How the ecosystem service concept can help make better decisions
Why Bother Making Difficult Decisions? • Decisions are the ...Objective Focused Thinking • Clear...
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Department of Agricultural Economics Smart Choices Jay Parsons, Associate Professor Department of Agricultural Economics University of Nebraska-Lincoln The 32 nd Annual Nebraska Women in Agriculture Conference February 23-24, 2017 – Kearney, NE Department of Agricultural Economics Why Bother Making Decisions? • Decisions are hard, especially when you have lots of choices and uncertainty. Department of Agricultural Economics Why Bother Making Difficult Decisions? • Decisions are the only way you can purposefully influence your life. • Decisions is your opportunity to earn a competitive advantage. • Decisions are opportunities to make choices. Department of Agricultural Economics Proactive Decision Making • Decisions should be viewed as an opportunity to make choices that help you accomplish your objectives in life. • Focus on objectives first, then choices. • Clear objectives help identify decision opportunities that lead to smart choices.
Transcript of Why Bother Making Difficult Decisions? • Decisions are the ...Objective Focused Thinking • Clear...
Depa
rtm
ent o
f Agr
icul
tura
l Eco
nom
ics
Sm
art C
hoic
es
Jay
Pars
ons,
Ass
ocia
te P
rofe
ssor
Dep
artm
ent o
f Agr
icul
tura
l Eco
nom
ics
Uni
vers
ity o
f Neb
rask
a-Li
ncol
n
The
32nd
Ann
ual N
ebra
ska
Wom
en in
Agr
icul
ture
Con
fere
nce
Febr
uary
23-
24, 2
017
–K
earn
ey, N
E
Depa
rtm
ent o
f Agr
icul
tura
l Eco
nom
ics
Why
Bot
her M
akin
g D
ecis
ions
?•
Dec
isio
ns a
re h
ard,
esp
ecia
lly w
hen
you
have
lo
ts o
f cho
ices
and
unc
erta
inty
.
Depa
rtm
ent o
f Agr
icul
tura
l Eco
nom
ics
Why
Bot
her M
akin
g D
iffic
ult
Dec
isio
ns?
•D
ecis
ions
are
the
only
way
you
can
pu
rpos
eful
ly in
fluen
ce y
our l
ife.
•D
ecis
ions
is y
our o
ppor
tuni
ty to
ear
n a
com
petit
ive
adva
ntag
e.•
Dec
isio
ns a
re o
ppor
tuni
ties
to m
ake
choi
ces.
Depa
rtm
ent o
f Agr
icul
tura
l Eco
nom
ics
Pro
activ
e D
ecis
ion
Mak
ing
•D
ecis
ions
sho
uld
be v
iew
ed a
s an
op
portu
nity
to m
ake
choi
ces
that
hel
p yo
u ac
com
plis
h yo
ur o
bjec
tives
in li
fe.
•Fo
cus
on o
bjec
tives
firs
t, th
en c
hoic
es.
•C
lear
obj
ectiv
es h
elp
iden
tify
deci
sion
op
portu
nitie
s th
at le
ad to
sm
art c
hoic
es.
Depa
rtm
ent o
f Agr
icul
tura
l Eco
nom
ics
Def
initi
ons
•At
tribu
tes
–th
ings
you
val
ue a
nd m
easu
re
(pro
fit, d
ebt,
happ
ines
s, e
tc.)
•O
bjec
tives
–di
rect
ions
of i
mpr
ovem
ent o
f one
or
mor
e at
tribu
tes
like
incr
easi
ng p
rofit
or
decr
easi
ng d
ebt,
etc.
•G
oals
–co
mbi
ning
an
attri
bute
with
an
acce
ptab
le ta
rget
leve
l of a
chie
vem
ent.
Goa
l: D
ebt r
educ
ed to
less
than
20%
of a
sset
val
ue.
Depa
rtm
ent o
f Agr
icul
tura
l Eco
nom
ics
Obj
ectiv
e Fo
cuse
d Th
inki
ng•
Cle
ar o
bjec
tives
–
help
iden
tify
choi
ces
you
can
mak
e–
help
det
erm
ine
the
info
rmat
ion
you
need
–he
lp d
eter
min
e th
e im
porta
nce
of d
ecis
ions
–he
lp y
ou e
valu
ate
your
dec
isio
n ch
oice
s–
help
exp
lain
the
choi
ces
you
mak
e to
ot
hers
.•
Let y
our o
bjec
tives
be
your
gui
de.
Depa
rtm
ent o
f Agr
icul
tura
l Eco
nom
ics
Obj
ectiv
e Fo
cuse
d Th
inki
ng•
Iden
tify
obje
ctiv
es fo
r you
r dec
isio
n op
portu
nitie
s in
the
near
futu
re.
