The 12-Week MBA Chapter 16: Collective Action and Decision-Making - How Teams Actually Make Decisions

You and four friends cannot agree on a restaurant. Now imagine trying to make a strategic decision with a team of thousands. That is the problem this chapter tackles, and the answer is not what most people expect.

This is post 17 in my 12-Week MBA retelling series.

The Peloton Story

The chapter opens with a dramatic real-world example. John Foley founded Peloton and rode it to massive success during the Covid-19 pandemic. Then in February 2022, he abruptly resigned.

What happened? As the pandemic wound down and people went back to gyms and offices, Foley kept betting on growth. He expanded production, filled warehouses with bikes, and hired aggressively. But the demand evaporated. Investor group Blackwells Capital released a brutal 65-slide presentation titled “Peloton Has Been Grossly Mismanaged.” Their biggest complaint? Poor decision-making across strategy, demand forecasting, safety, and hiring.

From the outside, it looks like an open-and-shut case. Foley made bad bets and lost. But the authors push back on something important. Was this really bad decision-making, or was it a reasonable bet that just did not work out?

Foley bet on continued growth. Growth did not materialize. Under uncertainty, some calls go your way and some do not. That is literally what uncertainty means. The question is not whether the outcome was good. The question is whether the process that led to the decision was sound.

This distinction between outcome quality and process quality is one of the most important ideas in this chapter.

Teams Are the Decision-Making Unit

Before getting into frameworks, the book establishes something fundamental. Organizations do not make decisions. People do. And the basic unit for collective decision-making is the team.

Whether you are running a startup or a company with hundreds of thousands of employees, everything ultimately comes down to small groups making choices together. Jeff Bezos has his famous two-pizza rule: a team should be small enough that you can feed everyone with two pizzas. That usually means single digits.

If you are a manager, you are probably on at least two teams. The one you lead and the one your boss leads. The book borrows an insight from Patrick Lencioni’s The Five Dysfunctions of a Team: your boss’s team is your first team and the team you lead is your second team.

This sounds counterintuitive. You might feel more loyalty to the people you manage directly. But the authors argue that committing to your first team is how you make sure your area stays aligned with the organization’s overall goals.

Think about the social dilemmas from the previous chapter. You can be personally selfless but still work selfishly toward your own team’s goals at the expense of the wider company. Turf wars, budget padding, hoarding resources. These are team-level social dilemmas. Your first team loyalty is the antidote.

Business Is a Series of Interesting Decisions

The authors share a quote from Sid Meier, the creator of the strategy games Civilization and Railroad Tycoon. Meier defined games as “a series of interesting decisions.” The authors think business is the same thing.

What makes a decision interesting? Two conditions. First, the options must be mutually exclusive. If you can do both, there is no real decision. Second, the outcomes must be uncertain. If one option is obviously better, there is no real decision either.

Both of these sound obvious. But they set up something important: the difference between the decision-making process and the decision’s outcome.

The Dice Game

The book illustrates this with a simple bet. Imagine rolling two dice. You predict whether the total will be between 2 and 8, or between 9 and 12. If you are right, you win a dollar. If you are wrong, you lose a dollar.

With fair dice, the 2-to-8 range comes up more often. So you pick that. Then you roll a 10 and lose.

Did you make a bad decision? Would you choose differently next time? Of course not. Given the available information, you made the right call. You just got an unlucky roll. The process was good even though the outcome was bad.

Now the book adds a twist. What if you could inspect the dice first, but it costs five cents per face you reveal? How much would you spend checking before you decide?

This gets at something deeper. Gathering information to make better decisions is itself a cost. Time, money, effort. And that cost has to be weighed against the benefit of making a slightly better choice. There is a point where analyzing more is not worth it. The authors tell the old story of a donkey sitting perfectly between two equally attractive piles of hay, unable to choose, and starving to death. Real donkeys do not do this. Real people should not either.

Good decision-making is about having a process that catches bad assumptions, produces good results more often than not, and does not cost more to run than any of the options on the table.

The Content Trap

Here is where this chapter really gets interesting. The authors run business simulations for a living. They have watched thousands of teams make decisions in over fifty countries. And they see the same mistake over and over.

They set up a simulation where a five-person team runs a virtual company. The first task is simple: choose which of three market segments to target. Here is the trick. The authors designed all three segments to be equally attractive. The choice itself does not matter much. What matters is that the team picks one and commits.

