Review

The economic crisis has inspired a lot of thinking about thinking. The recession has called into question the processes by which businesses manage risks. This seems to call for a sort of ‘return to judgement’ where companies are run by leaders that can challenge institutionalised approaches, but the judgment of leaders has also been subject to serious doubt during the last few years. This all heaps unprecedented significance on the question: how can we know if we are making the right decisions?

Colonel Richard Kemp commanded British Forces in Afghanistan. He opened The Risk Summit with a talk about great decisions that were made in the face of massive resistance. He asked what qualities people must have to make the right call despite fierce opposition, when the stakes are as high as to influence the outcome of a war. Lord Philip Gould pointed out later in the day that decisions must be judged in the context of time – which raised the question: were the decisions that Colonel Kemp spoke about actually good at the time, or only afterwards? Interestingly though, Kemp didn’t focus primarily on whether the decisions in question were objectively good or not. He was interested in the mind of a person that is making a decision, and also on its awareness of itself. He knows himself, and this is critical if he is to make the right choices. He knows, for example, that if he thinks for too long about what is at stake he can become paralysed, delaying for too long or becoming too risk-averse to make a risky call that needs to be made.

Indeed, interwoven through the day’s discussions was a fascinating stream of ideas about how good decision-makers think, and about understanding our own minds in order to make the right choices. Dan Gardner, a journalist and author, told a story about a visit to an African slum, where he had his wallet stolen. The wallet had a photo of his kids in it, and this disturbed him, so he wandered the slum looking for it, by himself, late at night. He realised the next day that this was alarmingly stupid, because he had put himself in danger for no good reason. He talked about the importance of understanding the inherently irrational responses that our brains can generate, in order to override them and make better decisions.

Hamish Taylor, who was Chief Executive of Eurostar and managed brands at places like P&G, talked about how we generally think in terms of only what’s familiar to us, so we limit the approaches and expertise that we can bring to problems. This is intuitive enough, but he has some fantastic examples of companies that came up with hugely successful solutions when they looked beyond the environment that was familiar to them, and so overcame a natural tendency to think in narrow terms. Hamish pointed to self-awareness as a means to overcome our propensity to self-limit and find new approaches to manage risk.

Peter Schwartz, who pioneered and ran scenario planning at Royal Dutch Shell for many years, led a session at the end of the day with Lord Browne of Madingley, former CEO of BP. Scenario planning is about building a robust process around how a company deals with the risk, but thoughts turned to the mind behind a great decision as they discussed a choice which Peter held to be one of the greatest of Lord Browne’s career. Interestingly, like Colonel Kemp’s, Lord Browne’s resolution to go public on the oil industry’s role in climate change went against strong opposition at the time. He and Peter felt that people are more likely to be able to make successful choices, as this turned out to be, if they know their own fallibility but also their strengths so they can retain self-belief in the face of others’ doubts.

Lord Gould pointed out that no decision can be understood autonomously. Colonel Kemp talked about his decision in reference to a list of choices made by other people dating back through history. The decisions that accumulate to build the portrait of a leader, as Lord Gould beautifully put it, are all influenced by previous leaders’ choices in a complex flow of context. In that sense perhaps every decision continues to have an effect on events through time, by its impact on future choices.

The extent of a decision’s greatness (or not) will therefore never be finally decided. In that case, the best thing for it is to focus not on trying to know whether a decision is objectively good – as this will only be settled by time – but on trying to know that our minds are in the right state when we make a call. Obvious maybe, but it seems in some cases we forget to challenge our own thinking, whether through hubris or excessive faith in long-standing systems. There is nothing like a recession to shake both of those.