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Tradeoffs: The Currency of Decision Making

Tradeoffs

Every decision we take, has a tradeoff, an opportunity cost. Instinctively we try the all-out approach, resulting in failure.
The real problem lies in our judgment of the opportunity cost.

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IDEA EXTRACTED FROM:

Tradeoffs: The Currency of Decision Making

Tradeoffs: The Currency of Decision Making

https://fs.blog/2019/12/tradeoffs-decision-making/

fs.blog

7

Key Ideas

Tradeoffs

Every decision we take, has a tradeoff, an opportunity cost. Instinctively we try the all-out approach, resulting in failure.
The real problem lies in our judgment of the opportunity cost.

Striving for Everything

A tradeoff is inevitable in almost every decision we take, as we usually forego some opportunity or benefit in our choices.

Many people strive for everything and believe there are no tradeoffs.

Focussing on less can get you something but focusing on everything may get you nothing.

Having "Everything"

We seem to think that the people around us have everything in life.

Tradeoffs in others take time to become apparent. Everyone lets go of something, making a sacrifice, to be able to focus, investing time and energy in what is important to them.

Balancing Everything is Impossible

It becomes impossibly hard to completely fine-tune and balance your work, family, health, relationships, friends and hobbies. 

We may have to let go of one of the areas to be able to fulfill the others.

Barry Schwartz

Barry Schwartz

The necessity of making trade-offs alters how we feel about the decisions we face; more important, it affects the level of satisfaction we experience from the decisions we ultimately make.

Time is a Tradeoff

Big decisions involve opportunity costs. Time is the price we pay for the choice we make.
Time is always a constraint as if we spend time doing something, we are not doing something else at that time. We can spend time in cultivating better habits than to unconsciously waste it daily doing trivial tasks.

Focus your Energy on Less

In the countless decisions we make, it is a good idea to focus your energy on less, considering the tradeoffs.
This makes us eventually make satisfying choices, that we can prioritize.

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SIMILAR ARTICLES & IDEAS:

10/10/10 Rule

Before making a decision, considers how you’ll feel about this decision in 10 minutes, 10 months, and 10 years.

It’s easy to make short-term decisions that may be beneficial 10 minutes...

Pareto’s Law

In anything we do, there’s always ~20% of activities that will deliver 80% of our desired results.

It’s easy to be wrapped up in ‘busy’ work without ever getting anything done. Pareto’s Law is a useful mental model to be more effective, rather than just be efficient.

Parkinson’s Law

Work expands so as to fill the time available for its completion. So try placing artificial time limitations.

If we’re given three hours to complete a task that normally would take an hour, we’ll find a way to fill those three hours. However, when we’re down to the final thirty minutes, we’re suddenly feeling the pressure to get things done. 

Not Making Good Decisions
We are exposed to biases that influence our ability to make good decisions.
  • We are quick to jump to conclusions because we fail to search for information that might disprove our thoughts.
The Four Villains of Decision Making
  • Narrow framing: The tendency to define our choices in binary terms. We ask, "should I, or shouldn't I?" instead of “What are the ways I could...?”
  • Confirmation bias: People tend to select the information that supports their preexisting attitudes, beliefs, and actions. 
  • Short-term emotion: When we’ve got a difficult decision to make, our feelings occupy our minds. And this doesn't add any new information that could benefit us. 
  • Overconfidence: People often think they know more than they actually do about how the future will unfold.
Defeating Decision-Making Villains
  • Counter narrow framing by widening your options. Expand your set of choices.
  • Confirmation bias leads you to gather self-serving information. Analyze and test your assumptions to overcome the bias.
  • Short-term emotion will tempt you to make the wrong choice. So distance yourself before deciding.
  • Prepare to be wrong. Don't be overconfident about how the future will unfold.
Get The Most Out Of Your Time

It starts with knowing what your time is worth. For instance:

  • People who spend their time doing more profitable work make more money. 
  • People who...
Monetary Value of Time

We all have some idea of how much our time is worth. On extreme ends, it is easy to know if a task is worth your time. For instance, if someone offers you $0.07 per hour and another $7,000 per hour, you would have no problem to decide.
However, in the middle of the time-value spectrum, it is less clear if a particular task is worth your time. While everyone has an hourly value, few people know the exact amount.

The Real Worth Of Your Time

Use the Realized Income Methods to calculate the value of your time. It is based on the income you received and will help you make better decisions on how to spend money day-by-day. You need two numbers for your calculations.

  1. How much time you spend to earn money.
  2. How much you earn during that time.

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