They give teams thirty minutes. Sometimes they give them an entire evening. It does not matter. The teams will argue about which segment is best until the clock runs out. They will pick apart every data point. They will construct elaborate theories about the fake economy the game designers built. Sometimes teams are still arguing at the bar at eleven at night.

The one thing they will not discuss? How they will make the decision as a team. Who speaks when? How do they resolve disagreements? When do they stop debating and just pick something? Those questions almost never come up.

The authors call this the content trap. We are drawn to the what of a decision like moths to a flame. What should we do? Which option is better? What does the data say? The content is exciting. It is where we show off our knowledge and earn respect.

But the how of decision-making? The process? That feels boring. Talking about rules and procedures is not nearly as exciting as arguing about strategy.

Why Action Bias Makes It Worse

The book connects this to a psychological concept called action bias. When there is a problem, we want to jump in and solve it immediately. We want to do something, anything, rather than sit and plan. This bias is especially strong in people who become managers and entrepreneurs. Our accomplishments came from seizing moments, not from watching them drift by.

But individual action bias can paralyze collective action. Five people all trying to solve a problem at the same time, without agreeing on who speaks when or how to resolve disagreements, is not teamwork. It is an intellectual brawl.

The authors admit they set their simulation teams up for this failure on purpose. They do not hint that teams should discuss process first. Then, after the first round goes badly, they reveal the trick. They tell teams explicitly: define your decision-making process before tackling the decision itself. Then they send the teams back out.

What happens next is almost comical. Someone starts with “OK, let’s talk about how we work together as a team.” Within seconds, someone else says “I think we need to lower our prices this round…” And the whole team dives right back into content.

The pull is that strong.

Forming, Storming, Norming, Performing

For newly formed teams, the content trap is at least obvious. You can feel the friction. Psychologist Bruce Tuckman described team development in four stages: forming, storming, norming, performing. A team comes together, clashes happen, they figure out rules for working together, and then they start producing results. It is basically the plot of every sports movie ever made.

But established teams face a sneakier problem. They have norms already, some chosen consciously, many adopted without anyone noticing. They feel safe jumping straight into content because they trust their process. But they might not realize their process has blind spots. Or that their environment has changed so much that what worked before no longer does. For these teams, the content trap is harder to escape because it is less visible.

A Simple Decision-Making Framework

The book does not add another forced acronym to the pile. Instead it breaks decision-making into three phases that most frameworks share:

Define

This is where most of the real work happens. You need to recognize when you face a true decision point, identify your options, and evaluate likely outcomes.

Common mistakes at this stage:

• Ignoring important decisions while making mountains out of small ones
• Seeing either/or when it is actually both/and or locking yourself into obvious options without considering creative alternatives
• Going off half-cocked with bad assumptions about costs and probabilities, or the opposite, analyzing until the world moves on without you

Deliberate

Even after you have defined your options and evaluated them, reasonable people can disagree. The deliberation phase is about having an agreed-upon process for resolving those disagreements. At some point, you have to stop weighing pros and cons and actually pick something.

Execute

It is one thing to say “I have decided to go on a diet.” It is another thing to actually stop eating cookies at midnight.

The authors say the next few chapters will dig into each of these phases in detail. But the framework itself is less important than the habit of talking about how you decide before jumping into what you should decide.

Key Takeaway

The biggest enemy of good team decision-making is not bad data or bad judgment. It is the content trap. We are so eager to jump into solving problems that we skip the most important step: agreeing on how we will work together to solve them.

A bad outcome does not mean a bad decision. Under uncertainty, good processes sometimes produce bad results. But good processes produce good results more often. And the cost of running the process should never exceed the benefit of the choice you are making.

If you take one thing from this chapter, let it be this: next time your team has an important decision to make, spend the first ten minutes talking about how you will decide. Not what you will decide. It will feel unnatural. It will feel boring. Your brain will scream at you to just start solving the problem. Resist that urge. The teams that win are the ones who figure out the process first.

Book: The 12-Week MBA by Nathan Kracklauer & Bjorn Billhardt | ISBN: 978-0-306-83236-9

Previous: Chapter 15 - Leadership

Next up: Chapter 17 - Defining the Decision - Getting the problem right before solving it.

Part of the 12-Week MBA retelling series