–W
hat a
re y
ou tr
ying
to a
ccom
plis
h?–
Wor
kshe
et 2
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iiiiiiiiiiiiiiiivvvvvvvvvvvvvvvvvvvveeeeeeeeeeeeeeeeeeeessssssssssssssssss
fffffffffffffffffffffooooooooooooooorrrrrr yyyyyyyyyyyyyyyyyyyyy
oooooooooooooooooouuuuuuuuuuuuuuuuuurrrrrrrr ddddddddddddddd
eeeeeeeeeeeeeeeecccccccccccccccciiiisssssssssssssssssssss
iiiiiooooooooooooooooooooonnnnnnnnnnnnnnnnnnn
oppo
rtuni
tiiiiiiiiiiiiiiiiiiiieeeeeeeeeeeeeeeeeeeeesssssssssssssssssssss
iiiiiiiiiiiiiiiiiiiinnnnnnnnnnnnnnnnnnnnn tttttttttttttttttttthhhhhhhhhhhhhhhhhhhhh
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aaaaaaaaaaaaaaaaaaaaarrrrrrrrrrrrrrrrrrrrr fffffffffffffffffffffuuuuuuuuuuuuuuuuuuuuu
tttttttttttttttttttttuuuuuuuuuuuuuuuuuuuuure
.–
WWhha
tt are
you
ttryii
ng tto
acc
ompll
iishh??
–W
orks
heet
2
Depa
rtm
ent o
f Agr
icul
tura
l Eco
nom
ics
Smar
t Cho
ices
in
Agr
icul
ture
A D
ecis
ion
Mak
ing
Proc
ess
Esta
blis
h th
e co
ntex
t
Inte
rnal
Con
text
Ext
erna
l Con
text
Obj
ectiv
e(s)
Invo
lved
Asse
ssm
ent
Ris
k Id
entif
icat
ion
Ris
k A
naly
sis
Eva
luat
eTr
adeo
ffs
Impl
emen
tatio
n
Communication & Consultation
Iden
tify
Dec
isio
n O
ppor
tuni
ty
Gen
erat
e Al
tern
ativ
es
Eva
luat
eC
onse
quen
ces
Mak
e th
e D
ecis
ion
Monitor, Measure & Revise
Depa
rtm
ent o
f Agr
icul
tura
l Eco
nom
ics
Iden
tify
Dec
isio
n O
ppor
tuni
ty
•R
ecog
nize
opp
ortu
nity
to m
ake
a ch
oice
–Al
tern
ativ
es (c
hoic
es to
cho
ose
from
)–
Obj
ectiv
e(s)
(rea
son(
s) to
cho
ose)
Wha
t sho
uld
I do
to co
mpl
y w
ith m
y CR
P re
quire
men
ts?
Depa
rtm
ent o
f Agr
icul
tura
l Eco
nom
ics
Obj
ectiv
es
•W
hat a
re y
ou tr
ying
to a
ccom
plis
h by
m
akin
g th
is d
ecis
ion?
•W
hat a
re y
ou tr
ying
to a
void
?
Depa
rtm
ent o
f Agr
icul
tura
l Eco
nom
ics
Obj
ectiv
es
Wha
t sho
uld
I do
to co
mpl
y w
ith m
y CR
P re
quire
men
ts?
Mus
t be
done
by
Sep.
30
Mus
t be
done
by
Sep.
30
Cann
ot g
raze
from
May
15
to Ju
ly 1
5g
fy
yDo
n’t w
ant i
t to
be to
o bi
g of
has
sle
(low
tim
e)g
f(
)Do
n’t w
ant i
t to
cost
too
muc
h &
pre
fer t
o m
ake
mon
ey (h
ighe
r pro
fit)
Depa
rtm
ent o
f Agr
icul
tura
l Eco
nom
ics
Est
ablis
h th
e C
onte
xt
•In
tern
al c
onte
xt–
Wha
t is
the
situ
atio
n w
ithin
the
orga
niza
tion?
•E
xter
nal c
onte
xt–
Wha
t is
the
situ
atio
n ou
tsid
e th
e or
gani
zatio
n as
far a
s th
e en
viro
nmen
t you
ar
e m
akin
g th
e de
cisi
on in
?
