Every problem we face — including war, crime, climate change, and income inequality — can be traced to decisions made by an individual or group of individuals. A company’s success or failure is the result of decisions. Decisions you make about school, career, health, and relationships have massive impact on your individual well-being and success.
The stakes are high, so what if we could learn to consistently make better decisions? We might find that the solution to most of our problems is hiding in plain sight right under our noses. In this post, I will present a 10-step, structured decision-making process. Adopting this process can help you avoid blind spots and choose actions that will help you build the life you want.
Your brain is a decision-making machine.
Our brains make thousands of decisions every day. In his book Thinking Fast and Slow, Nobel Prize winner and best-selling author Daniel Kahneman summarizes decades of scientific research on how the human brain makes decisions. He outlines how our brains have two modes of thinking.
System 1 is fast, instinctive, and emotional.
You use System 1 when you:
- solve 2+2 =?
- drive a car on an empty road
- display disgust when you see a gruesome image
System 2 is slower, more deliberate and more logical.
You use System 2 when you:
- solve 17 X 24 =?
- count the number of vowels in a sentence
- parallel park in a tight parking space
Both functions are useful depending on your situation. Our brain also creates shortcuts called judgment heuristics to save time, allow us to think faster, and to conserve energy. These mental shortcuts are usually helpful, but they also can be biased, creating blind spots when we are trying to make important decisions.
All humans are biased and have blind spots.
The science is clear. All humans have bias and blind spots. And we often make decisions without possessing or reflecting on quality information.
As Nobel-Prize-winning physicist Richard Feynman said, “The first principle is that you must not fool yourself — and you are the easiest person to fool.”
Smart people can make terrible decisions. Cognitive bias, blind spots, difficulty finding quality information, and time constraints can lead to poor decisions. Biases are pervasive, hardwired, and highly resistant to feedback, and they can cause us to overlook or dismiss crucial information.
The following are examples of common biases.
Availability bias. This bias leads you to believe that what you see is all there is. It can cause you to give preference to info and events that immediately come to mind, usually because they were recent, you personally observed them, or they were memorable.
Example. Most people overestimate the number of people killed by terrorism and underestimate risks associated with driving motor vehicles. According to a report created by the U.S. Department of Homeland Security, in 2017 there were 18,753 people killed globally by terrorists. According to Safer America, every year, roughly 1.3 million people die in car accidents worldwide — an average of 3,287 deaths per day. Therefore, more people die in six days due to car crashes than die from global terrorist attacks in a year.
Representative bias. This occurs when two things look or seem similar and you assume the two things will be the same or will lead to the same outcome. Representativeness is basically stereotyping.
Example. Many people may assume that Jim would major in engineering based on his interests and activities. Jim grew up playing chess and video games. He was president of the computer science club in high school and loved to build things. Is Jim more likely to major in business or engineering? Jim is more likely to major in business. There are almost four times the number of business degrees given compared to engineering degrees. According to a report by the National Center for Educational Statistics in the year 2014-15, there were 364,000 degrees in business and only 98,000 engineering degrees.
Confirmation bias. This describes our tendency to search for, interpret, and favor information that confirms our preexisting beliefs and desired outcome. It is not based on objectivity.
Example. Confirmation bias is prevalent in politics and can be seen when people consider emotionally charged issues such as immigration and abortion. Deeply held beliefs can cause people from left-wing and right-wing political viewpoints to see the same event in radically different ways and to reject alternative explanations.
Affect bias. This happens when you make decisions based on a strong positive or negative emotional state or you make a “gut” decision without consulting all the evidence.
Example. Attitudes towards nuclear power, climate change, and consumer judgments are commonly influenced by affect bias. I’ve been guilty of this bias. I worked for twenty years promoting renewable energy and energy efficiency. Due to my strong beliefs and bias, I did not fully consider the benefits of nuclear power and fossil fuels. I was wrong.
Decisions are influenced by many factors.
Humans are not consistent. In addition to bias, stress, fatigue, distractions, excessive attention to an outcome, peer pressure, or too much trust in an “expert” can all impact our decisions. The way information is presented and our natural limitations in memory, attention, and processing also can contribute to poor decisions.
On its own, rigorous, detailed analysis does not drive good decisions. Research conducted by McKinsey and Company, which included a survey of 2,207 executives, shows good analysis in the hands of managers who have good judgment won’t naturally yield good decisions. The third ingredient — the process — is also crucial.
Make smarter decisions.
Life requires lots of decisions, but not all decisions are equally important. Just because a decision is urgent and time sensitive does not make it important. Some decisions have greater influence on our lives, and those are the ones that deserve your best efforts.
Your ability to make good decisions depends on the quality of your thinking. The quality of your thinking depends on the quality of the models in your head. A model is an idea that helps you better understand the reality of the world around you. We all have models in our head based on our genetics, experiences, and backgrounds, and we need multiple models to make good decisions because one mental model is not sufficient.
“To the man with only a hammer, every problem looks like a nail.”
