Decision Tree Analysis

Map complex decisions with branching outcomes, probabilities, and expected values.

Category: Strategy | Type: Skills

Skills: Decision Analysis, Probability, Expected Value

Prompt

Decision trees make the invisible visible. Process: 1. Define the decision node — what choice are you making about [your decision]? 2. Branch: list every possible action. 3. For each action, list the possible outcomes with estimated probabilities (must sum to 100%). 4. Assign a value to each outcome (monetary, score, or utility). 5. Calculate Expected Value = sum of (probability x value) for each branch. 6. Choose the branch with the highest expected value. Advanced techniques: sensitivity analysis (which probability estimate, if wrong, changes the decision?), sequential decisions (chain multiple trees), and real options (the value of keeping options open). The power is not in precise probabilities — it is in making your assumptions explicit and testable. A rough decision tree beats a precise gut feeling.

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