MWB #31 - How To Judge Your Decisions
All we do in life is an optimization to get better at decision making. In this week's letter, I expanded on decision making principle.
Hello there,
What I have to share with you today is short but can be the beginning of a new shift in your thought process. It’s about how to judge your decisions. We decisions every day, every hour and those decisions determine the direction of our lives. So it only makes sense to become a better decision-maker. So here’s a conversation between a Bank CEO and an Executive.
Executive: Looks like we made a poor decision
CEO: No. We made a good decision. The outcome was poor.
CEO: There were many unknowns and we decided based on what we knew.
CEO: Never judge a decision by its outcome.
A short conversation indeed but it touches the heart of what a lot of us do. We tend to judge our decision making prowess based on the outcome. Often, that is usually wrong. Outcomes depend on a lot of factors and those factors are usually out of our control. What’s important is our process to arrive at the decisions we are making.
And this is not only about when the outcome is not favourable. It also applies to conditions when the outcome is favourable. That is to say, you can make the wrong decision and get a favourable outcome and you can make the right decision and get an unfavourable outcome. Fortunately or unfortunately, that’s the way of the world.
I have invested in an asset for a bad reason and got a great ROI. I liked the ROI but I knew if I do that for well long enough, I will soon lose a fortune. I have also invested for the right reason and lost money. Again, it’s a common phenomenon. However, making decisions based on the wrong mental framework is not sustainable. Soon one will accumulate too great a loss.
On the other hand, spending quality time to improve your decision-making process will bring a better outcome sustainably. Here are few things that can help you become better at making decisions:
Become a student of history - knowing the “beginning” of a thing gives you an advantage of knowing how it got to where it is and the different decisions that men had to make to get it there.
Pay attention to patterns - Ian H. Wilson, former CEO of GE said this “no amount of sophistication is going to allay the fact that all your knowledge is about the past, and all your decisions are about the future.” Knowing that all your decision is about the future demands that you pay attention to patterns that may continue in the future or emerge in the future. Your decisions should be in alignment with those patterns.
Know how the world works - the knowledge of how the world works gives you the advantage to recognize patterns, discover new things, and understand when a thing is headed for doom or boom.
Be ready to change your mind as often as new information presents itself - nothing huts our decision making process more than willful blindness. But a mind that is open to constant updates in the light of new information is going to constantly get better at decision making.
This is surely not an exhaustive list and the subject of decision making is not one where one would read just a thing and consider themselves to have it all figured out. Never!
Rather, it is a subject that one must recognize its centrality and criticality and then determine to seek innovative ways to always get better at it. In fact, I will argue that all of our efforts in life is geared towards becoming better decision-maker. Yes, all. However, below are some obvious resources that have helped me to become better at decision making.
(blog) Farnam Street
(book) Thinking Fast and Slow
(book summary) Lessons of History
(Essays) Paul Graham
That’s just a handful actually. The more curious you become about getting better at decision making, the more you realize everything you do can be optimized to help you become a better decision-maker.
Tweet of The Week
This thread was thought provoking for everyone who read it. I believe you should give it a read as well.
That’s it for this week.
See you in the next.