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Tradeoffs: The Currency of Decision Making

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.

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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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10/10/10 Rule

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

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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.
Default options

Deciding is too much effort so we’re likely to just stick with the default or safer option if it’s already been chosen for us. 

When we get offered too many choices, the same...

Best decision making happens in the morning

This is when serotonin is at it’s natural high, which helps to calm our brain. Thus, we feel less risk averse and so we can face risks and make harder choices.

The part our bodies play in decision-making

If we’re feeling hunger, thirst or sexual desire, that can actually spill over into the decision areas of our brains, making us feel more desire for big rewards when we make choices. 

This can lead us to make higher-risk choices and to want for more.

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Decision-making errors

Most decision-making errors boil down to:

  • logical fallacies (over-generalizations, comparing apples and oranges, circular thinking)
  • limiting beliefs (underes...
Confirmation Bias

If you already have an opinion about something before you've even tried to figure it out, chances are you'll over-value information that confirms that opinion.

Think about what kinds of information you would expect to find to support alternative outcomes.

Attribution Bias

The “fundamental attribution error,” is when we excuse our own mistakes but blame other people for theirs.

Give other people the chance to explain themselves before judging their behavior.

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Make all important & difficult decisions on paper

It relieves pressure from the situation and allows your mind to focus on the task at hand, rather than spiraling into self-doubt and second-guessing.

When making decisions, get clear about your reasons

You’ve got to get absolutely crystal clear about your outcome and your purpose. If you forget the reasons behind your decision, you won’t follow through. 

Don't let fear motivate your decision making

And don’t wait for absolute certainty because you’ll almost never get it. One of the ways to overcome this is to have a consistent process for making decisions. 

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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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Typical Budgeting is Flawed

Typical regular budgeting methods assume that just by allotting limited money to a particular expense type (like groceries) is enough for us to spend less and balance our budget instantly.

Th...

The Reverse Budget

A Reverse Budget looks at your current lifestyle and makes slow improvements over time until things are sufficiently better.

We look at how much we are spending eating out, commuting and daily indulgences and see the past quarter trends using your credit card and bank account spending.

The Two Approaches using Trends

When you look at our past spending patterns and trends, you can select one or two categories to focus and use one of these two approaches:

  1. Tackle the high-dollar impact areas like housing, fuel, food, or healthcare, and see if those can be cut down to some extent.
  2. Focus first on your 'disposable money' expenses like eating out, and entertainment and curbing those, gradually.

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Decision fatigue

As you make more decisions (especially difficult ones), and as you consider more options, you start to get mentally tired making your subsequent decisions worse and more difficult.

Fewer options and decision making

We assume more options will make us happier, but that's not true.

By strategically decreasing the number of decisions we need to make we're making sure we actually choose something, and we can save our decisiveness for when it really counts.

Rules

A rule is a predetermined response to a given situation, a set action for how you’ll handle a common situation so that you don’t waste any time trying to decide between two or more small and unimportant options.

Examples: "I Never answer calls from unrecognized numbers" or "I don’t check email before 10 am, after 7 pm, or on Saturday."

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Lessons from Social Media
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The best time in world history

It is the best time in world history to be alive. We are safer, healthier, less violent, more tolerant, more educated, and more literate than ever. We have more economic freedom, more knowledge, more entertainment, and more connectivity.

But, the overwhelming amount of information and opportunity makes it more difficult to find meaning and purpose. We should learn how to deal with the effects of new technologies and be aware of its limitations.

Corporate overlords

Amazon's logistical efficiency, Apple's global supply chain and other tech companies like Samsung, Facebook, and Google are corporations that are holding the world together more than any international governmental organization.

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Meal Planning
Meal Planning

Meal planning is a sort of calendar for your groceries and meals. The same way you might plan out your week or month for work, meal planning takes care of that for each meal.

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Meal Plans Save Money

Buying groceries can last much longer. A five-pound bag of rice costs around $10. It can last for many weeks and also compliment any meal.

Meal Plans Save Time
  • Meal prepping: The idea is you have certain meals that you want to eat over a week, and you cook them in bulk and refrigerate them until needed.
  • Cooking for one: Instead of taking 30-45 minutes to cook each meal every day, you can take 1-2 hours at the start of the week and cook many meals to refrigerate that can cover the whole week.
  • Cooking in bulk is another way to save time. Try and make a little extra on purpose with each meal.

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