You may still wonder about the difference between descriptive and normative decisions and think about which type the business decision should be classified into. Before we reach a unanimous answer to the question, we shall all agree that decision-making is human behavior. So, the difference between the two types of decisions is closely relevant to our descriptive vs. normative decision-making behaviors.

So, what behavior leads to a descriptive decision? And what behavior leads to a normative decision?This depends on our two-folded human nature of decision-making. That is, our choice of decision is determined by one of the two decision systems: affective; the other is deliberative.

Theaffective decision systemis the "hot emotional system." This system exists within the 6+ million-year-old brain and is motivated by different stimuli directly related to our own or inherited observations. This system is usually driving our descriptive behavior.We have learned how to make decisions from observations accumulated by our ancestors and ourselves over thousands of years.

For thousands of years, whenhearing the roar of a lion,people were scared and most likely chose to run away.Such experiences are accumulated from generation to generation. Today, we still subconsciously feel scared when we hear a lion roaring.

Ironically, the latest reflection of this decision system is the so-called "data-driven" decision-making. Many people firmly believe that any business decision can be made automatically, without human intervention, by computer algorithmsdriven by a titanic amount of data collection. The only difference between this "modern" affective decision system and that with a history of thousands of years is that we now accumulate our observations much more quickly in digital format (i.e., data).

In contrast, thedeliberative decision system, or the realm of reason, is the "cool cognitive system." The final evolution of the human brain some 150,000 years ago resulted in the development of the prefrontal cortex and the deliberative decision system. The system requires a decision to be made through a rigorous reasoning process, not direct observations.

The moststraightforwardexample of the head-on fight between the two decision systems in our mind is the jury trial system in the US.

Suppose you serve as a juror in a murder trial. On the one hand, the prosecutor presents a piece of "strong" evidence that the victim's car key was found in the defendant's bedroom (have you watched the Netflix documentary "Making a Murderer" as recommended in BUA 601?) On the other hand, the defense lawyer keeps reminding you that finding the car key in his client's bedroom does not construct a logical causal relationship between the victim's death and his client.

So, although the prefrontal cortex enhanced, but did not replace, our "old" brains: As a result, the two systems coexist, often creating considerable internal conflict. We usually think of hard work as a physical activity that will exhaust us. However, another kind of work, the cognitive effort involved in thinking, can end up exhausting your deliberative decision system, thereby increasing the influence of the affective decision system. For instance, if we only have a handful of data related to a problem we need to solve, we have to spend much time thinking thoroughly about the problem to understand logical connections between different factors in the problem situation. But suppose we can collect titanic amounts of data about the problem. In that case, we probably prefer to outsource all the thinking work to some data-driven computing algorithms, despite the risk associated with that (referring to the relevant discussion in BUA 680).

In the business world, we can also subconsciously make decisions based on accumulated empirical observations. But, one direct consequence of an increasingly complex business environment is that we often have to deal with new situations with which we don't have previous experiences.

Even just a couple of years ago, one of the most important decisions faced by a major retail company's CEO was store location. At that time, it was a soundly reasonable decision to locate your stores where there is a high volume of people traffic because overwhelming dataobservations indicate the significant positive relationship between people traffic and store profit. But now we understand such a relationship may not be that obvious in the face of public health risk.

In addition, the simple logical thinking of correlation not implying causation reminds us that we cannot fully trust empirical observations to conclude.

On the other hand, there are two important reasons whyour descriptive behavior does play a veryimportant role in decision-making.The first reason is motivational: If we do not learn through demonstration, we can be faulty decision makers. Even if we closely follow rigorous reasoning rules, we will not see the point of learning a powerful normative process without clear empirical evidence. In other words, if we don't cumulatively collect and describe the outcomes of our decisions, we cannot understand why some decisions should follow rigorous reasoning rules.

The second reason is practical: Descriptive models allow us to assess the outcomes of our decisions unbiasedly. The results of a normative process of completing mathematical calculations involving addition and multiplication followingthe order of operationsare no better than the numbers entered into the calculation. So, the results of our normative decision process will be no better than its inputs. We must understand that these inputs come from humans displaying various biases and distortions, and we must learn to control such factors. Especially within the context of this course, it is our descriptive behavior of accumulating empirical business data and describing the data through various analytical models that can meaningfully support our normative decision-making process.

So, what is the significance of everything discussed so far for you as a business professional?

A strong mindset of either descriptive-only or normative-only behavior is an extreme case in business decision-making. In other words, a business decision is rarely purely descriptive or normative. Most often, business decisions involve both, some including more descriptive components and others including more normative components. So, an important decision to make about making business decisions is to balance wisely between the descriptive and normative parts based on the different scenes you are in.

When hearing a lion roaring, you should run immediately if you are in a national park in Africa; you should not do that if you are in The Mall of America.

Although as might be suggested above, determining whether one business decision should be made as a descriptive or a normative decision is not merely dependent on the size of empirical data you have. More importantly, it depends on how complex the problem is and how inferential your decision will be. In principle, the more complex a problem and/or inferential a decision is, the more normative components should be included in your decision-making, regardless of how big your data is.

Google Flu Trends(GFT) was aweb serviceoperated byGoogle. It provided estimates ofinfluenzaactivity for more than 25 countries. By aggregatingGoogle Searchqueries, it attempted to make accurate predictions about flu activity only by describing the patterns of hundreds of millions of Google search queries about "flu". This project was first launched in 2008 by Google.org to help predict flu outbreaks. Google Flu Trends stopped publishing current estimates on 9 August 2015 because of numerous false predictions compared with those made by the usual onsite studies conducted by health organizations and/or authorities.

What do you take out from this? two pages please