Depa
rtm
ent o
f Agr
icul
tura
l Eco
nom
ics
Inte
rnal
Con
text
•O
bjec
tives
, stra
tegi
es, a
nd p
olic
ies
•S
truct
ure
(role
s, re
spon
sibi
litie
s)
•K
now
ledg
e, s
kills
, and
reso
urce
s•
Rel
atio
nshi
ps b
etw
een
othe
r par
ts o
f th
e fa
rm o
r ran
ch•
Stre
ngth
s an
d w
eakn
esse
s
Depa
rtm
ent o
f Agr
icul
tura
l Eco
nom
ics
Ext
erna
l Con
text
•Tr
ends
and
key
driv
ers
•P
erce
ptio
ns o
f key
sta
keho
lder
s•
Eco
nom
ic s
ituat
ion
(mar
kets
, etc
.)•
Soc
ial a
nd p
oliti
cal e
nviro
nmen
t•
Tech
nolo
gica
l env
ironm
ent
•E
nviro
nmen
tal a
nd le
gal s
ituat
ion
•O
ppor
tuni
ties
and
thre
ats
Depa
rtm
ent o
f Agr
icul
tura
l Eco
nom
ics
Est
ablis
h th
e C
onte
xt
Good
wat
er so
urce
for l
ives
tock
Good
wat
er s
No
fenc
ing
No
fenc
ing
Graz
ing
prac
tice
appr
oved
with
FSA
Graz
ing
prac
tice
appr
oved
with
FSA
Good
nea
rby
gras
s can
be
used
too
Good
nea
rby
gras
s can
be
Grow
ing
whe
at n
earb
yGr
owin
g w
heat
nea
rby
I don
’t ha
ve ca
ttle
but
rent
er d
oes
I don
t hav
eca
ttle
but
rent
erRe
nter
rela
tions
hip
is g
ood
Rent
er re
latio
nshi
p is
gSp
ring
is a
bus
y tim
e
Nea
rby
road
pro
vide
s acc
ess
Nea
rby
road
pro
vide
s acc
eCa
ttle
mar
kets
are
dow
nCa
ttle
mar
kets
are
dow
Hay
pric
es a
re d
own
Hay
pric
es a
re d
own
Graz
ing
land
is fa
irly
expe
nsiv
eGr
azin
g la
nd is
fairl
y ex
pens
ive
Mus
t be
care
ful n
ot to
ove
rgra
zeM
ust b
e ca
refu
l not
to o
vSt
rict r
ules
with
in C
RP
Stric
trul
esw
ithin
CRP
Good
rela
tions
hip
with
FSA
off
ice
Good
rela
tions
hip
with
FSA
off
ice
Tran
spor
tatio
n co
uld
be a
n is
sue
Depa
rtm
ent o
f Agr
icul
tura
l Eco
nom
ics
Def
initi
on o
f Ris
k•
RIS
K is
the
effe
ct o
f unc
erta
inty
on
your
ob
ject
ives
.1–
How
doe
s un
certa
inty
affe
ct th
e lik
elih
ood
you
will
acc
ompl
ish
your
obj
ectiv
es?
–R
isk
has
both
pos
itive
and
neg
ativ
e ef
fect
s.
1 AN
SI/A
SSE/
ISO
310
00 R
isk M
anag
emen
t Prin
cipl
es a
nd G
uide
lines
Depa
rtm
ent o
f Agr
icul
tura
l Eco
nom
ics
Sour
ces
of R
isk
in
Agr
icul
ture
1.M
arke
ting/
Pric
e R
isk
2.P
rodu
ctio
n R
isk
3.In
stitu
tiona
l/Leg
al R
isk
4.H
uman
Ris
k5.
Fina
ncia
l Ris
k
Depa
rtm
ent o
f Agr
icul
tura
l Eco
nom
ics
Ris
k Id
entif
icat
ion
Live
stoc
k m
arke
ts co
uld
go u
p or
dow
nLi
vest
ock
mar
kets
coul
d go
up
or d
own
Live
stoc
k he
alth
issu
es co
uld
caus
e de
ath
or e
xtra
exp
ense
sLi
vest
ock
heal
th is
sues
coul
d ca
use
deat
h or
ext
ra e
xpen
ses
Wea
ther
coul
d af
fect
pro
duct
ion
perf
orm
ance
up
or d
own
and
land
cond
ition
Wea
ther
coul
d af
fect
pro
duct
ion
perf
Anim
al h
andl
ing
coul
d ca
use
inju
ryAn
imal
han
dlin
g co
uld
caus
e in
jury
Tim
e re
quire
d co
uld
be m
ore
or le
ssTi
me
requ
ired
coul
d be
mor
e or
less
Obs
erve
rs co
uld
view
pra
ctic
e un
favo
rabl
y or
favo
rabl
yO
bser
vers
coul
d vi
ew p
ract
ice
unfa
vora
bly
or fa
voFe
ncin
g co
uld
be o
f unc
erta
in v
alue
in th
e fu
ture
Depa
rtm
ent o
f Agr
icul
tura
l Eco
nom
ics
Gen
erat
e A
ltern
ativ
es•
Alte
rnat
ives
are
pos
sibl
e co
urse
s of
act
ion
•U
se y
our o
bjec
tives
and
ask
“How
?”•
Be c
reat
ive
and
imag
inat
ive
•C
halle
nge
cons
train
ts•
Do
your
ow
n th
inki
ng fi
rst,
then
ask
oth
ers
for
sugg
estio
ns. K
eep
an o
pen
min
d!•
Itera
te a
nd g
ener
ate
bette
r alte
rnat
ives
Depa
rtm
ent o
f Agr
icul
tura
l Eco
nom
ics
Gen
erat
e A
ltern
ativ
es
1.Ha
ve re
nter
run
catt
le o
n it
and
tem
pora
ry fe
nce
it 1. 2.
Have
rent
er ru
n ca
ttle
on
it an
d te
mpo
rary
fenc
e it
Adve
rtis
e an
d re
nt to
the
high
est b
idde
r with
out f
enci
ng in
pla
ce2. 3.
