Why Do Smart People Make Dumb Decisions?


We say that successful leaders possess good judgment and failed leaders lack it, but what does that really mean?

People have spent years attempting to measure their judgment. Most efforts focus on critical thinking, IQ, or other cognitive abilities, but they ignore other individual differences that influence judgment. More importantly, they fail to answer the question, “Why do smart people make dumb decisions?”

Others focus on personality characteristics or core values and describe how those attributes influence decision-making. Although this approach directs attention to other key determinants of judgment, it does not reflect the fact that both cognitive and non-cognitive attributes influence judgment.

Research shows that about half of a leader’s decisions will fail. This indicates that existing approaches to judgment are missing something, but what? The answer lies in a basic fact of life – everyone makes mistakes. As such, beyond making correct decisions, good judgment also involves reacting appropriately to failed decisions. How a leader reacts to feedback about his or her failed decisions is crucial to correcting mistakes, learning from them, and making better decisions in the future.

Judgment includes (a) cognitive and non-cognitive attributes that impact the pre-decision process, and (b) a crucial post-decision element of reactions to feedback. Using this information, individuals can make better decisions and more quickly recognize and correct mistakes by understanding how they process information, what natural tendencies they rely on before making decisions, and likely reactions to feedback about failed decisions that could undermine their ability to learn from mistakes.

Organizations and individual leaders can benefit from this comprehensive understanding of elements influencing individual decision-making.

Organizations can:

  • Diversify their leadership teams and ensure that individual leaders have the right sources of information to make decisions.
  • Optimize the types of decision-makers they need based on factors such as industry sector or level of organizational maturity.
  • Gauge their overall receptivity to feedback and coaching and customize coaching interventions to improve judgment at the organizational level.

Individual decision-makers can:

  • Develop their judgment by playing to their natural strengths.
  • Carefully monitor other approaches that do not come as naturally to ensure that they consider all relevant factors before making a decision.
  • Increase awareness of tendencies that limit the value of feedback and impede their ability to recognize and correct mistakes to make better future decisions.