Why Smart Leaders Make Bad Calls—and How to Avoid Them

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Hi, I'm Susan Drum, and welcome to the Enlightened Executive, where your personal evolution sparks your leadership evolution. Each episode we feature groundbreaking techniques and strategies to help you get the edge in personal and leadership effectiveness. This episode is brought to you by Meritage Leadership. At Meritage, we strengthen leaders and empower teams to achieve high performance. Go to meritageleadership.com to learn more. Are you curious about your development path to enlightened leadership? Take our free 5 minute quiz@susandrum.com to discover your superpower and the roadblocks that could get in your way of effective leadership. Today we're focusing on how not only to make better and faster decisions, but also to avoid making slow and bad decisions. And I'm grateful to introduce my guest, Dr. Alan Bernard. Dr. Bernard is one of the world's leading decision scientists and theory of constraint experts. He is the CEO of GoldRat Research Labs, a company he co founded in 2008 with Eli Goldratt. Allen is passionate about applying science to developing new methods to help people make better decisions and move them closer to their goals. And his clients include Microsoft, Cargill, Nike, Cisco, SAP, Intel, Penguin, Random House, and Habitat for Humanity. So welcome, Allan.

Thank you so much, Susan.

I am excited to talk to you about, yes, making better decisions and, yes, not making the wrong decision. So let's first start out. How did you get into this, you know, realm, this focus on decision making and your connection with Eli, who wrote a very famous book called the Goal and that connection.

Yeah, I grew up in South Africa and grew up, you know, without much resources. I was very close to my granddad. We had a. A farm. And he was the one that encouraged me to read biographies and autobiographies about successful people. And he gave me this book called the Maris who's who when I was 10 years old. I don't know if you've ever seen the book, but it basically contains a listing of short biographies of the most successful people in every field. And he asked me, tell me what you notice about these successful people. And I said to him, I noticed that none of them had ideal starting conditions. You know, many of them suffered neglect and even abuse. Bullied, they don't always have great environments to work in, maybe poverty. And many of them suffered some kind of disorder, learning disorder or disability even. And so I said, my conclusion is that your starting conditions do make things a little bit easier or more difficult, but it doesn't matter in the end. What really matters is your basic assumptions and beliefs about what's possible. And when I kind of looked further into that. I realized that's what informs our decision making. So ultimately we get judged by the quality and the speed of our decisions and that's what determines whether we successful in any field. You know, yes, we good genes help, luck helps. Right. But those are not in your control. The things that are in your control is hard work. Doesn't matter what you're doing, you have to work hard. It takes a lot of effort. And secondly is good decisions or at least avoiding really bad ones. And that's. I decided to make that. My life goal is trying to understand why good people make an often repeat bad decisions and using that research to develop methods and apps to help them make better, faster decisions. When it really, really matters.

Yes. Yeah. So what's the punchline there? Why do people make bad decisions?

It's like an anti climatic punchline. Good people make bad decisions for very good reasons. So if you think about, if you just classified what would be a really bad decision is there's this famous equation, I think it was popularized by Jack Cranfield that said E plus R equal O. It's a very simple way of understanding any decision. Event plus response equal outcome. So what can go wrong? There's an event that happens that actually is out of our control, has nothing to do with us, but it causes us to stress and panic and overreact or underreact. So first is knowing what matters. When should I make a decision and when not is kind of important. The R is our response. But the mistake that we make there is we go into automatic mode and then we react rather than respond. And when we react, we often over or under react. And then the O part is the outcome. And the mistake that we often make there is in the moment we are not actually thinking about what's the outcome I really want because that's very helpful in understanding what's the best possible response. Right. So getting back to the question about so why do good people make bad decisions? Is we often over or under react. And there's two main categories of reasons for that. So if you think about I'm overweight, I go on a crash diet, right. Versus keep on eating what I want. That crash diet, if it worked, great. But why would I do that? Is some kind of exaggerated frustration with a status quo or an exaggerated expectation of the future can cause me to overreact. And that's true both in our business. And a competitor comes in, they cut prices and we overreact and we try to match them and we trigger a price War, which is a race to the bottom, right. And it's because of an exaggerated frustration or expectation that causes us to overreact on the other side, why do we procrastinate, which is underreact. And that normally is a much deeper reason, but it relates to an exaggerated fear of losing the positives associated with the status quo, or an exaggerated fear of the effort or the risk of making the change. So if I'm trying to understand why is somebody struggling to quit a bad habit? Right. You think about quit a bad habit. Don't each of these options have got pros and cons, right?