Adve
rtis
e an
d re
nt to
the
high
est b
idde
r with
out f
enci
ng in
pla
ceG
et st
ocke
r cat
tle o
f my
own
and
graz
e it
(tem
pora
ry fe
ncin
g in
stal
led)
3. 4.Ge
t sto
cker
catt
le o
f my
own
and
graz
e it
(tem
pora
ry fe
nci
Inst
all f
ence
and
then
adv
ertis
e fo
r lat
e su
mm
er g
razi
ng4. 5.
Inst
all f
ence
and
then
adv
ertis
efo
r lat
e su
mm
ergr
azin
Appr
oach
FSA
abo
ut a
ltern
ativ
es o
ther
than
gra
zing
5. 6.Ap
proa
ch F
SA a
bout
alte
rnat
ives
oth
er th
an g
razi
ngPa
rtne
r with
rent
er o
n liv
esto
ck p
urch
ase
and
graz
ing
arra
ngem
ent
Depa
rtm
ent o
f Agr
icul
tura
l Eco
nom
ics
Eva
luat
e C
onse
quen
ces
•H
ow w
ell d
oes
each
alte
rnat
ive
addr
ess
the
obje
ctiv
es a
ssoc
iate
d w
ith th
e de
cisi
on?
•G
athe
r rel
evan
t and
relia
ble
info
rmat
ion
to h
elp
you
unde
rsta
nd th
e co
nseq
uenc
es o
f eac
h al
tern
ativ
e.•
Use
exp
erts
wis
ely
and
do y
our o
wn
trial
s.•
Don
’t re
ly o
n on
ly h
ard
data
. Eve
n be
st d
ata
only
de
scrib
es th
e pr
esen
t or t
he p
ast.
Dec
isio
ns a
re
abou
t the
futu
re.
•U
se a
ppro
pria
te s
cale
s an
d be
real
istic
abo
ut
prec
isio
n.
Depa
rtm
ent o
f Agr
icul
tura
l Eco
nom
ics
Eva
luat
e C
onse
quen
ces
Tim
e (0(0
-0-no
ne; 33
-3-lo
ts)
Prof
it ($
)
1.Re
nter
/tem
p fe
nce
0$0
1. 2.H
nter
/tem
p fe
nce
Ren
HHigh
est b
idde
r/no
fenc
e0 1
$0 $160
02. 3.
Hgh
est b
idde
r/no
fenc
eig Ow
n st
ocke
rs/t
emp
fenc
e1 3
$160
0$2
600
3. 4.O
wn
stoc
kers
/tem
p fe
ncIn
stal
l fen
ce/a
dver
tise
3 2$2
600
$300
0*4. 5.
Inst
all f
ence
/adv
erti
Appr
oach
FSA
/alt.
2 2-
000
$3 --$10
005. 6.
Appr
oach
FSA
/alt.
Part
ner w
ith re
nter
2 110
00$1 $1
300
*Fen
ce a
mor
tized
ove
r 30
year
s
Depa
rtm
ent o
f Agr
icul
tura
l Eco
nom
ics
Ris
k A
naly
sis
•C
larif
y co
nseq
uenc
es–
Cla
rify
unce
rtain
ties
(ran
ges
&
prob
abili
ties)
–C
larif
y ris
k so
urce
s•
Inco
rpor
ate
risk
tole
ranc
e in
to d
ecis
ion
•D
uel f
ocus
on
nega
tives
& p
ositi
ves
•C
onsi
der l
inke
d de
cisi
ons
Depa
rtm
ent o
f Agr
icul
tura
l Eco
nom
ics
Ris
k Id
entif
icat
ion
Live
stoc
k m
arke
ts co
uld
go u
p or
dow
nLi
vest
ock
mar
kets
coul
d go
up
or d
own
Live
stoc
k he
alth
issu
es co
uld
caus
e de
ath
or e
xtra
exp
ense
sLi
vest
ock
heal
th is
sues
coul
d ca
use
deat
h or
ext
ra e
xpen
ses
Wea
ther
coul
d af
fect
pro
duct
ion
perf
orm
ance
up
or d
own
and
land
cond
ition
Wea
ther
coul
d af
fect
pro
duct
ion
perf
Anim
al h
andl
ing
coul
d ca
use
inju
ryAn
imal
han
dlin
g co
uld
caus
e in
jury
Tim
e re
quire
d co
uld
be m
ore
or le
ssTi
me
requ
ired
coul
d be
mor
e or
less
Obs
erve
rs co
uld
view
pra
ctic
e un
favo
rabl
y or
favo
rabl
yO
bser
vers
coul
d vi
ew p
ract
ice
unfa
vora
bly
or fa
voFe
ncin
g co
uld
be o
f unc
erta
in v
alue
in th
e fu
ture
Depa
rtm
ent o
f Agr
icul
tura
l Eco
nom
ics
Ris
k A
naly
sis
1.Re
nter
/tem
p fe
nce
2.HHi
ghes
t bid
der/
no fe
nce
3.O
wn
stoc
kers
/tem
p fe
nce
4.In
stal
l fen
ce/a
dver
tise
5.Ap
proa
ch F
SA/a
lt.
