Clear Thinking

To overcome our defaults and improve our thinking, we must build strength to make a space for thinking between a situation and our response.

We need make it a habit and use inertia default for our benefit. Here are the source of strengths to be developed:

• Self-accountability (holding ourselves accountable for our actions)
• Self-knowledge (knowing our strengths and weaknesses)
• Self-control (mastering our emotions)
• Self-confidence (trusting our abilities)

Once we’ve build the strength to create space for thinking, then we can apply clear thinking to make decision.

Decision is a judgment that certain option is the best one.

Decision making process is as follow:

1. Define the problem
2. Explore potential solutions
3. Evaluate the options
4. Make the judgment
5. Execute the best option

When deciding between several options, you must have specific evaluation criteria with these features:

• Clarity: criteria must be clear, simple, and easily understood
• Goal Promotion: criteria must favor options that achieve desired goal
• Decisiveness: criteria must favor exactly one option.

For example, you want to live in suburb and look for new job. You can use the following criteria:

• Increased take home pay at least 30% (Clarity, Decisiveness)
• Allow work-from-home (Goal Promotion)
• You believe you can make impact in the first 90 days (Decisiveness)

You must know what is the most important thing for you when using your selection criteria.

If you don’t know what it is, then you don’t fully understand the problem yet.

One way to find the most important thing is by listing down all the criteria, then compare in pairs (one-to-one) which criteria is more favorable when it’s true. Do it for all criteria until we find the ultimate winner.

Quality of your decision is determined by the quality of information you have. Most information is irrelevant. High quality information is both accurate and relevant.

Seek information from direct source. Run your own experiments. Learn from the real expert, not imitator or popularizer. Evaluate motivation and incentives of your source, because everyone has their own perspectives.

High quality information comes from experts. There are ways to approach them effectively:

1. Show that you have skin in the game
2. Be precise on what you’re asking
3. Show respect for their time and energy
4. Listen to their reasons
5. Follow up and keep them updated

Experts love sharing what they know especially if it makes difference. Helping others make their life meaningful and they also enjoy doing what they’re good at.

At certain point, you must stop looking for more information and start taking action.

It depends on whether the decision is reversible or not and to what extent the outcome is consequential.

Take action based on the following rules:

• ASAP (as soon as possible): if the cost to undo the decision is low
• ALAP (as late as possible): if the cost to undo the decision is high
• FLOP (first lost opportunity): if we start losing options

For example, decide ASAP what to eat for breakfast, decide ALAP where to live, and be aware of FLOP when you choose where to have internship.

Things don’t always go as planned. You need to have a buffer between what we expect to happen and what could happen. That’s margin of safety.

Engineers build a bridge to sustain more than double its maximum capacity. Investors only choose business they understand so that they can calculate the margin of safety. You need to save for rainy days.

Most people evaluate decision based on its outcomes, but they forget that there are outside factors, such as luck.

Quality of a decision is determined by the process and the reasoning used when the decision is made.

To evaluate your decision we need to make it visible by writing down your thoughts when you make the decision. Then you can evaluate whether the result is aligned with your expectation or not.

For example, a good trader usually keeps a trading journal to record each trade and reasoing behind it. This way allows them to learn what works and improve their trading skill over time.

We’re making decision mostly to get what we want, but it’s equally important for us to know whether what we want is the right thing.

In the end, it’s about what matters in life. We all want a happy, fulfilling and enjoyable life. We need to think deeply on whether what we pursue align with our ultimate goal.