Making decisions can often be a daunting task, but with the right framework in place, it can be a much more manageable and rewarding process. That’s where Decision Theory comes in. It provides us with a structured approach to decision-making, incorporating techniques from experts in various fields. In this blog, we’ll cover a range of techniques, from Regret Minimization by Tim Ferriss to Tony Robbins’ 6-step process, to help guide you towards making informed and effective decisions.
Regret Minimization by Tim Ferriss
Because we can never actually predict the future- Regret Minimization is the best way to choose when faced with a difficult decision.
Regret Minimization is choosing the decision that, if it does not work out as you had planned, you will regret less. Minimizing the regret you would feel if the path you take doesn’t work out. Here’s how it works:
- Step 1: Articulate the parameters of your decision. What do you actually need to decide?
- Step 2: Write down your first option.
- Step 3: Write down your second option.
- Step 4: Rank how much you will regret having chosen option 1 if it ultimately ends up a failure.
- Step 5: Rank how much you will regret having chosen option 2 if it ultimately ends up a failure.
- Step 6: Choose the option with the least regret.
Tip: The time horizon for knowing the success failure of an important career decision is 1–3 years.
Why is this the best decision theory?
- Because at the end of our lives, the worst is always to have regret. We therefore should always seek to minimize regret.
Making Good Decisions by Brandon Chu
I propose that being a good decision maker means doing two things: Making them using the right amount of information and as quickly as possible
Making decisions using the right amount of information
Deciding how important a decision is, is the most important decision you can make.
Jeff Bezos touches on this concept with what he calls type 1 and type 2 decisions.
- Type 1 decisions are not reversible, and you have to be very careful making them.
- Type 2 decisions are like walking through a door — if you don’t like the decision, you can always go back.
when the stakes are high, you should work a lot harder at making the right decision.
Although I don’t see Type I and II decisions as binary, I do see them as representing the spectrum for a framework for determining “decision importance”
This framework, or any variation of it, will create common ground for you to compare decisions and articulate the importance of them to others. Tweak it based on your current context, and recognize that defining decision importance informs everything else about how you should approach making the decision. So do it first.
Making decisions as quickly as possible
The less important a decision, the less information you should try to seek to make it.
- your confidence level on predicting a decision’s outcome is a function of how much information you have about the decision
- the more important a decision, the higher confidence you require and thus the more information you need
- your goal shouldn’t be to always make the right decision, it should be to invest the right amount of time in making a decision relative to its importance.
- The downside is that you will end up making more wrong decisions, but when you do, they’re likely not important. The upside is that you will end up making more decisions, which means you’re creating more output.
Information gathering effort follows the Pareto principle (80/20 rule)
- What’s the difference in effort required for gathering 35% of information versus 70%? It’s not 2x — most of the time you will already have a significant amount of the relevant information close by.
- The Pareto principle applies here in that you can usually get ~80% of the information you need with little investment, whereas getting 100% will take a lot of effort.
The combination of these models reveal something important. The speed of your decision making not linearly correlated to how important you think a decision is, it’s exponentially correlated. Incorrectly assessing a low importance decision as high means you waste a significant amount of time gathering excess information.
Most decisions are not important
Jungian psychoanalyst James Hollis recommendation
Ask yourself of every dilemma, every choice, every relationship, every commitment, or every failure to commit: Does this choice diminish me, or enlarge me?
Tony Robbins’ Strategy
- Needs to be done in writing, there’s too much in your head
- It’s value clarification
- What makes it hard is that there are several outcomes you want to get and it’s sometimes hard to get all of them and you don’t know the priority
6 step process:
1) Outcomes: Get clear on them
You have to know what you’re after, it’s often multiple things when it’s a hard decision so you have to put them in the order of importance
What’s the result you’re after? Why do you want to achieve it? You must be clear about your outcome(s) and its/their order of importance to you. Without this clarity, tough decisions just become more difficult decisions. Remember, reasons come first; answers will come second. If you don’t know the reasons you’re doing something, you won’t follow through. Get as specific as possible here.
2) Options: Know them
Write your potions down
The obvious ones you have as well as getting creative and coming up with a 3rd or more options
Write down all of your options, including those that initially may sound far fetched. Remember: One option is no choice. Two options is a dilemma. Three options is a choice. Write down ALL possible options whether or not you like them. The more options you have, the more confident you’ll be in your final decision.
3) Consequences: Asses possible ones
For each one write what’s the upside and what’s the downside
Now, look at what you’ve got. What are the upsides and downsides of each option? What do you gain by each option? What would it cost you? Again, the more detail you can get here, the better equipped you’ll be for phase 2.
4) Evaluate your options
Review each of the options upsides and downsides. As you think about the potential consequences, ask yourself these questions:
- What outcomes are affected if I take this option?
- How important (on a scale of 0–10) is each upside/downside in terms of meeting your outcomes?
- What is the probability (0–100%) that the upside/downside will occur?
- What is the emotional benefit or consequence if this option were to actually happen?
After jotting down these answers, you’ll probably be able to eliminate some options from your list. See, you’re already getting closer to the best solution.
How can you mitigate the downsides?
For each of your remaining options, now review the downsides. Then brainstorm alternative ways to eliminate or reduce those downsides. Again, the more ideas you can come up with, no matter how far-fetched, the better prepared you’ll be to face that potential consequence.
Based on the most probable consequences, select the option that provides the greatest certainty that you will meet your desired outcomes and needs. This is your best option — and because you’ve looked at so many other possibilities, you know that to be true.
Resolve that, no matter what happens, this option will give you a win. Design your plan for implementation and then take massive action.
Remember, it’s better to make a tough decision and monitor to see if you need to shift your approach than to remain paralyzed in indecision.
Farsighted Book Technique
Mapping: Generate Other Options
Identify other options
Actively seek them out — Explore other options
“Whether or not” decision vs “Which one” decision
Mapping: Seek Out Diversity
Assemble a diverse team of people to help you make the choice (they are collectively smarter)
Diversity trumps ability
Gender, ethnic, intellectual, and professional diversities are all good.
Brings in new information, new tools, new perspectives…
For personal decision also think about generational diversity
Predicting: Ditch the Single-Focus Approach
Humans are terrible at predicting the future
Be curios have an eclectic set of interests, diversity in your mind, it helps make you better at predicting. Draw upon different fields and disciplines.
Don’t be a single-minded thinker.
Predicting: Scenario Plans & Premortems
Imagine different outcomes — scenario planning
Thinking of long term consequences, think of stories:
- Things get weird
- Things go well
- Things go terrible
- Tell the story of how this decision went horribly wrong. It makes people more creative on looking at potential flaws they might not have perceived before.
- More likely to have it end right if you go through how it could go wrong.
Deciding: Consider the Possibility
Think rigorously about probability
Default (it’s going to happen, it’s not going to happen, maybe)… go further, add actual probability. 1–100
Jeff Bezos: don’t do it unless it has a 70% probability
Consider different probabilities
Deciding: Weight the Values
Which values are more important to you? in pro and cons list they are all weighted the same.
Value model: Updated pros and cons list
- Create a list of values that are important to you
- For each, give it a weight (numerical 0–1)
When overthinking (take action)
(These are just my personal notes, so a lot I copied from other places! Wasn’t planning to publish anywhere so didn’t save the sources but I’m sure if you paste some into Google you can read more on it and find the original source!)