Decision making and planning

Decision making and forward planning in turbulent times

BY RURAL WEST

Decades of research on behavioural decision making have suggested humans use two ways of processing information and making decisions — system 1 and system 2 thinking bias.

System 1 thinking is emotional, instinctive, and automatic, we rely on shortcuts to generate solutions to problems. We use system 1 for everyday tasks. Whereas system 2 thinking is slow, logical and deliberate. In turbulent times our brain often uses system 1 thinking, taking short cuts to get to the answer it needs. The more variations and things to think through, the more our brain will take short cuts. This is what experience gives us.

Here is an easy way to test your mode of thinking:

A bat and a ball cost $1.10 in total. The bat costs $1.00 more than the ball. How much does the ball cost?

If you used system 1 thinking for this problem, using experience and shortcuts to answer the problem, you would have likely guessed 10 cents. However, if you engaged system 2 thinking, were slow and methodical and did the math, you would see the correct answer is 5 cents.

Depending on how you went, forward planning might be a useful tool to consider.

While we are doing fairly well in this unique environment, price increases, supply delays and increased shipping costs continue to affect people. It can significantly influence end of season outcomes.

Forward planning can be a great tool in this space, and if you like to plan,

f DEVELOPING multiple solution sets is a good idea for dealing with turbulence developing multiple solution sets is a good idea for dealing with turbulence. This allows system 2 thinking. These types of issues also extend to the finance and banking sector. With a lot of back-office workers located overseas, requests for access to cash and approvals for new loans are significantly delayed. If you are considering a new purchase or additional working capital requirements for next season, consider getting early approvals where possible and allowing 6–8 weeks for processing.

Even though there is a lot of turbulence in the operating environment at the moment, we find farmers are good at sourcing the necessary knowledge they need, though the sources vary greatly!

Whether through each other, research, consultants, courses and web-based resources, the access to programs that record operations and expenditures to allow growers to measure what they manage is always important for accuracy and insights! This data allows more accurate predictions and the development of useful decision points and solution sets from a systems 2 perspective.

MORE INFORMATION

Supported by the State and Federal governments, Rural West works with a wide range of primary producers and regional small business owners to improve their position and profitability. Contact Rural West on 1800 612 004, via email enquiries@ruralwest.com.au or visit www.ruralwest.com.au for more information.