– Charlie Munger, vice chairman of Berkshire Hathaway
Life is too short to not learn from other people’s mistakes. Using multiple mental models allows you to learn from other people’s experience and look through a multidisciplinary lens. Using mental models activates the System 2 part of your brain and helps you see the problem or opportunity from different perspectives. The website Farnam Street provides an excellent overview of the most beneficial 109 mental models to help make better decisions.
Here are two examples of useful mental models.
Inversion. This model provides a thinking tool to help you remove obstacles or avoid a stupid action. Flip the problem around and think backward. By approaching the problem from the opposite end of where you normally start, you find an opportunity to identify obstacles in a different way.
Example. If you want to lose 25 pounds, you might normally think about the actions you need to take to accomplish that goal — eating healthier, exercising, etc. Inversion looks at the problem in reverse and involves identifying all the things to avoid — going to happy hour, walking by your favorite bakery, etc. Inversion doesn’t always solve the problem, but it helps you think more clearly about removing unnecessary obstacles.
The map is not the territory. Maps are useful tools, but they are a reduction of what they represent. Maps are an abstraction and therefore flawed. They are useful in guiding you as long as you test real world conditions as you go.
Example. Online dating profiles are maps. Anyone who has ever met a few different people from an online dating website knows that people do not always live up to how they describe themselves on their profile. The map is not the territory.
10-step process to avoid blind spots and make smarter decisions.
The best way to improve your thinking and the quality of your decisions is to refine your decision-making process. Not all decisions are important enough to require a process. But important decisions need a process to avoid bias and blind spots and give you the best chance to be successful. This process requires thinking deeply and writing down your answers to each step.
1. Define the problem or opportunity. Start with a blank sheet of paper and write down the problem or opportunity using clear and precise language. Don’t use jargon. Do use simple vocabulary that an eight-year old can understand.
2. Start with WHY? Why do you need or want to solve this problem? Or why do you want to pursue this opportunity? Is this the right problem or opportunity to work on?
3. What is the goal? What does success look like? How will you know if the problem is solved or the goal is met?
4. Who makes the decision? Identify and write down everyone involved in making the decision. If you are the only decision maker then it’s easy. But depending on the context or complexity of the decision multiple parties may need to be involved.
5. Identify and weight decision criteria. List up to five criteria to evaluate and test potential solutions or scenarios. Weight the decision criteria based on importance. For example, if I were evaluating new job opportunities, I would use the following five criteria and then apply a rating (1 to 10 scale with 10 as the best score) to each criterion for each job. This would provide a score for each job opportunity.
Interest level: interest in the mission and the problem the business is solving
Financial return: total compensation including base salary, benefits, and stock options
Location: distance I’ll need to commute to work
Impact: my potential impact in the company
Learning opportunity: how much will I learn in my role at this company
6. Select and apply mental models. Mental models force you to think about the problem or opportunity through different lenses. They provide a 360-degree view of the problem or opportunity to help reduce blind spots and minimize bias. This step may require compiling data and conducting analysis. In my example above regarding representative bias, I highlighted that Jim would be more likely to major in business instead of engineering. The only way to know this is to apply mental models such as the “insensitivity to base rates” or “regression to the mean,” which require creating a reference class that is statistically significant.
7. Create a minimum of three imagined scenarios. Develop at least three different potential solutions or scenarios with a detailed list of benefits and consequences for each scenario. Assume each scenario is wrong. Try to disprove them!
8. Get feedback from people with diverse viewpoints. Encourage competition of ideas from people with different backgrounds, skills, and perspectives. Be sure to include all people involved in making the final decision. Update scenarios and lists of benefits and consequences based on feedback.
9. Dedicate time to think. Set aside time to review and think about scenarios. Grapple with tradeoffs, uncertainties, and risk.
10. Make the decision. After you go through this type of structured decision-making process and think deeply about the problem or opportunity, you will often find that the answer is clear. However, if the answer is still not obvious, resist the temptation to make the decision by consensus. Review all the scenarios and feedback and make the final decision.
Your decisions shape the quality of your life. Success of companies and countries depends on better decision-making processes. All humans have bias and blind spots, and we often make decisions without quality information. Just being aware of your biases does not help you make better decisions. You must make the effort to utilize a deliberate process to overcome them. We form impressions way too quickly and then use selected evidence to confirm our initial conclusion. Experience brings increased confidence, but you should not rely on confidence in your intuition. Most people don’t recognize the limits of their expertise.
Use the 10-step process above and look for evidence that disproves your explanation. Resist and overcome your tendency to develop strong impressions and opinions too quickly. Problems need to be studied from multiple perspectives to ensure you are limiting your blind spots. Use mental models from multiple disciplines so you can see the problem from different perspectives. Then look to understand how these models fit together into a coherent whole. Knowledge is alive and subject to change as new evidence arrives. We need to continuously learn and relearn.
If you want to learn more about how to make smarter decisions, I recommend the following:
Seeking Wisdom: From Darwin to Munger by Peter Bevelin
The Great Mental Models: General Thinking Concepts by Shane Parrish
Articles on decision-making on Farnam Street Website