6.Pa
rtne
r with
rent
er
Con
sequ
ence
s
Tim
ePr
ofit
Like
lyW
orst
Wor
stLi
kely
Best
01
200
035
0
80%
20%
10%
80%
10%
12
1000
1600
2500
70%
30%
25%
50%
25%
33+
2100
2600
4000
90%
10%
30%
60%
10%
23
3000
3000
3500
80%
20%
10%
80%
10%
23
2000
1000
0
90%
10%
20%
70%
10%
12
200
1300
2000
80%
20%
10%
60%
30%
Ris
k So
urce
s (+
unce
rtai
nty)
Mar
ket
Pro
duct
ion
Inst
itutio
nal
Hum
anFi
nanc
ial
+
++
++
+++
+++
++
++
++++
+
++++
++
Depa
rtm
ent o
f Agr
icul
tura
l Eco
nom
ics
Eva
luat
e Tr
adeo
ffs•
Look
to s
impl
ify d
ecis
ion
–El
imin
ate
dom
inat
ed a
ltern
ativ
es•
Pairw
ise
com
paris
ons
–Ig
nore
irre
leva
nt o
bjec
tives
•Fu
lly in
corp
orat
e ris
k an
d un
certa
inty
–R
isk
tole
ranc
e an
d up
side
opp
ortu
nity
–Li
nked
dec
isio
ns
Depa
rtm
ent o
f Agr
icul
tura
l Eco
nom
ics
Eva
luat
e Tr
adeo
ffs
1.Re
nter
/tem
p fe
nce
2.HHi
ghes
t bid
der/
no fe
nce
3.O
wn
stoc
kers
/tem
p fe
nce
4.In
stal
l fen
ce/a
dver
tise
5.Ap
proa
ch F
SA/a
lt.
6.Pa
rtne
r with
rent
er
Con
sequ
ence
s
Tim
ePr
ofit
Like
lyW
orst
Wor
stLi
kely
Best
01
200
035
0
80%
20%
10%
80%
10%
12
1000
1600
2500
70%
30%
25%
50%
25%
33+
2100
2600
4000
90%
10%
30%
60%
10%
23
3000
3000
3500
80%
20%
10%
80%
10%
23
2000
1000
0
90%
10%
20%
70%
10%
12
200
1300
2000
80%
20%
10%
60%
30%
Ris
k So
urce
s (+
unce
rtai
nty)
Mar
ket
Pro
duct
ion
Inst
itutio
nal
Hum
anFi
nanc
ial
+
++
++
+++
+++
++
++
++++
+
++++
++
Depa
rtm
ent o
f Agr
icul
tura
l Eco
nom
ics
Eva
luat
e Tr
adeo
ffs
1.Re
nter
/tem
p fe
nce
2.HHi
ghes
t bid
der/
no fe
nce
4.In
stal
l fen
ce/a
dver
tise
6.Pa
rtne
r with
rent
er
Con
sequ
ence
s
Tim
ePr
ofit
Like
lyW
orst
Wor
stLi
kely
Best
01
200
035
0
80%
20%
10%
80%
10%
12
1000
1600
2500
70%
30%
25%
50%
25%
23
3000
3000
3500
80%
20%
10%
80%
10%
12
200
1300
2000
80%
20%
10%
60%
30%
Ris
k So
urce
s (+
unce
rtai
nty)
Mar
ket
Pro
duct
ion
Inst
itutio
nal
Hum
anFi
nanc
ial
+
++
++
++
++++
+
++++
++
Depa
rtm
ent o
f Agr
icul
tura
l Eco
nom
ics
Eva
luat
e Tr
adeo
ffs
1.Re
nter
/tem
p fe
nce
2.HHi
ghes
t bid
der/
no fe
nce
6.Pa
rtne
r with
rent
er
Con
sequ
ence
s
Tim
ePr
ofit
Like
lyW
orst
Wor
stLi
kely
Best
01
200
035
0
80%
20%
10%
80%
10%
12
1000
1600
2500
70%
30%
25%
50%
25%
12
200
1300
2000
80%
20%
10%
60%
30%
Ris
k So
urce
s (+
unce
rtai
nty)
Mar
ket
Pro
duct
ion
Inst
itutio
nal
Hum
anFi
nanc
ial
+
++
++
++++
++
•Th
e re
al tr
adeo
ff to
con
side
r is
less
tim
e in
(1) c
ompa
red
to
mor
e pr
ofit
pote
ntia
l w/ m
ore
risk
in (2
) and
(6).
•C
ompa
ring
(2) a
nd (6
), re
ady
to p
ossi
bly
elim
inat
e (2
) bec
ause
of
dow
nsid
e pr
ofit
risk
but w
orth
doi
ng m
ore
anal
ysis
on
it.g
yTo
be
cont
inue
d …
.
