Limitations of Decision Trees in Business Investment Decision Making

The video explores the use of decision trees in business investment decisions, highlighting their advantages in representing choices and outcomes. However, it also delves into the limitations, such as biases in probability estimates, difficulty in acquiring meaningful data, and neglect of external factors. The concept of the 'flaw of averages' is introduced, illustrating how businesses might face issues with decision trees due to risk aversion and the potential for exaggerated data. The video concludes by comparing two investment options, emphasizing the importance of considering risk and intuitive decision-making.

What are some limitations businesses face when using decision trees for investment decisions?

What external factors can influence the outcomes of investment projects that decision trees may overlook?

How do biases in data affect the decision-making process in businesses using decision trees?

Discuss the importance of qualitative data in the decision-making process compared to quantitative data.

Explain the concept of the 'flaw of averages' as discussed in the video.

Why might businesses prefer investment A over investment B despite both having the same expected value?

How can the systematic approach of decision trees lead to potential problems for businesses?