Good outcomes are the result of three factors: Quality of the decision, quality of the execution, and chance.    Quality of a decision comes down to a correct assessment of the ability to execute and the element of chance (which includes risk).  Quality of execution similarly is strongly related to chance, as executing without regard to risk is foolish.

Over the past decade or two the world’s business leaders have been obsessed with execution.  Here is a typical list from Amazon that shows a strong focus on execution as strategy. A similar list of books on risk is telling.  The focus here is more tactical and technical.  Risk apparently is the domain of geeks, not general managers.

And who was focusing on decision making?  Again a simplistic list from an Amazon search is revealing: almost all the books are on the psychology of individual decision making.  Few titles on collaborative decision making, or improving businesses to make better decisions. Put simply: why has there been so little focus on decision making that marries execution and chance for better business outcomes.

The current economic crisis is immensely complex and flip summaries will not resolve it.  However, it is clear that decision making in business, government oversight, and personal behavior has been found wanting.

- A finely tuned system that executes well, when all is well, will not do in dire times — our banking system is Exhibit A.
- Risk models that model economic times when there was little risk, will not tell us about the dangers the future inevitably holds– our housing and mortgage industries are Exhibit B.
- Business leaders whose rewards are reaped in the short term, will not make good decisions for shareholders and households that plan to reap their rewards in the long-term– our current stock markets are Exhibit C.
- Government that aims to regulate the interest of all market participants while clearly sitting in the pocket of some stakeholders earns the trust of no one– our crisis of confidence now is Exhibit D.
- People who have become only consumers, and whose life-style is borrowed with abandon, one day will have to return to the values of that People–we are almost all, unfortunately, Exhibit E.

Decisions.  We all face decisions.  Hopefully next time they will be better–decisions that acknowledge the importance of risk, and decisions that take into account our ability to execute.