s take a step back. Based on all the different theories of what counts as a “rational” choice, we know that some people perform better in the kinds of choices that are typically presented in research studies. There are people, for example, who are less affected than others by the way information is presented to them (in other words, they are better able to resist framing effects). Or, while most people are overconfident most of the time, some people actually have a pretty accurate level of confidence into their own judgments. There are also people who are better able to abandon a bad plan that involves sunk costs, while others are more prone to keep throwing good money after bad. We also know that these decision skills are related to other cognitive abilities, and that they can be taught and improved with explicit instructions and practice. (Check out the list of references below for just a sample from a large body of research.)

The question is though: do people who perform better on those sorts of tasks also make better real-world decisions? And most importantly, can those better decisions be measured by better outcomes? Are “skillful” decision-makers, as defined by those measures, perhaps better able to avoid bad life events?

Apparently, the answer is a robust YES, across different ways of measuring the quality of decisions and the quality of decision outcomes.

For example, in one study, the researchers gave people hypothetical tasks to measure their decision skills. The test they used is called A-DMC, for Adult Decision Making Competence, and it measures skills such as resistance to framing effects, ability to disregard sunk costs, over- and under-confidence, or the ability to process complex information in a decision.

The researchers then asked people about a variety of stressful life events that could result from poorly made decisions. The events ranged from serious (declaring bankruptcy, being diagnosed with Type 2 diabetes) to minor (getting blisters from sunburn, throwing out groceries you bought because they went bad). Other examples of stressful life events included missing a flight, getting kicked out of a bar, having your driver’s license revoked, or having spent a night in a jail cell.

It turned out that people who performed better in hypothetical decision tasks (as seen in high A-DMC scores) were indeed less likely to have experienced such negative life events.

Other research has also linked performance on decision-making competence tasks to better real-life outcomes, such as fewer suspensions among students.

It is important to note that not everyone is dealt the same hand when it comes to avoiding stressful life events. For example, people from disadvantaged socio-economic backgrounds are exposed to more negative life events. Also, poor decision outcomes are more common among younger people. However, the relationship between decision-making competence and better decision outcomes was still significant even after the researchers controlled their analysis for socio-economic status and age.

Granted, even the soundest decision-making processes cannot guarantee good outcomes. Given all the uncertainties in life, unpleasant surprises are often inevitable, even to skilled decision makers. However, what these studies confirm is that across time, people, and decisions, good decision processes predict good decision outcomes on average.

After knowing this, it bears repeating: decision-making competence can be taught and improved. Several independent research groups across different countries, using different types of interventions at schools, have shown clear improvements in decision skills as a result of targeted decision education.

by Ursina Teuscher (PhD), at Teuscher Decision Coaching, Portland OR

Selected References:
Blais, A.-R., Thompson, M. M., & Baranski, J. V. (2005). Individual differences in decision processing and confidence judgments in comparative judgment tasks: The role of cognitive styles. Personality and Individual Differences, 38(7), 1701–1713.
Brady, S. S., & Matthews, K. A. (2002). The influence of socioeconomic status and ethnicity on adolescents’ exposure to stressful life events. Journal of Pediatric Psychology, 27(7), 575–583.
Bruine de Bruin, W., Parker, A. M., & Fischhoff, B. (2007). Individual differences in adult decision-making competence. Journal of Personality and Social Psychology, 92(5), 938–956.
Del Missier, F., Mäntylä, T., Hansson, P., Bruine de Bruin, W., Parker, A. M., & Nilsson, L.-G. (2013). The multifold relationship between memory and decision making: An individual-differences study. Journal of Experimental Psychology: Learning, Memory, and Cognition, 39(5), 1344–1364.
Jacobson, D., Parker, A., Spetzler, C., Bruine de Bruin, W., Hollenbeck, K., Heckerman, D., & Fischhoff, B. (2012). Improved learning in U.S. history and decision competence with decision-focused curriculum. PloS One, 7(9), e45775.
Levin, I. P., Gaeth, G. J., Schreiber, J., & Lauriola, M. (2002). A New Look at Framing Effects: Distribution of Effect Sizes, Individual Differences, and Independence of Types of Effects. Organizational Behavior and Human Decision Processes, 88(1), 411–429.
Lui, V. W. C., Lam, L. C. W., Luk, D. N. Y., Chiu, H. F. K., & Appelbaum, P. S. (2010). Neuropsychological performance predicts decision-making abilities in Chinese older persons with mild or very mild dementia. East Asian Archives of Psychiatry, 20(3), 116–122.
Marin, L. M., & Halpern, D. F. (2011). Pedagogy for developing critical thinking in adolescents: Explicit instruction produces greatest gains. Thinking Skills and Creativity, 6(1), 1–13.
Parker, A. M., Bruine de Bruin, W., & Fischhoff, B. (2015). Negative decision outcomes are more common among people with lower decision-making competence: an item-level analysis of the Decision Outcome Inventory (DOI). Cognition, 6, 363.
Parker, A. M., de Bruin, W. B., & Fischhoff, B. (2007). Maximizers versus satisficers: Decision-making styles, competence, and outcomes. Judgment and Decision Making, 2(6), 342–350.
Reyna, V. F., & Farley, F. (2006). Risk and Rationality in Adolescent Decision Making Implications for Theory, Practice, and Public Policy. Psychological Science in the Public Interest, 7(1), 1–44.
Stanovich, K. E. (1999). Who Is Rational?: Studies of Individual Differences in Reasoning. Psychology Press.
Stanovich, K. E., Grunewald, M., & West, R. F. (2003). Cost–benefit reasoning in students with multiple secondary school suspensions. Personality and Individual Differences, 35(5), 1061–1072.
Stanovich, K. E., & West, R. F. (2008). On the relative independence of thinking biases and cognitive ability. Journal of Personality and Social Psychology, 94(4), 672–695.
Teuscher, U. (2003). Evaluation of a Decision Training Program for Vocational Guidance. International Journal for Educational and Vocational Guidance, 3(3), 177–192.