The first step in making a decision is to frame the question, but it is also where you can first go wrong. The way a problem is framed can profoundly influence the subsequent choices we make. People tend to accept the frame they are given; they seldom stop to reframe it in their own words.
As an example, whether outcomes are described as gains or losses has been found to have a big effect on people's choices. In one experiment, people were asked to express their preferences among different programs impacting community jobs. They were told that due to a factory closing 600 jobs were about to be lost. However, if program A is adopted, 200 jobs will be saved. On the other hand, if program B is adopted, there is a 1/3 probability that 600 jobs will be saved and a 2/3 probability that none of the 600 jobs will be saved. Most people preferred program A. Another group was given a rephrasing of the choice. If program C is adopted, they were told, 400 people will lose their jobs. If program D is adopted, there is a 1/3 probability that nobody will lose their job and a 2/3 probability that 600 will lose their job. This group mainly favored program D.
Similar effects occur in less-controlled, everyday circumstances. For example, it sounds more positive to say that a new product launch has a "1-in-10 chance of succeeding" compared to the mathematically equivalent statement that it has a "90% chance of failing." If people are rational, they should make the same choice in every situation in which the outcomes are identical. It shouldn't matter whether those outcomes are described as "gains" or "losses" or "successes" or "failures." But, the choice establishes very different frames, and decisions may differ because of it.
Another example, described by John Hammond and Ralph Keeney, involves automobile insurance laws voted on in New Jersey and Pennsylvania. Each state gave voters a new option: By accepting a limited right to sue they could lower their insurance premiums. New Jersey framed the initiative by automatically giving drivers the limited right to sue unless they specified otherwise. Pennsylvania framed it by giving drivers the full right to sue unless they specified otherwise. Both measures passed, and in both cases large majorities of drivers defaulted to the status quo. But, because of the way Pennsylvania framed the choice, drivers in that state failed to gain about $200 million in expected insurance savings.
- Ask yourself if you are working on the real problem.
- Try posing problems in a neutral way that combines gains and losses or embraces different reference points.
- Look at the problem from other perspectives. For example, reverse the context. If you are the seller, how would you see things if you were the buyer?
- Choose a frame that captures all of what's important. For example, ask, "What's the total cost of ownership?" not "What's the price?"
- Choose a high-level perspective for framing. For example, looking only at project-by-project risk may result in a portfolio of overly conservative projects.