Yeah.

So what would be the pros of not quitting my bad habit is that in my mind I might say, well, it helps me to cope with stress. That's the assumption that's really blocking me is this exaggerated fear of losing the ability to cope with stress, especially if I'm in a high stress environment.

Yeah.

The other exaggerated fear would be the fear of the effort or the risk of actually quitting. Right. Maybe I've tried in the past and I failed. So the solution to the first one is to have a more rational way of really looking at the cons of not changing and the pros of changing and make sure I'm not exaggerating those, but also not underestimating those. The way to overcome procrastination is to ask yourself a simple question. What are you scared of losing or what are you scared of gaining? Is there not another way? So I can say, well, yes, I understand that you don't like my mentor, Dr. Ellie Goldratt, smoked. Right. His whole life and then he ended up tragically passing away because of lung cancer. It wasn't because he was ignorant, Right. Very well educated guy, but somehow he associated smoking with his genius.

Yeah, right.

That state of mind that it put him into. And once, you know, I explored that with him because I was challenging him all the time, like, dude, like, why wouldn't you just stop? Right?

Yeah.

And he said it's. It's because he hasn't found another way of putting him into that state of mind.

So he.

Yeah, exactly. Associated that directly with the genius. And you often find that with highly creative people, right. It would be smoking weed or meditation. There's something that they associate and if you see them not changing their behavior, it's because of a fear of losing, that part. So a very simple technique is to ask them directly, what are you scared of losing? And what can you add to your solution so you don't have to give up that.

Yeah, yeah. Is there another way in your response? I notice the powerful impact of our emotions on our decision. You talked about making decisions out of frustration. You talked about making decisions out of fear.

Yeah.

Let's talk a little bit about what you've seen in terms of the emotional response and how much leverage it has. Because I know some people are like, oh, if we could just get rid of emotions in business, everything would go better. But the reality is we have them. And. Yeah. And so how do we work with that?

And not only we have them, but when you think about it from an evolutionary point of view, there must have been a benefit to evolve emotions. Right?

Yeah.

The one thing that we have that AI doesn't yet have. Right. But it seems from early indications that AI is busy evolving it.

Yeah.

And. And there must be an evolution reason for it. So if you think about the pleasure part of the emotion, the positive emotion. Right. If you experience a positive emotion, that energizes you and we need energy to do the hard work. So I can see that there's a positive reason to develop or evolve a positive emotion. The question is, what would be the evolutionary reason for developing a negative emotion? Because it clearly has a downside. It can get you into a virtuous spiral of depression, even suicidal thoughts. But if you can limit it, and I think most of the most successful people in the world, their key characteristic is not just the genius, the persistence, but it's the ability to control their emotions on both sides. Right. So if you can control your negative emotion enough to say, I need to feel bad about this. Right. I really messed this up and it hurt me and it hurt a lot of people, and I should experience some level of blame and shame, but not too much. Right. So it's almost like thinking about that as a kind of an inverse U shape where the middle is enough positive emotion, enough negative emotion on the left hand side is too little, and on the right hand side is much.

So I totally agree with you.

You totally underestimate the impact that emotions have. And they serve a very specific solution. Right. If you think about the world as very complex and very uncertain, if I go into cognition mode, what Daniel Kahneman Called System 2. Right. Slow and deliberate way of making decisions, it very quickly gets completely overwhelming. I will never have all the information. I will never be able to predict accurately what will happen. What I can do is if I'm attuned to my emotions and I can control it, I don't allow it to run away with me, positive or negative, making decisions Based on how something makes me feel is actually a brilliant way of making decisions in a very complex world.

Exactly. So decisions. I just want to add some key points there because done a lot of work around understanding people's emotions that they overuse or underuse. And we actually have an assessment that shows you when you're dealing with stress or conflict situations, what's the information you dial up and what's the information you dial down? And it's looking at again these kind of weighted of emotions and looking at, well, we've got two positive emotions which is joy and love. But then we've got five what we call depleting emotions. Anxiety, sadness, fear, anger. Right. And in each of these there's a range that you want to be able to feel this emotion because it's got important information for you. Right.

And qualities.

Yes, yes. But you don't want to over, you know, there's a range. So it's about 10%. We look for on average 10 to 12% between all of these negative emotions. And we can see are you over leveraging anger or are you under leveraging anxiety? And there's a problem with either one of those. So I love your description of like the bell curve because that's essentially what where the bell curve is is at this 10% level.

Yeah.

