Any decision is, in essence, a prediction about the future. Making a decision is making a guess about how things might turn out.
You can rarely guarantee a good outcome (or a bad one). The goal is to try to choose the option that will lead to the most favorable range of outcomes.
Good outcomes can result from both good and bad decisions, and bad outcomes can result from both good and bad decisions.
- Step 1, for each option under consideration, identify the reasonable set of possible outcomes.
- Step 2, identify your preferences using the payoff for each outcome – to what degree do you like or dislike each outcome, given your goals and values? If an outcome moves you toward a goal, the payoff is positive. If an outcome moves you away from a goal, the payoff is negative.
- Step 3, estimate the likelihood of each outcome unfolding. You know enough to make an educated guess. All your knowledge, imperfect as it might be, means that your guess isn't random. The willingness to guess is essential to improving decisions.
- Step 4, assess the relative likelihood of outcomes you like and dislike for the options under consideration. With the possible outcomes, payoffs and probabilities, you can now see how the upside compares to the downside, whether the possible gains compensates for the downside.
These four steps force you to assess what you know, and seek out what you don't.
Increasing accuracy costs time. Saving time costs accuracy.
The challenge for any decision-maker is that you want to accomplish two things at once: You don't want to waste too much time and you don't want to sacrifice too much accuracy. The key to balancing the trade-off between time and accuracy is figuring out the penalty for not getting the decision exactly right.
If your goal is to get certainty about your choice, you will be stuck in analysis paralysis and never be finished. Pretty much every decision is made with incomplete information.
One of the best tools for improving your decision-making is to get other people's perspectives.
When asking for input or advice, don't offer your opinion first. When you tell someone what you think before hearing what they think, you can cause their opinion to bend toward yours, oftentimes without them knowing it. Provide what the person needs to know to give worthwhile feedback – and nothing more.
The goal of good decision-making can't be that every single decision will work out well. That's an impossible goal. Embracing that fact is necessary for becoming a better decision-maker.
Your goal is, across the portfolio of all the decisions that you make in your life, to advance toward your goals rather than retreat away from them.
"How to decide" by Annie Duke
