Yes it’s a rather negative title, but unfortunately it’s true – the science and art of decision making is not simple or straightforward. As a result managers make poor decisions, doctors over-diagnose and juries often reach wrong conclusions. Read Daniel Kahneman (Thinking Fast and Slow) if you really want to understand our fallibility.
An example will illustrate the point. Imagine the Board of your company is very, very good at identifying winning and losing projects (I’m being very generous) – they sort out the wheat from the chaff with 95% accuracy. But the Board doesn’t do all the hard work of research, development and fact finding. This up to managers, and in the spirit of optimism let’s say that these managers are very good at identifying a winner – 99% of the projects they bring to the Board are winners. What is the probability that the Board rejects a project as a loser, given that it is in fact a hopeless case? With the excellent skills attributed to the Board and management you might think the chance of getting it wrong is infinitesimal – but it isn’t. If the Board rejects a project there is actually only a one in six chance that it was actually a loser.
It isn’t obvious and certainly not intuitive why this should be the case. Working out the probabilities requires a modest understanding of Bayesian probability – but let’s not go there. You don’t have to take my word for it, just find someone who has abused their neurons sufficiently that they understand this stuff.
The moral of the story is that the smartest groups of people on the planet (doctors, lawyers, corporate executives etc) routinely reach incorrect conclusions. There are two remedies. Learn probability theory (not likely) or be more balanced in the conviction that a decision is right or wrong, and remember – the opposite is generally true also.