Depa
rtm
ent o
f Agr
icul
tura
l Eco
nom
ics
Eva
luat
e Tr
adeo
ffs
•El
imin
ate
(3) b
ecau
se o
f tim
e co
mm
itmen
t and
pro
fit/r
isk
trad
eoff
isn’
t El
imin
ate
(3) b
ecau
se o
f ti
muc
h di
ffere
nt fr
om (4
).•
muc
h di
ffere
nt fr
om (4
).El
imin
ate
(5) b
ecau
se o
f com
mitm
ent t
o ne
gativ
e pr
ofit
impa
ct a
nd m
ore
Elim
inat
e (5
) bec
ause
of
time
com
pare
d to
(1).
•tim
e co
mpa
red
to (1
).El
imin
ate
(4) p
rimar
ily b
ecau
se o
f cap
ital r
equi
rem
ent a
nd m
ore
time
Elim
inat
e (4
) prim
arily
bec
ause
of c
apita
l req
uire
men
t and
mor
e tim
e co
mpa
red
to (2
) and
(6).
It do
es re
turn
mor
e pr
ofit
pote
ntia
l but
not
wor
th
com
pare
d to
(2) a
nd (6
). It
does
retu
rn m
ore
pit
give
n th
e ris
k an
d lik
ely
time
requ
irem
ent.
•it
give
The
en th
e ris
k an
dgi
ve eere
al tr
adeo
ff d
likel
y tim
e re
and
ffffto
cons
ider
is eq
uire
men
t.e
reisis
less
tim
e in
(1) 1)
1)co
mpa
red
to m
ore e
prof
it Th
ee ea
l tra
deof
fre
ff o
cons
ider
ito
is e
ss ti
mle
pote
ntia
l w/
mor
e ris
k in
(2) a
nd (6
).•
pote
ntia
l w/
mor
e ris
k in
(2) a
nd (6
).Co
mpa
ring
(2) a
nd (6
), re
ady
to p
ossi
bly
elim
inat
e (2
) bec
ause
of d
owns
ide
Com
parin
g (2
)and
(6),
read
y to
pos
sibl
y el
imin
atpr
ofit
risk
but w
orth
doi
ng m
ore
anal
ysis
on
it.
Depa
rtm
ent o
f Agr
icul
tura
l Eco
nom
ics
Mak
e th
e D
ecis
ion
1.Re
nter
/tem
p fe
nce
2.HHi
ghes
t bid
der/
no fe
nce
3.Pa
rtne
r with
rent
er
Con
sequ
ence
s
Tim
ePr
ofit
Like
lyW
orst
Wor
stLi
kely
Best
01
200
035
0
80%
20%
10%
80%
10%
12
1000
1600
2500
70%
30%
25%
50%
25%
12
200
1300
2000
80%
20%
10%
60%
30%
Ris
k So
urce
s (+
unce
rtai
nty)
Mar
ket
Pro
duct
ion
Inst
itutio
nal
Hum
anFi
nanc
ial
+
++
++
++++
++
1.O
ffer i
t to
rent
er to
put
ut
a te
mpo
rary
fenc
e eup
and
run
catt
le a
t no
char
ge
Depa
rtm
ent o
f Agr
icul
tura
l Eco
nom
ics
Impl
emen
t the
Dec
isio
n
•C
omm
itmen
t to
actio
n•
Man
date
to ta
ke a
ctio
n–
Res
ourc
e al
loca
tions
–R
esou
rce
flow
coo
rdin
atio
n•
Cre
ate
an a
ctio
n pl
an
Depa
rtm
ent o
f Agr
icul
tura
l Eco
nom
ics
Impl
emen
t the
Dec
isio
n
Actio
n Pl
an
Nex
tSte
psD
eadl
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Res
pons
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yD
one
Cont
act r
ente
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ms
Mar
10
Me
Conf
irm w
/ FS
AM
ar 2
5TB
D (m
e/re
nter
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Mar
ch 2
Depa
rtm
ent o
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icul
tura
l Eco
nom
ics
Esta
blis
h th
e co
ntex
t
Inte
rnal
Con
text
Ext
erna
l Con
text
Obj
ectiv
e(s)
Invo
lved
Asse
ssm
ent
Ris
k Id
entif
icat
ion
Ris
k A
naly
sis
Eva
luat
eTr
adeo
ffs
Impl
emen
tatio
n
Communication & ConsultationId
entif
y D
ecis
ion
Opp
ortu
nity
Gen
erat
e Al
tern
ativ
es
Eva
luat
eC
onse
quen
ces
Mak
e th
e D
ecis
ion
Monitor, Measure & Revise
1)Ab
ility
to a
ntic
ipat
e de
cisi
ons
2)Ad
equa
te re
sour
ces
and
capa
city
to re
spon
d to
ch
angi
ng c
ondi
tions
3)Fr
ee fl
ow o
f inf
orm
atio
n in
to
and
thro
ugho
ut th
e or
gani
zatio
n4)
Willi
ngne
ss to
lear
n an
d ad
apt
5)R
isk
man
agem
ent i
s em
bedd
ed in
all
deci
sion
m
akin
g pr
oces
ses
Key
Prin
cipl
es
Goo
d R
isk
Man
agem
ent C
ultu
re
Depa
rtm
ent o
f Agr
icul
tura
l Eco
nom
ics
Depa
rtm
ent o
f Agr
icul
tura
l Eco
nom
ics
Take
Hom
e Po
ints
•G
ood
deci
sion
-mak
ing
skill
s ca
n be
lear
ned.
