Weekly Blog #17 - Three aspects of effective decision making...

Updated: Apr 27

I was once told that "everything in life is a process". I've also learned recently that "most of what happens in life is 'just another one of those'...". At first glance there is nothing special about these two sentences, they're not oozing with wisdom and they appear to be quite bland and universal. On second thought and after applying these sentences not only to what happens around us but to what directly effects us, there's a lot more to it.


Think about it: wouldn't it be great if we'd understand all the decisions we made to a level of detail that allows us to write down the processes we go through in such way that we and others could repeat our most effective and successful decision making processes at any given time? Therefor, we'd not only be able to minimize randomness but also to stop repeating mistakes we made in the past.


Unfortunately, most of the decisions in everyday life are made subconsciously. There are millions and millions of automated or semi-automated processes happening during the day - e.g. how we drive, how we ride a bike, how we brush our teeth, how we use our hands to create things - and we can call ourselves lucky if our brains have been trained and primed well enough so that the decisions and the processes that have been triggered lead to a positive outcome. However, it is almost certain that the outcomes don't carry the best results we could get if we'd fully understand all these processes. Just think of the amount of "good advice" that's been given to you about how to drive more safely or how to brush your teeth more efficiently...


To be clear: there is probably no one best way to make decisions. And there is no way that we can fully control all of the decision making processes that are supported or steered by our subconscious mind. However, there are some universal rules for effective decision making that can be applied to the bigger and more important decisions in life.


I am going to dig into three aspects of decision making that recently helped me the most:

1. cutting out emotions and weighing in second- and third- order consequences

2. recognizing blind-spots and believability-weighing decisions

3. synthesizing information through time

The first thing I had to understand is that if I want to make sound decisions I'd have to keep my emotions out of the equation. I tend to subconsciously make a decision first and then pick the data and information that supports it. Doing that on a regular basis results in becoming closed-minded to other options and ultimately making bad decisions.


Here's an example: since moving to Shanghai I wanted to get in shape and explore the benefits of a healthier lifestyle, including running, sleeping 7+ hours, eating less and healthier, etc.. Instead of being driven by positive or negative emotions while choosing if "today is a good day for running" or "ordering food on Sherpa's vs. cooking something myself" I started to ask myself if I had subconsciously already made up my mind and if so, to weigh in so called second- and third-order consequences to manipulate the subconscious decision making that has already been taken place.


The first-order consequence of running is usually being exhausted, sweaty and sometimes in pain. Additionally, you have to change your clothes, probably you have to drive to a certain place to do your exercise and sometimes you even have to pay for it. Your subconscious tells you that this is not what you want. So, if there is the slightest bit of doubt and you find a good excuse not to go you probably stay at home and do nothing. Regarding running at least that's been my decision making process for almost a decade!


To change something about it I had to compare near term results (getting up from the couch, sweat, pain, etc.) with potential results over time. I've been doing this for the better part of my professional career but never really in regards to decision making processes in my private life. Thinking about the potential second-order consequences of running regularly a few things come to mind: loosing weight, getting that six-pack I wanted, etc.. Third-order consequences could be: becoming more confident plus all the long-term benefits associated with a healthier lifestyle.


Important notice: weighing in second- and third-order consequences requires to learn about the process and the potential outcomes. It doesn't help if you only assume "potential gains and benefits" without knowing if they will ever come to pass. There's a difference between picking up pieces of advice through media, friends or family and really understanding the second- and third-order consequences that could result from the decisions you consciously make. It helped a lot to change the narrative of my decision making from "if I do A, the results COULD be B, C, D or E" to "if I do X, the results WILL most probably be Y and Z." by learning about the consequences and asking myself questions like "Am I learning?", "Have I learned enough?", "Can I make a good decision based on what I've learned?".


And on a side note: going through this type of process and weighing in second- and third-order consequences of your own behavior and the effects of our behavior on others can also be helpful in deciding how we personally handle the current situation related to 2019-nCov.

The second important aspect of decision making for me is to recognize and be aware of so called blind-spot areas regarding my own knowledge. This required me to lay off the ever so present confirmation-bias and to overcome my own ego. To do that I started creating a list of general topics that I don't know much about, e.g. the financial market, general health related topics, politics, ... I also gathered a couple of things I am familiar with to an extend that I can make good decisions on my own and give advice if others ask for guidance.