And even the same is true with, believe it or not, joy and love. You want to be between 50 and 60% of, you know, the, the comparison to others of where you are in that range. Because overusing joy and love, believe it or not, is a little bit like putting a blinder on to the situation that will then cause you to potentially make some bad decisions.

So, so mine is not as quantitative as yours, it's more qualitative because it's hard to put quantities to it. But it's, we again trust our instinct and our emotions. We, we have a very good intuitive sense about what's too much, what's too little or what's enough. So imagine a graph where the horizontal axis, the amount of shame that I feel, right. And on the left hand side is zero and on the right hand side is 100%. And then vertical axis is the goal I'm trying to achieve, whether it's wealth, health, happiness. Right. So you have this little inverse U shape and what you can ask somebody is to make an assessment where they are. If they saying it's I'm feeling this amount of shame. In their mind it's say 20%. You think, you ask them, do you think that's too little enough or too much. If they say too little and say go, you should spend a couple of more weeks feeling that. Right. Because you can't learn the lesson. Most people will instinctively tell you probably I'm on the way, the right hand side. I've been stuck in this demotion for too long. Neither am I getting any, any value or others are getting any value. So it's a very simple qualitative way of just saying like where are you direct? Should I move to right? Yeah, way on the right. Which is where most people are just like go back without jumping all the way back. You should have some like you say some level. Whether it's 12% or there's definitely a level of too little and you should just be able to control your emotions into that sweet zone of good enough. The Goldilocks zone.

Yeah, yeah, yeah. I was always fascinated by, you know, the example around let's say anger and that there's a gift and there's information in anger and there's a gift and the information is there's a boundary that's been crossed, right. Or a value that's been dishonored. And the gift is the ability to take action to re establish the boundary if that's needed. But, but you do like you said, want to be you. If you over experience your anger, then you're setting too strict of boundaries and you're becoming kind of like this almost like Teflo, right. Everything has to be controlled and it has to be upsetting me again and I need to like keep creating these boundaries and like, well that's difficult to work with as a leader and, and to let not feeling your anger then it's sort of like you run the risk of being a doormat, people walking on you, people violating things that you as a leader need to stand up and, and toe the line and say no, this is the boundary.

Right.

And that's where I see often people not recognizing where there can actually be benefit in like a depleting emotion, like anger.

Yeah. I did a post in fact today with one of the videos that Alex or Moji shared with me. It's, he called it the two words that changed everything for him. He was stuck in this vicious cycle of poverty and depression etc and then he discovered these two words, my fault, right? And it's like it's me and I, I like that idea. But I put a warning to that just to say that there's many things that happen to us that are really not your fault and that forcing somebody to take full responsibility to what happened to them psychologically can be extremely damaging. You know, it's like this person passed away or I got sexually abused. Is it really my fault? No, it's not.

Yeah.

It's just bad things happen to good people all the time. My take on it is slightly more nuanced and I hope better and not just some, but all conditions. It's to say it's not my fault, but it is my problem. Right. I. I have to use what happened to me. It triggered a negative emotion of sadness and anger. And that can give me energy and I need energy to take action. So that's where Alex also needs. Thing is, he said it, it helped him because accepting it's my fault, not my mother or my, my father or my boss or Trump or whoever gave him the energy and realizing that there is no other option, there's no good that comes from blaming others. Yeah, Right. There's more good that comes from blaming myself. But I do think that there's a level of too much we shouldn't take on all the responsibility. That can be really, really counterproductive.

Right, right. Yeah. This, it's interesting because there's patterns that we have in terms of where we look to assign responsibility. So typically a person, again, this assessment is pretty wild because it'll show are you more likely to blame yourself? Are you more likely to blame someone else? When something happens, can you actually find the, the sweet spot where, where you can take responsibility? But also. Except that sometimes, like you said, I mean, you just go to what Viktor Frankl's incredible book and talking about terrible things can happen, but what's in my control is the meaning I give it and the decisions I make from there.

Yeah. I think that our research, like many other research studies, have shown it is really not what happens to you in life, meaning that you give to what happens to you that makes all the difference.

Yeah. Yeah. Now you've got some interesting. Is it software that helps in decision making? Can you tell us a little bit about that?

