[MUSIC] Okay, so we appear to use two systems to think and make decisions. First, an unconscious system one or slow in conscious, system two. So which is better? If you're going to decide about something at work, or in any other setting, is it better to go with a gut feel, unconscious process of system one or the slow conscious and effortful, system two? Well, on the surface, it sounds as though system one is going to be better. After all, with system one, you don't have to make an effort. You can process lots of information simultaneously. And you can make your decision by just going with what feels right. The problem is that system one can also lead to mistakes. Here are some examples. If it takes 5 machines, 5 minutes to make 5 widgets, how long would it take 100 machines to make 100 widgets? Is the answer 100 minutes or 5 minutes? What is your immediate gut feel of system one answer? I expect, it's 100 minutes. If it takes 5 machines, 5 minutes, to make 5 widgets, it makes sense that it would take 100 minutes, for 100 machines, to make 100 widgets. But if you think it through, using your conscious system two thinking process, you'll realize that the correct answer is actually five minutes. Your intuition, your gut feel, your unconscious system one, is wrong here. Because it is processing the information in a shallow way rather than in a deeper and more rational way. Let's take another example. A mother has six children. These children could be boys or girls, of course. And the probability of having a boy is about the same as the probability of having a girl. So here are three possible sequences of the gender of the mother's children. The first is boy, boy, boy, girl, girl, girl. The second is boy, boy, boy, boy, boy, boy. And the third, girl, boy, girl, girl, boy, girl. What is your gut feel? Are all three of these equally likely? Are some more likely than others? Well, many people instantly think that having six boys in a row is less likely than having a girl, followed by a boy, then two girls, and a boy and finally another girl. This is what system one tells us. But system one is wrong again. It's true that when someone has six children, they're far more likely to have a mixture of boys and girls and a sequence of boys and girls that seems quite random. But the exact sequence of boys and girls shown here in the third sequence is no more or less likely than having six boys, all six girls, all three boys followed by three girls or any other sequence. This is because these events are independent. The probability of having a boy is not influenced by whether the previous child was a boy or a girl. It's 50/50 whether or not the previous child was a boy or a girl. So once again, system one has let us down. It's given us the wrong answer. At work, when we're often under time pressure and feeling rushed, it's all too easy to fall back on system one thinking in decision-making. Now, it's important to point out that making decisions by gut feel isn't always bad. If you have a lot of experience and expertise in some area, your system one decisions will often be good ones. For example, expert chess players can get a feel for the best move in a game, and that feel is very often very helpful. What's more, there are times when you can't use system two thinking. If someone lunges at your face quite out of the blue, you have to decide how to respond instantly in order to avoid injury. Nevertheless, in many situations we can override system one choice. And it does make sense to do so. As a rule of thumb, if a decision is important at work, it usually makes sense, if you have the time, first of all, to make sure that you are clear about what you want to achieve when you make the decision. What's your goal? What's your aim here? Secondly, consider whether there are any options that you haven't yet thought of. It's often very useful to have a chat with others about the problem, as they may have come up with options that haven't occurred to you. Then, thirdly, calmly and consciously weigh out your options in the light of what you're trying to achieve. In this topic we've looked at leadership and then we've looked at decision making. In the final section, we will bring these two areas together and look at them in a particular context. Imagine that you are in a leadership position in an organization and you are considering whether to expand your business of operation into another country. Your organization is successful, but it might be even more successful if you open a branch in a neighboring country. How do you go about things? Well, if someone is an autocratic leader, she may decide to take her own unilateral decision about this. And if she tends to use system one rather than system two thought, her decision about whether or not to expand might well be based on gut feel and instinct. A leader such as this might make a gut feel choice to expand into another country and then just tell everyone what to do in order to make it happen. However, a democratic leader who tends to use system two thinking might well decide in a very different way, she may consult others about the best approach. And base the choice on the weight of opinions of all rather than just her own. Because she is thinking things through consciously, she may look for some helpful way of thinking about the consequences of opening the operation in another country. She may identify Pestle analysis, populate all for establishing the macro environment in which an organization is operating or might operate. Let's have a look at Pestle. Each of the letters in Pestle, P-E-S-T-L-E, stands for a particular factor relevant to the environment in which organizations up rate. P is for the Political environment. E stands for the Economic environment. S stands for Sociocultural. T for Technological. L for Legal and E for Environmental. So the idea is that if you are considering whether to expand your organization into another country, you would consider, firstly, the political environment there. For example, how politically stable is the country? The economic environment. What is the inflation rate? And what is the rate of economic growth? Then, the sociocultural environment, for example, what is the age and educational background of the people in the country and who are you likely to be able to recruit? The technological environment is the development of the Internet in the country sufficient for your needs. Then, the legal environment. For example, what legal hurdles need to be dealt with before you can open your business in this other country? And lastly, other environmental factors such as human rights, the need for a diverse workforce, collaborating on environmental issues, deciding whether or not to expand an organization into another country is a big decision. One that could make or break that organization. So the leadership styles of those involved, the way that key people make choices or whether or not conscious and extensive use is made of helpful frameworks such as Pestle analysis. Unlikely to have a major impact on what happens and how successfully things turn out for everyone concerned. Thank you for watching this module. And I very much hope that you'll find it not only interesting now, but practically useful in the future. [MUSIC]