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cus
on a
ccom
plis
hing
obj
ectiv
es.
–Pr
oact
ivel
y lo
ok fo
r opp
ortu
nitie
s to
mak
e sm
art
choi
ces
that
lead
to o
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tives
.–
Syst
emat
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roce
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nd e
valu
ate
info
rmat
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brac
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inty
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bed
in d
ecis
ion
mak
ing
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ppor
tuni
ty to
man
age
to a
n ad
vant
age
agecon.unl.edu/cornhuskereconomics
Cornhusker Economics Seven Characteristics of a Good Decision
It is the policy of the University of Nebraska–Lincoln not to discriminate based upon age, race, ethnicity, color, national origin, gender-identity, sex, pregnancy, disability, sexual orientation, genetic information, veteran’s status, marital status, religion or political affiliation.
December 21, 2016
People make thousands of decisions every day. These decisions shape lives and determine fu-tures, some of them in very significant ways. However, some argue that the ability to make good quality decisions is contrary to human na-ture (Spetzler, et al.). Stress, time constraints, and uncertainty can amplify this situation and lead to mistakes that are difficult to overcome. In a recent survey by the Department of Agri-cultural Economics at the University of Nebras-ka and the Nebraska Department of Agriculture, it was revealed that 54% of Nebraska agricultural producers are currently experiencing a great amount of financial stress. In stressful times, it is important to focus on making good decisions. But, what do good decisions really look like? In what follows, I draw on the work of Hammond, et al. (1999) and Spetzler et al. (2016) to offer seven characteristics of a good decision. 1. An appropriate decision frame To make a good decision, you need more than just a list of choices. An appropriate decision frame captures the context in which you are making the decision. This includes both the in-ternal environment and the external environ-ment in which you are making the decision. Above all, it also includes the objective(s) you are trying to accomplish by making the decision. With an appropriate decision frame, you can grow your list of choices as large as needed to find the best alternative to get you from where you are currently at to where you want to go after making the decision.
Market Report Year Ago
4 Wks Ago
12-16-16
Livestock and Products, Weekly Average Nebraska Slaughter Steers, 35-65% Choice, Live Weight. . . . . . . 116.36 NA * Nebraska Feeder Steers, Med. & Large Frame, 550-600 lb. . . . . 181.56 NA 145.49 Nebraska Feeder Steers, Med. & Large Frame 750-800 lb. . .. . 153.11 NA 137.76 Choice Boxed Beef, 600-750 lb. Carcass. . . . . . . . . . . . . . 203.13 NA 192.05 Western Corn Belt Base Hog Price Carcass, Negotiated . . . . . . . . . . . . . .. 51.32 NA 53.21 Pork Carcass Cutout, 185 lb. Carcass 51-52% Lean. . . . . . . . . . . . . . . . . . . . 72.81 NA 76.42 Slaughter Lambs, wooled and shorn, 135-165 lb. National. . . . . . . 146.22 NA 138.63 National Carcass Lamb Cutout FOB. . . . . . . . . . . . . . . . . . . . . . . . . . . 360.03 NA 350.69
Crops, Daily Spot Prices Wheat, No. 1, H.W. Imperial, bu. . . . . . . . . . . . . . . . . . . . . 3.98 NA 2.72 Corn, No. 2, Yellow Columbus, bu. . . . . . . . . . . . . . . . 3.51 NA 3.06 Soybeans, No. 1, Yellow Columbus, bu. . . . . . . . . . . . . .. . . 8.28 NA 9.29 Grain Sorghum, No.2, Yellow Dorchester, cwt. . . . . . . . . . . . . . . . . . 5.73 NA 4.70 Oats, No. 2, Heavy Minneapolis, Mn, bu. . . . . . . . . . . . . . . 2.87 NA 2.97
Feed Alfalfa, Large Square Bales, Good to Premium, RFV 160-185 Northeast Nebraska, ton. . . . . . . . . . . 177.50 NA * Alfalfa, Large Rounds, Good Platte Valley, ton. . . . . . . . . . . . . . . . . 77.50 NA 67.50 Grass Hay, Large Rounds, Good Nebraska, ton. . . . . . . . . . . . . . .. . . . 85.00 NA 65.00 Dried Distillers Grains, 10% Moisture Nebraska Average. . . . . . . . . . . . . . . . 132.00 NA 110.00 Wet Distillers Grains, 65-70% Moisture Nebraska Average. . . . . . . . . . . . . . . . 51.00 NA 43.50
No Market
2. Clear values to adhere to and objectives you are trying to accomplish Identifying the objective(s) you are trying to accom-plish is part of properly framing a decision. These ob-jectives need to be clear and align with your values. Why is this so important? Because your objectives form your decision criteria, help determine what infor-mation to seek, help you explain your decision choice to others, and help determine how important the deci-sion is to you and how much time and effort you should expend on making it. When you look back on a decision, you should clearly see how the choice you made helped you fulfill key objectives and adhere to your values better than the other alternatives available at the time. 3. Creative alternatives to choose from Two fundamental principles need to be kept in mind when generating alternative choices. First, the choice you make can never be better than the best of the alter-natives you have to choose from and, second, you can never choose an alternative you haven’t considered. When you look back on a decision, you want to be able to say that you created an innovative list of alterna-tives. You thought outside the box and you iterated some original alternatives into better alternatives. It is much better to have too many bad alternatives on your list than not enough good ones. At the end of the day, it is much easier to make a good decision if you are try-ing to decide between several good choices. 