Theory of Common Sense in Decision Making

I get fascinated by so many theorems/theories doing rounds. No matter which subject you choose or what specialization you intent to do, you will always have theorems/theories at your disposal.

A fine Sunday morning, I decided that I need to propound a theorem too. Now, since I am no researcher and my management skills are as strong as a two year experienced five months into MBA person, I would clarify that what you will get to read ahead might not be high on jargons but you would definitely get a dose of common sense.

Let me call my theory as the Theory of Common Sense Involving Decisions or to cut it short, the TCSID (you weren’t expecting a better name; were you?)

As the guy with a funny hairy woolen hat said, Common Sense is not so common; I believe him, but I would add that it gets all the more uncommon with the degree of numbers that get into our mind.

I have seen that managers get so fascinated by numbers that they forget to catch the core idea of the problem. All of the energies get wasted in number crunching to prove that the said cost benefit analysis supports their views. Then there are the organizational biases that creep in where personal or group opinions are given priorities over what is exactly right.

While taking all these decisions, there is something that we actually miss on and that is COMMON SENSE. I am not a finance person because I am predominantly a marketing one so what I am going to write ahead will be more relevant to marketing professionals.

Marketing is all about understanding the customers and taking decisions accordingly. What is a market; it is definitely not as complicated as the big definition by Kotler, it is simply US, THE PEOPLE.

Understanding how we will behave when offered something is the key to making right decisions. And we certainly do not need calculations for that. Our calculations are based on assumptions and these assumptions are solely based on our common sense. We understand and form opinion about people because of our common sense, we certainly do not get into calculations of if x is equal to y then z is a spendthrift.

Observations are based out of our sense and if they are right, we make the right assumptions, our calculations go perfect and we achieve the target.

Even Raghuram Rajan says that the decisions taken are based on his observations of the Indian Economy and the gut feeling and definitely not the IS-LM curves that we study in Macroeconomics.

In a nutshell, even though common sense is not so common, it isn’t so uncommon. It is very much there, what misses is the realization of its being and the acceptance of over fascination with numbers.

Find and accept the two and you will make the best of the decisions for yourself and the firm.