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The advantages of a decision tree are fairly obvious: a “path” through possibilities, with alternatives, leading toward a desirable outcome. The tree anticipates dead ends and disastrous missteps, but most importantly it clarifies the difference between controlled and uncontrolled events – what decisions are in the CEO’s power to make, and what decisions must await the outcome of changes uncontrollable. For example, a tree showing ways to use excess capital will show what choices are available, and what choices must await Stock Market fluctuation. Another revelation from decision trees is the taxonomy of priorities – for example, is employee maintenance more or less important than stockholder dividends?
The major disadvantage of decision trees is loss of innovation – only past experience and corporate habit go into the “branching” of choices; new ideas don’t get much consideration. There is a tendency with trees to only consider paths that have been successful in the past, thus stultifying thought about changing situations. The trees are usually over-simple, not branched enough, and little consideration given to the “thickness” (value and probability) of each branch. Finally, like all metaphors, there is a tendency to argue by analogy – phrases like “the roots of the business,” the “seasons of new growth,” etc., tend to obfuscate the real debate. So, while they visualize the decisions to be made, at the same time they condense a complex process into discrete steps (which may be a good or a bad thing).
Decision trees are diagrams that help you consider and map out outcomes that occur after an initial decision. For example, a decision tree could help you decide between two jobs. After you construct a diagram showing each path branching out from your initial choice, you can consider where the initial decision might lead you.
The advantages of decision trees are that you can see where an initial decision might lead you and consider the effects and ramifications of that decision. For example, if you take one job, you might have to move, and that move would incur extra expenses, and you can consider all the ways in which the job would affect your life. The disadvantages of decision trees are that it is sometimes hard to predict the exact ways a decision will affect you because you may not have enough data to make accurate predictions about the future. In addition, you might be too optimistic or unrealistic to predict the future branches of a decision tree accurately.
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