Whenever one of the topics from the first list calls for a decision, e.g. "Who do I vote for?", "What's the next investment I want to make?", "What can I do about my back pain?", I know that I cannot make the best decision by myself without consultation of smarter, more believable people. So I made a second list with sources and people I trust and I know to have good expertise in these areas. This method still needs proof of concept in my private life but it has helped a lot regarding work-related topics.


Important notice: regarding this process I am trying to make sure that I ask questions of the right people and gather information from the right sources. Finding out about one's track record can be very helpful to decide who and what to believe. Listening to uninformed people is usually worse than getting no answers at all. Also, it's important to learn how to differentiate opinions from facts and - if we are no sure about what to believe - gain some distance and look at the decisions we have to make from different angles. Everything looks bigger up close.


One more thing: I have learned that it is important not to overweight the importance of one piece of information in the decision making process. No matter how much one might approve of one specific data-point or a single important fact, it is only one point of data or information at a certain moment in time. Learning how much knowledge you can extract out of one specific piece of information is as important as differentiating between momentary or one-time occurrences and long-term patterns.

The third aspect of which I have only recently realized it's importance and relevance to good decision making is to synthesize information through time. Since the details of what synthesizing over time means have already been perfectly summarized in Principle 5.3 in the book "Principles" by Ray Dalio, I will mostly refer to this specific chapter in the following.


An important part of synthesizing information through time is to compare the level of change to the rate of things changing. If you want to make a decision based on the development of something, e.g. if you want to assess if the performance of an employee has improved, it is important to not only look at the level of improvement, for example by comparing work results from the past to more recent results, but to also look at the time that has past to reach an improvement. To determine an acceptable rate of improvement it is necessary to evaluate it's level in relation to it's rate of change. In other words: how fast do things improve, by how much do they improve, and is the the relation between these two factors acceptable to reach a certain goal in the future?


Another relevant aspect of making decisions through synthesizing is to understand the concept of "by and large". This means that it is important to be able to make good estimations and approximations and it can be helpful to be imprecise at times. Usually, our educational system requires us to be precise in every aspect. In real-life this can be quite impractical. Since most of my decision making usually has to be effective rather than perfect, knowing the facts "by and large" can be very helpful. Being aware when decisions are made "by and large" and letting others know it as well also helps to prevent detailed discussions about the "not always" cases. From my experience it is usually not worth diving into the weeds and having a discussion about the exceptions rather than making decisions based on the rule. Applying this to my project work has kept me from wasting countless hours on non value-adding discussions because most people quickly realize that they are referring to exceptions rather than the rule.


The last aspect I want to share in this regard and something I have to constantly remind myself of is the "80/20" or "Pareto" rule. The rule states that usually 20 percent of all possible causes create 80 percent of the effect and also that 80 percent of energy put into a process usually only create 20 percent of measurable gain. There is a lot of information about Pareto and the 80/20 rule out there so I won't dive into it in detail.

Some additional thoughts...


Besides the above mentioned aspects of making sound and effective decisions, it always helps me to understand on which level a decision making process and the accompanying discussion is being held.


There are certain levels, more and less detailed, on which a decision can be made. The different levels can provide different perspectives and it's important to understand and decide on which level it is appropriate to make a decision. For example, if you want to judge the quality of living in a certain area by looking at Google Maps, you can zoom in to street level and look at the different houses, but you can also zoom out to understand the peripherals and to learn about public transportation, regional geographical aspects, neighboring towns and cities and other interesting factors.


Deciding what level you want to base your decision on and understanding how to navigate the different levels is in my opinion crucial for effective decision making. However, this requires a lot of self-awareness, practice and discipline and I find myself more often that not struggling to clearly recognize what level I'm on and if it is the right level upon which to make my decisions.

If you are interested in further details and additional opinions regarding effective decision making I can recommend the following books (incl. Amazon Affiliate links):


"Principles" by Ray Dalio (https://amzn.to/33nrYft):


"The 80/20 Principle" by Richard Koch (https://amzn.to/38VzXS5):


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