Howard Raiffa Taught Us to Make Better Decisions

Lessons from a pioneer in the field of negotiation analysis.

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If you’ve ever made a decision tree, engaged in risk analysis, or created a scoring system when preparing for a negotiation, you benefited from the work of economist Howard Raiffa, whether you realized it or not. And the decisions you’ve made in your negotiations likely have been far smarter as a result.

Raiffa, a Harvard Business School and Harvard Kennedy School emeritus professor and co-founder of the Program on Negotiation at Harvard Law School, died on July 8 at age 92. He improved the quality of people’s thinking across the globe through his work in decision and negotiation analysis.

Questioning intuition

In his early career, Raiffa contributed to game theory, a mathematical approach to decision making. But before long he moved away from game theory because of its assumption that the world is populated by “impeccably rational, supersmart people,” as Raiffa wrote in his influential book The Art and Science of Negotiation: How to Resolve Conflicts and Get the Best out of Bargaining (Belknap Press, 1982).

Raiffa developed a more descriptive and realistic approach to decision making and negotiation. His approach considers, he writes, how “erring folks like you and me actually behave” rather than “how we should behave if we were smarter, thought harder, were more consistent, were all-knowing.” He advised negotiators not only to replace their intuition with more careful analysis but also to anticipate their negotiation counterparts’ behavior based on the common tendency toward irrationality, according to Harvard Business School professor Max H. Bazerman.

In the decades since, researchers have documented the many ways in which intuition fails us in the face of important decisions. (For a recent example, see “Negotiation Research You Can Use,” on the link between analysis and empathic accuracy, on page 7 of this issue.) Raiffa himself contributed to this work by identifying overconfidence as a persistent bias that leads negotiators to take undue risks and make sloppy decisions. His analytical approach to decision making is presented in the sidebar below, “Making Smart Choices.”

A broad influence

At Harvard, Raiffa was among the first professors to have his students role-play negotiation simulations in the classroom, now the predominant form of negotiation instruction around the world. Beyond his work in academia, Raiffa lent his expertise to real-world problems, including the Cold War and the Israeli-Palestinian conflict. In the 1970s, Raiffa, who served in the Army Air Corps during World War II, cofounded and led the International Institute for Applied Systems Analysis, a think tank aimed at reducing tensions between the East and West.
In his writing and teaching on negotiation, Raiffa promoted a mutual-gains approach aimed at improving all parties’ outcomes, which he viewed as the most effective way to create value and build lasting relationships. He advised negotiators to analyze each party’s alternative to a negotiated agreement, each party’s set of interests, and the relative importance of those interests.

Raiffa also addressed the ethical challenges of negotiation. In 1979, the Harvard Crimson reported that he concluded his Harvard Business School negotiation course by telling his students, “When we see we could improve our profit or further maximize our desired result, we might ask, Is this a ‘dirty’ dollar or a ‘clean’ one that we could earn here? What would happen if everybody did this? Would we be able to sleep at night if we did this? How would we feel if we had to explain this to our families?”

A wealth of ideas

After his retirement from Harvard in 1994, Raiffa and his wife, Estelle, to whom he was married for 71 years, eventually moved to Arizona. There, Raiffa, who long suffered from Parkinson’s disease, attended seminars and met with doctoral students at the University of Arizona.

Above all, Raiffa used the freedom of retirement to dig into his wealth of ideas. “I had the luxury of doing exactly what I wanted, and my files were full of partially done projects,” he wrote in a memoir. “I became animated once again and realized I would continue what I did pre-retirement—only with fewer interruptions.”

Making smart choices

In his book with John S. Hammond and Ralph L. Keeney, Smart Choices: A Practical Guide to Making Better Decisions (HBS Press, 1999), Howard Raiffa presented an eight-step decision-making model that can be applied to any important decision:

1. Work on the right decision problem. Frame the decision you’re facing carefully, being sure to acknowledge any complexities and avoid making assumptions that limit your options.

2. Specify your objectives. Consider what you want to accomplish most and which of your interests, values, concerns, and fears are most relevant to achieving your goal.

3. Create imaginative alternatives. Make sure you consider a range of creative and desirable alternatives to meeting your goal.

4. Understand the consequences. What would be the consequences of achieving your goal? Think about both the pros and the cons.

5. Grapple with tradeoffs. Because objectives often compete, you need to strike a balance between them by setting priorities—which can, in turn, require tradeoffs. For example, buying an affordable house may require you to rule out your first-choice neighborhood.

6. Clarify your uncertainties. Confront uncertainty by weighing the likelihood of different outcomes and assessing their possible effects.

7. Think hard about your risk tolerance. People vary in their willingness to accept risk and in the risk they’ll accept from one situation to the next. Determine the risks inherent in your choices and how willing you are to accept them.

8. Consider linked decisions. The choices you make today could very well affect those you face tomorrow, and your goals for tomorrow affect your choices today, note Raiffa and his colleagues. Gather the information you will need to resolve choices you will likely face in the future before making short-term decisions.

Unfortunately, people rarely follow such a methodical approach to making decisions. When you do, you can feel secure in the knowledge that you have made the best choices possible under the circumstances.

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