Yeah. So I ended up doing my PhD to try to see is there a generic process that we can go through that will help us to avoid these five common decision mistakes that we all make. So first one is we have some kind of problem opportunity and we pay attention to things that we shouldn't, and we don't pay attention to the ones that we should. So step one should really be, what is this thing that has happened, the event that happened that's putting pressure on me to make a decision and why it's important to me and then getting a reflection back to say, check what you've written. Is it really important enough for you to actually stop procrastinating and make a decision? Step two is having to address the mistake where we jump from the problem to a solution rather than knowing and seeing that the solution is one side of a conflict. We always have two options. We don't have three options or infinite options. We always have just two options. Do something, don't do something, or do something, do something else. Each one of these options have got pros and cons. And that's what makes solving problems so difficult, is not finding the solution, it's finding a solution that has mostly pros and non cons. So that's what step three is about, is problem solving is finding a solution to a problem. Innovation is finding a solution to a problem without trade offs. So if I can find a way to resolve that conflict, that gives me both pros with none of the cons, that is a true innovation. And that's what step three is about. Step four says, look, we all have got a lot of experience that can warn us why things wouldn't work. So the mistake that we make is when somebody tells us, yes, but we say, stop being so negative, you never support me. And we ignore their valid reservations. We should say, listen, they care enough about us to tell us what can go wrong. But don't leave it like that. Ask them what's the yes, and what must I add to my innovation, my breakthrough to address your concern? And then step five is just do an experiment. We actually don't learn from experience. We learn from experiments. We have a mechanism to learn from experiments, which is fast feedback, right? You touch a hot stove plate, you get instant feedback and learn. But in reality, the feedback can be very distant from the cause. Imagine that same hot stovepipe, if you touched it and it burned you a day later or a week later, it will be impossible for you. So step five is just do good experiments, find a fast way of getting feedback. I call it doing minimally viable experiments rather than minimally viable products. Which is I'm so clear about the assumption. I want to check what's the simplest experiment to go and check that if I did this, will customers really buy more? If I do this, can I really produce more, more reliably, etc. So my PhD was developing this process. I ended up calling it the pro con cloud out of respect for the two giants on whose shoulders I stood, which is Benjamin Franklin that developed the procon list in 1770. And in my own mentor, Dr. Ellie Goldwater, developed the evaporating cloud. I basically said, both of these have benefits, but they have limitations. How can I create a process out of them that also address the limitations? And then once I tested it in my PhD, I realized, okay, this process works. And now the next constraint is how long it takes you to go through it. Can we develop an app? And I developed an app called Harmony. Decision maker can download it for free on all the app stores. And the last constraint that we've worked on is that we all have biases and blind spots.

Yep.

So even if I. If you go through this process and it's much more robust to make sure you really looking at it from all angles, you're avoiding these five mistakes, you can still have problems. So the question is, why can't we use AI to help us along that journey? So in our latest version of the of the app, we call it AI do it for me. You just specify the problem or the decision that you're facing, and you have two options. You can do the work and AI can check it to say, you forgot about this. You ignore these cons or you forgot these pros, or you didn't consider this possible innovation or the fun way, as you say, do it for me, and it will do. Susan, that full analysis, all five steps, that might take an expert, you know, like myself, somebody I've trained maybe an hour or two to do, which is still a lot faster than weeks and months to make a decision.

Yeah.

Do it in seconds. Right. And then you can stand back and check and challenge it and partner with the AI. So that's what I'm super, super excited as. As a partners between humans and AI, we are unstoppable. I think we can really solve any problem.

Yeah. That is fascinating. There's so much I want to talk about there. Like first, when you were talking about that step four and discounting the person, you know that says, hey, yes, but this won't work. They're. They're typically. We see pattern enneagram. I do a lot with the enneagram. Right. And so that's typically style six loyal skeptic or troubleshooter. And that is a tool that absolutely highlights the blind spots in each of our thinking. But often in a team setting, that person gets brandished as, you know, like the Debbie Downer. Right. And I'm like, no, but everyone else needs to listen because they have important information and that person needs to learn to how can I give a solution, not just be a naysayer. Right. Like that. But here's what will. Right. And so it sounds like I like your processes. That really accounts for that. So I imagine, you know, somebody with that enneagram type that's going through the system, they're going to be more. Look, they're going to be more hardwired to look at the cons and they're not going to look as much at the pros. So the AI then can give them more of the pros. Right? That's really.

Yeah.

Or if you're like myself, which is type 7 and I'm always looking at the pros. Right. And I might miss some of the cons.

Yeah.

