How do you make decisions?
I just finished going through Annie Duke’s latest book, How to Decide. Last year, I read her previous book, Thinking in Bets. Both are great primers on decision-making. How to Decide is laid out like a workbook and has a variety of exercises to complete at the end of each chapter. If you’ve read other books about decision-making before you will likely have seen a lot of this material (studies, concepts, etc.) before. But I like how she presents everything and feel like the book does a great job of bringing all of the pieces into one place. Definitely worth checking out.
Of course, this means that my question this week is about decision-making prompted some serious reflection into my own decision-making models.
How do you make decisions?
Here’s a few things that came up this week while I was thinking about this question….
Resulting
Duke uses the term ‘resulting’ in both books and the idea is that we judge the quality of our decision on the quality of the result. This isn’t helpful because they are not always directly connected.
Maybe I run a red light and don’t get a ticket or cause an accident.
Maybe I go through a green light and get hit by someone.
I doubt there is anyone who would argue the right decision was to run the red light. But we make similar assertions in different areas all the time because we look only at the result. A bad decision could lead to great results in the same way that a well executed decision could lead to poor results. Don’t look solely at the results.
Dumb luck and bad luck
The reason we can’t look at the results as our only indicator of a well reasoned decision is that for any situation that does not have a 100% guaranteed outcome we must accept the role of luck. A decision with a 99% chance of success still has a 1% chance of failure. And bad luck can strike any of us. Similarly, dumb luck can make any of us think that our terrible decision with a 1% chance of success was a great decision if dumb luck happens to tip the scales in our favor. We have to acknowledge the role of luck in almost everything.
When to use a model
We may not need a decision-making model to choose our outfit for the day but we do want one when we need to make a seemingly big decision. Should I quit my job? Should I move? Should I buy this investment property? We face loads of big decisions and if we can create a model that leads to the best possible decision, then regardless of the outcome, we can take confidence in the result (even if it’s not what we wanted).
Small decisions
Duke says that small decisions, decisions that have minimal impact, are repeatable, without large opportunity costs should be developed over time through experimentation.
This is one of the things we intuitively know but still get tripped up on. One of the things she recommends is that we constantly experiment with these small decisions to build out a menu of things we like and things we don’t. As our menu grows and we build more data points around the items on the menu we will find that these small decisions no longer take any time. Have you ever met someone who orders the same thing on the menu at their favorite restaurant? They may have tried a variety of different meals to build out their menus of likes/dislikes.
Don’t waste time fretting over small decisions, just keep experimenting till you really find what you like. I’m still trying to find the perfect white t-shirt because that’s become my go-to clothing item. If you have any suggestions, let me know!
Base rates versus snowflakes
We’re different. Our situation is different from everyone else. We tend to overestimate the uniqueness of our situation compared to others. Ask a first year restaurant owner how likely it is that their business will succeed and they will give you a high percentage (at least I hope so). But the reality is that 60% of all restaurants close before they hit their first year in business. Yes, we should be hopeful. But we should also understand the landscape we’re entering. We want this objective data to help ground us in our journey. Knowing that there is a high rate of failure before beginning our own journey can prompt us to better understand the obstacles in front of us and help to begin problem-solving the common issues before we even face them. We need to find base rates to bring in a dash of reality to our dreams.
Pay attention to the unexpected
Some decisions will end with the result you wanted. Some decisions will not end with the result you wanted. Some decisions will end with a completely unexpected result. Your decision-making is only as good as your ability to anticipate all possible outcomes. If you experience an outcome that didn’t even come up as a possibility when you were thinking through the decision, you need to step back and look at how you missed this. How did you miss this possibility? How can you approach your process differently in the future to account for something like this?
Hard decisions = easy decisions
Have you ever had two really good options in front of you and you painstakingly struggled to decide between the two? If the outcome of this decision has minimal impact, stop weighing the options and just choose one and move on. Choosing between two really fun vacation destinations that seem equally matched shouldn’t take up tons of bandwidth. Ask yourself, “if this was my only option, would I be happy?” If the answer is yes, choose one and don’t look back.
Find your range
Have you ever heard someone say, “yeah, I think it’s likely that this will happen.” What is your interpretation of the word “likely?” If you were to note it with an exact percentage what would it be? 60%? 80%? 100%? We all have different definitions for words that express probabilities. In group decisions it’s important to establish common language and the easiest language ot use is exact figures. Instead of saying something is likely, commit yourself to a range—the likelihood of this happening is 65% to 80%. Your goal is to supply the smallest range possible that still contains the real probability. This is hard. But it also creates a common understanding of the likelihood of something happening.
Prayer
Anytime I’ve got a big decision in front of me, I pray. I ask for help in the decision-mkaing process and then eventually take my decision back to God and essentially say, “here’s what I’m thinking. If this is a terrible idea, please put something in the path to block my way and I’ll stay open to any adjustments that need to be made.” We’re meant to reason things out as best we can and we’re also meant to stay open to the plans God has for us that we may not fully understand until the pieces of the puzzle are in place.