4. Good information We live in the information age but determining which information is important and reliable can sometimes be a challenge. You can easily become overwhelmed with information that is either not reliable or not rele-vant to the decision you are trying to make. A good decision uses reliable and relevant information while properly accounting for uncertainties. A laser focus on your objectives can help you achieve this task. It is important to remember that there are no future facts. At best, good factual information only describes the present and the past. Decisions are concerned about the future and the future is full of uncertainties. Use experts wisely to help gather relevant information about what the future could look like but do so with a realistic view concerning uncertainty. When you look back on a decision, you want to be able to say that you incorporated the relevant facts known at the time and the best information about what the future could be into making your decision.
5. Clear tradeoffs and sound reasoning
One of the most difficult challenges in making de-cisions is grappling with tradeoffs involving multi-ple objectives. This is one of the reasons we often try to monetize everything and treat decisions as profit maximizing choices. However, seldom can this be done without some difficult discussions about what something is worth. In other words, grappling with tradeoffs between objectives can be difficult and requires sound reasoning. For exam-ple, if it is more important to have the capacity to harvest your crop within 10 days than it is to save $2,000 in interest then that needs to be reflected in the reasoning you use to make the decision.
Sound reasoning and evaluating tradeoffs also ex-tends to consideration of downstream decisions. A decision made today usually impacts future deci-sion opportunities and available choices. Decision trees can be useful in drawing out connections be-tween the alternative choices under consideration and the impact they have on downstream deci-sions.
Finally, all of these tradeoffs and reasoning take place in a world that is filled with uncertainty. This needs to be reflected in your process. Appropriate scales need to be used and the tradeoffs need to reflect the accuracy of those scales. It is sound rea-soning to treat two values as equal if they are close enough given the uncertainty surrounding them. As you look at your decision, you want to be able to say that your reasoning was sound in evaluating how well each alternative choice would help ac-complish the objectives you have for making the decision.
6. Choice alignment with values and objectives
If you make a good decision, you should be able to look back and say that the choice you made aligned well with your values and the objectives you were trying to accomplish. Sometimes, we for-get to reflect on this before making our final choice. It is important to remember to do so be-cause often one objective becomes too easy to fo-cus on relative to the others and begins to domi-nate your selection process. A quick reflection on choice alignment with values and objectives can help prevent your decision from improperly re-flecting an imbalance amongst your priorities.
7. Committed implementation Finally, a good decision must be accompanied by a commitment to implement it. When you evaluate your decision, reflect on how committed you are to fully implementing your choice. When you look back on a decision, you want to be able to say that the choice was implemented completely and a committed effort was made to make it a success. It is important to realize that even with all seven of these characteristics in place; good decisions can still lead to bad outcomes because of uncertainty. That is why you can’t judge the quality of a decision based solely on the results. Results are obviously important but habits that produce these seven characteristics de-scribing the choices you make are even more im-portant because they will more consistently produce good results.
References and Recommended Reading: Hammond, John S., Ralph L. Keeney, and Howard
Raiffa. Smart Choices: A Practical Guide to Making Better Life Decisions. New York: Broad-way Books, 1999.
Spetzler, Carl, Hannah Winter, and Jennifer Myer. Decision Quality: Value Creation from Better Business Decisions. Hoboken, New Jersey: Wiley & Sons, 2016.
Jay Parsons, (402) 472-1911 Associate Professor
Dept. of Agricultural Economics University of Nebraska-Lincoln
Decision Process
Identify Decision Opportunity:
Establish the Context Objectives:
Internal Context: External Context:
Risk and Uncertainties:
Alternatives:
Consequences:
Risk:
Risk Analysis
Alternatives
Objective Consequences
Alternatives
Tradeoffs:
Decision:
Implementation:
Linked Decisions:
Smart Choices in Agriculture A Decision Making Process
Jay Parsons, Ph.D. Department of Agricultural Economics
University of Nebraska-Lincoln [email protected]