This process can like help you make sure you're getting that. So that's, that's super cool. And sort of understanding what I know to be how leaders typically function and how they can supplement. I do worry though, when you say let AI just do it for you because certainly there's this experience of like, what information is it drawing from? And you have other information that the AI actually doesn't have. Yes, it has some information, but I would like not want to have us as human beings just hand that over to AI. And because, I mean even we just did simple research on a client, we asked it a question and it gave us like really old data, not current data, and we just went with it and didn't double check the sources. Had we double checked the sources, we would have seen that was actually old data. So there are what. What's so interesting about AI is it presents an opinion as fact. And unlike when we did Google searching, there was like several different things you could look at, right. Or, but this is like presented as fact. And if you don't double check it.

So well, it's no different. If you think about. We have two systems of thinking, right. What said System one, System two. System one is fast and automatic. It's intuition and instinct. And system two is more slow and deliberate. It's cognition. Right. When we are making decisions, which is where most of our decisions are made, as in system one, we are also giving only one response and we are highly confident about that response. That's what ChatGPT is doing before the reasoning element was added, right. You basically took an input and it gave you a straight output and wouldn't know the difference between whether that output is good or not. As soon as they added the reasoning, they are forcing it to say, first of all, what is the criteria for good answer?

Yes.

Right. That's an important quality that we should do ourselves. Like what is the outcome that you want. I can only judge a response based on what's the outcome I want. So it's now built into it, it's doing it automatically. But where you are absolutely right is that humans in the loop is still vital because at the end of the day it's not what's the best answer or what's the right answer. There is no right answer in this complex universe. But there are better answers. Which one is better? For me, that helps me take actions that move the needle in a positive way. Right. So for me, I don't see a downside in getting the AI to do it automatically if you are forcing the user to still review every step, but you make it very clear and visible. So that's what I like about my process. It takes every step. It doesn't just show you the innovation, it shows you exactly how it got there.

Yeah.

Every step of the way. And it asks you to check and challenge every step. And if you challenge something in step one, it says, thank you very much, I need to do redo steps 2, 3, 4 and 5. Like 2. We ask the user, tell me, is the status quo still an option? Is doing nothing still an option? You think you still have time because then your conflict is change, no change.

Yeah.

Right. But if status quo is not an option, the AI shouldn't be presenting you with that option. Your input to say, how are you feeling at the moment?

Yeah.

You know, you want to still hang on in this relationship. You think that, you know, or, or no, now it's about getting a divorce or just separating initially. Or it's like, okay, so, so those are. There's critical points where the human intelligence intervention is absolutely critical.

Yeah, absolutely. So what would one thing that you would suggest leaders and entrepreneurs and executives do tomorrow to improve their decision making quality?

Great question. So every decision that we make requires prediction. Right. It will be what there's a prediction of. What's the current positive of my status? What's the current negative of my status quo? There's a prediction about what will be the future positives of this change and the future negatives. We as human beings in this complex world suck at predicting the likely outcome. But most of us actually have really good intuition about predicting the best and worst case and in most really important decisions, that's the only information we need. So a hell yes decision is one where the worst case benefits is still greater than the worst case cost.

I see.

Does it make sense?

Yeah.

So that's the only information I can say to you're an entrepreneur, you're busy making a decision. Just think about the worst case benefit of the options that you have. The worst case cost of those options and one where there's still a multiplication effect. Right. My worst case benefit is two times greater than the worst time. Hell yes. Decision. Go for it.

Yeah.

At the same time, avoid the other extreme where the best case benefit is not much bigger than the best case cost. Right. It's like looking at big upside, small downside. That's what I'm really looking for. That's a hell yes decision. Hell no decision is very small upside, big downside.

Yeah, yeah.

Right. Like having a one night stand falls into that category. How good can it really be? Small upside, but a big downside. I could lose everything, you know?

Yep.

Yep. Oh my God.

That is too funny. Well, where can people learn more about you and your work?

So Dr. Alan Barnard is my social media handles. I have a website Dr. Alan Barnard. All my social media is Dr. Alan Barnard. I have a YouTube channel if they interested to check out. All the apps that we've developed is HarmonyApps.com so that branding of Harmony is that when we face a decision that hangs over us like a dark cloud, it puts us in a state of disharmony within ourselves and with other people. So finding a breakthrough, a real innovation to help us make better, faster decisions gets us back into a status of harmony.

I love it. I love it. Well, thank you so much for joining us. And if you like this episode, you're not going to want to miss my interview with Sherry Jacobs who shows us how setting clear boundaries can actually spark innovation, empower teams and drive high performance. Let's lead the way. Hope you enjoyed today's episode and I'd like to point you to the next important step. Hit the subscribe button to get notified when we release new content. I'll see you on the next episode of the Enlightened Executive.

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