Part 2: The Mind's Shortcuts: Harnessing Cognitive Models for Better Decisions

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Building on our previous discussion of rational decision-making frameworks, let's explore how our minds create and use cognitive models to navigate complex choices. Consider two pharmaceutical companies with similar strategic decisions about developing new drug candidates. Company A relied solely on traditional financial metrics, while Company B incorporated sophisticated mental models considering multiple interconnected factors. This scenario exemplifies what researchers describe as the difference between single-strategy and adaptive decision-making approaches.

The Power of Mental Models in Organizational Decision-Making

Recent research by Kahn and Daw (2025) reveals that our brains use multiple decision-making systems simultaneously. Their study demonstrates how the brain dynamically adjusts between different approaches based on their effectiveness in different situations, a finding that has profound implications for organizational decision-making.

Understanding Our Brain's Decision Toolkit

Viale et al. (2023) and Kahn and Daw (2025) identify three key mechanisms:

1. Model-Based Planning

   
   

   • Detailed evaluation of potential outcomes based on structured analysis

   • Step-by-step analysis of consequences and potential pathways

   • Flexible but computationally intensive

     
     

2. Successor Representation (SR)

   
   

   • Efficient prediction of future outcomes

   • Balance between flexibility and computational cost

   • Particularly effective in stable environments

     
     

3. Quick Response Systems

   
   

   • Rapid decision-making based on embodied experience

   • Most efficient but least flexible

   • Best suited for routine decisions

Making This Work in Organizations

Strategic Framework Implementation:

1. Decision Classification

   
   

   • Identify and categorize decision types by complexity and frequency

   • Match decision approaches to environmental stability

   • Create clear protocols for different decision categories

   • Implement systematic review processes

     
     

2. Model Development

   
   

   • Build comprehensive mental models for key decision areas

   • Include feedback mechanisms for continuous refinement

   • Integrate multiple perspectives and data sources

   • Create dynamic adjustment capabilities

     
     

3. Systematic Review Process

   
   

   • Regular evaluation of decision outcomes against objectives

   • Adjustment of models based on environmental feedback

   • Documentation of lessons learned and best practices

Real-World Application

Environmental Awareness

• Monitor and assess decision environment stability

• Recognize significant condition changes

• Adapt models to environmental shifts

Feedback Integration

• Implement robust feedback mechanisms

• Measure both immediate and long-term outcomes

• Adjust strategies based on performance data

Common Pitfalls to Avoid

1. Over-complication

   
   

   • Not every decision requires complex modelling

   • Match model complexity to decision importance

   • Maintain efficiency in routine operations

     
     

2. Rigid Thinking

   
   

   • Avoid single-strategy lock-in

   • Build adaptability into decision models

   • Regular review and update of approaches

     
     

3. Isolation

   
   

   • Incorporate multiple stakeholder perspectives

   • Establish cross-functional collaboration

   • Foster collective intelligence in decision-making

     
     

In our next post : We will delve into the social dimensions of rationality and explore how organizational culture shapes decision-making processes.

Remember: As Pinker (2021) emphasizes, the goal isn't to eliminate uncertainty but to create better frameworks for managing it effectively.

References:

Daw, N. D., Niv, Y., & Dayan, P. (2005). Uncertainty-based competition between prefrontal and dorsolateral striatal systems for behavioral control. Nature Neuroscience, 8(12), 1704-1711. https://doi.org/10.1038/nn1560

Kahn, A. E., & Daw, N. D. (2025). Humans rationally balance detailed and temporally abstract world models. Communications Psychology, 3(1), 1-11. https://doi.org/10.1038/s44271-024-00169-3

Pinker, S. (2021). Rationality: What It Is, Why It Seems Scarce, Why It Matters. Viking Press.

Viale, R. (2021). Embodying Bounded Rationality: From Embodied Bounded Rationality to Embodied Rationality. Frontiers in Psychology, 12, 710607. https://doi.org/10.3389/fpsyg.2021.710607

Viale, R., Gallagher, S., & Gallese, V. (2023). Bounded rationality, enactive problem solving, and the neuroscience of social interaction. Frontiers in Psychology, 14, 1152866. https://doi.org/10.3389/fpsyg.2023.1152866