The Villains (of Decision Making)
10/10/10 rule
How can I save money? My expense remains the same..so is there a choice?
Well, it turns out from an experiment that when one’s salary is divided into 10 envelopes instead of 1, individuals tend to save more!
Spending each envelope is an individual decision, making them think twice before making a big purchase.
Talking about decision making, here are some stats for you 👇
44% of lawyers would not recommend the profession to someone else.
More than half of teachers quit their jobs within four years.
83% of corporate mergers fail to create any value for shareholders.
Why are we (the human race) so bad at decision making? How can we improve?
Turns out that a lot of bad decisions are a result of our biases and narrow framing of our options.
It’s February month and we switch the theme to the art and science of decision making, a topic most of us often struggle with.
But before that, as mentioned earlier, our subscribers from India are having a tough time paying due to regulatory issues - so have enabled an alternative payment method from Razorpay.
“Success emerges from the quality of the decisions we make and the quantity of luck we receive.
We can't control luck.
But we can control the way we make choices.”
And making right decisions is a function of learnings over the past wrong decisions.
“Any time in life you’re tempted to think, ‘Should I do this OR that?’ instead, ask yourself, ‘Is there a way I can do this AND that?”
Instead of asking, “Should I buy this or not”, ask “What’s the best use of my money” or “how else could I spend this money?”
Instead of “should I break up with him or not”, ask “What step(s) should I take for our relationship?”
Sharing atomic ideas from the book Decisive by Heath brothers.
The Four Villains of Decision Making
The four villains of decision making:
Narrow framing. This makes you miss options When we face a choice, we tend to look at our options narrowly, and often in binary terms, e.g. “Should I buy a new house or not?” or “Should I quit or stay in my job?”. This limits the options that we consider.
Confirmation bias. Confirmation bias acts to make us gather self-serving information. As we analyze our options, we tend to only look for data that confirms our beliefs, assumptions and predispositions, instead of truly seeking the best information.
Short-term emotion. Short-term emotion will have you making hasty decisions Despite our detailed data and analysis, when we actually make our choice, we tend to be influenced more by our short-term feelings.
Overconfidence. You make wild optimistic guesses about the future.
After making the decision, we tend to feel certain about how the future will turn out, when in reality we are merely guessing and have no way of accurately predicting the future.
How to make the right decisions?
Use WRAP framework.
Widen your options
Reality test your assumptions
Attain distance before deciding.
Prepare to be wrong
Widen your options
Having more options gives you more things to consider, and you will overcome the tendency for narrow framing
“Our lack of attention to opportunity costs is so common, in fact, that it can be shocking when someone acknowledges them.”
Reality test your assumptions
Get outside your head and test your ideas in the real world.
Why is it that we are so good at advising others, but so bad at helping ourselves?
“The researchers have found, in essence, that our advice to others tends to hinge on the single most important factor, while our own thinking flits among many variables. When we think of our friends, we see the forest. When we think of ourselves, we get stuck in the trees”
Sometimes we think we’re gathering information when we’re actually fishing for support.
(I know for sure many startups who do this in the name of finding product-market fit)
Attain distance before deciding.
Overcome short-term emotion by attaining distance
Distrust the inside view and take the outside view. Get out of your own head and consult the base rates.
“When we assess our choices, we’ll take the inside view by default. We’ll consider the information in the spotlight and use it to form quick impressions.”
Prepare to be wrong
How do you even know if you are right or wrong? Well, setup a tripwire. The natural tendency in life is to slip into autopilot. A tripwire is a signal that would snap us awake at the right moment compelling us to reconsider a decision or to make a new one.
When you get stuck in autopilots, consider deadlines or partitions.
Use the vanishing option test
One way to force yourself to come up with ideas is to make your current option(s) disappear – “if this wasn’t an option, no way I could do it, what then would I do?”
The 10/10/10 rule for decision making
Ask yourself, “if I do this (or that), how will I feel about it in 10 minutes, 10 months, and 10 years?”
Asking this question can often put the decision and its consequences in perspective.
Happy being decisive!
PS: This is a rerun from an earlier post