When you make a decision, you’re doing it with limited information. As things unfold, you may get new information. That new information reveals that another option is better.
There are, of course, costs to quitting. Part of a good decision-making process involves factoring in the costs of quitting. The lower the cost of quitting, the faster you can make decisions because it makes it easier to change course partway through as you get more information. When the cost of quitting is low, that can also be an opportunity to experiment and learn more about the world or your own preferences.
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Time is a limited resource. Therefore it is important to be able to distinguish when which decisions are worth spending more time on, and which ones are not.
There is a trade-off between time and accuracy. Increasing the accuracy of a decision costs time, but saving time costs accuracy....
Happiness is a good proxy for understanding the impact of a decision on achieving long-term goals.
The test involves asking yourself if the outcome of the decision will likely have a significant effect on your happiness in a year, month or week. The shorter the time period for which your an...
Two things determine how life turns out – luck and the quality of your decisions. You can’t affect luck, but you can affect the quality of your decisions. By improving the quality of the decisions, you increase the odds of good things happening to you.
The future is inherently uncertain, so...
People generally find it hard to distinguish a good quality decision from a decision that turned out well. Instead of assessing the decision-making process, they just tend to look at the result of the decision.
Psychologists call this “outcome bias”.
The idea that the result of a dec...
Once you’ve made an estimate of the likelihood of each outcome, it’s important to be clear about how uncertain your estimate is. A good way to do this is to offer a range alongside your estimate.
The purpose of a range is to signal, to yourself and to others, how uncertain you are of your g...
In the case of any single decision, good quality decisions can still turn out bad and a bad quality decision can still turn out good. This is due to the role that luck plays. In the long run, however, higher quality decisions are more likely to lead to better outcomes.
The paradox o...
Most people are likely to blame bad luck for a bad outcome and credit skill for a good outcome. This is motivated reasoning. Motivated reasoning is the tendency to process information to get to the conclusion we want (rather than the truth). Motivated reasoning might be comforting, but it hinders...
A decision tree is a useful tool for evaluating past decisions and improving the quality of new ones.
Before a decision, the different potential outcomes of that decision are like the many different branches of a decision tree. There are many possible futures but only one past. Once the out...
Freerolling describes a situation where there is an asymmetry between the upside and downside because the potential losses are insignificant. The limited downside means there is not much to lose – but potentially much to gain.
Once you identify a freeroll opportunity, you don’t need to thin...
Hindsight bias is the tendency to believe that the way something turned out was inevitable or at least predictable. A common example is when people say “I should have known”, “I can’t believe I didn’t see that coming”, or “I told you so (especially if they didn’t)”. Hindsight bias can di...
“Reasonable” is the key word here. You don’t have to try and account for every possibility. Some outcomes are so unlikely it’s not useful to include them in your decision process.
These outcomes can be general scenarios or more focused on particular aspects that you care about. For example,...
To what degree do you like or dislike each outcome, given your values?
This is a personal question that can vary between individuals. The simplest way to do this is to list potential outcomes on the tree in order from most preferred to least.
You should also think about the ...
It’s important to make an estimate, even if you’re unsure
Most people are uncomfortable estimating the likelihood of something happening in the future because they don’t like being wrong. Since you don’t have perfect information, you can’t give an objectively perfect answer.
Beliefs are contagious. If you tell others what you think when asking for feedback, their feedback is likely to mirror your own views. Keeping your views to yourself makes people more likely to tell you what they really think.
Outcomes are also contagious. ...
Make a checklist of details that someone would need to know in order to give you high-quality feedback and then give them those details. This is particularly useful for repeating decisions because you can think about it before considering an individual instance of a decision.
Maximising is trying to make the “optimal” decision. It involves examining every possible option and trying to make the perfect choice. Most people have maximising tendencies, but there’s no such thing as a “perfect” decision when information is imperfect.
Confirmation bias – The tendency to notice and seek out information that confirms our existing beliefs.
Disconfirmation bias – The tendency to be more critical of information that contradicts our existing beliefs.
Overconfidence – ove...
One way to make higher quality decisions is to get more information – often from other people. If you’re using these ambiguous terms with other people, it’s harder to uncover disagreement (and disagreement can help you get relevant information).
Precision uncovers disagreement. For example...
Once you’ve combined probabilities with your preferences for each payoff/outcome, you will be able to evaluate and compare options more clearly.
Consider the other options objectively.
Compare the options to one another but do not rely on a pros and cons list.
A pros and...
Sometimes we have trouble deciding between two options that seem very close to each other in quality. These decisions are “sheep in wolf’s clothing”.
Even if such decisions are high impact, the closeness is a signal that you can make the decision faster and worry less about accuracy. After...
More like this
Sunk cost is about the past. Opportunity cost is about the future.
If you are scared to quit (which is absolutely natural), always think of the opportunity cost. Think of the brighter future, not the scary past, and often times that is enough to give you that extra push...
An opportunity cost is the potential ‘alternative’ or benefit that is forfeited when one chooses a particular option.
The other, foregone option, if it is lower than other companies, is the key factor in this trade-off.
The sunk cost fallacy is one of the primary reasons you are so afraid to quit anything. It occurs when you tell yourself that you can’t quit because of all the time or money you have already spent. The idea of all of that going to waste is what is keeping you at bay, paralyzed at th...
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