How to make smart decisions without getting lucky

Consistent, high quality decisions leads to a consistent, high quality life.

And yet, I was not taught this skill in school or by anyone, really.

I started reading decision science books a few years ago when I was tired of not knowing what I should have done or feeling unsure about the decision that I did make.

Politics at work taught me that I shouldn’t listen to everyone’s opinion on the matter, and my cultural upbringing as an immigrant showed me that “the right decision” is often very influenced by cultural norms and expectations.

Amazing insight, but very confusing and not that useful.

Sitting in a tug-of-war between three very different cultures (Japanese, Peruvian, American), then growing up and being tossed around in high-stakes politics at a Fortune 200 company for a few years, I decided to take matters into my own hands and research how the best decision makers in the world do it.

What I found is that decision science is a very well-studied area of research and that there actually are clear answers to the question “how do I make good decisions consistently?”

“Process mattered more than analysis—by a factor of six.”

A professor at the University of Sydney and a director at McKinsey & Company studied over a thousand business decisions of large companies over five years.

They noted that most business decisions were made via rigorous analysis of a lot of data, but the decisions were still bad ones.

Counterintuitively, “good analysis in the hands of managers who have good judgment won’t naturally yield good decisions.”

Translation: it’s not enough to be smart and have good judgement. We need strong decision-making processes to check our biases.

And in fact, they found that process mattered SIX TIMES more than analysis when it came to making sound decisions.

The below process I created takes inspiration from world-class decision makers in different fields — poker players (Annie Duke), investing moguls (Charlie Munger, RIP), and writers (Daniel Kahneman and Shane Parrish).

Step 1. Understand the true problem

One day, I was weighing which city I was thinking of moving to — this had been a topic on my mind for months — and I realized that I didn’t have a clear sense of what “success” might look like to compare the two cities against.

I would probably be relatively happy in either location… so what exactly is missing from where I am now? And if I don’t have a clear sense of why I’d be happier in a new city, what’s the real purpose of starting all over again?

This was a good reminder for me to get clear on what’s the real problem (or opportunity) that I’m trying to solve for.

One of the core tenets of decision making is to separate out understanding the problem space from the solution-ing space. Rarely can humans simultaneously understand what the right problem is and come up with quality solutions at the same time.

You probably already use this best practice at work, now remember to apply it at home.

Step 2. Challenge your biases

Imagine if you went to court and only the people suing you got to present their case and the jury had to make a decision based on that.

That would suck.

For big decisions, it’s critical to bake-in disagreement as part of your decision making process because there are so many types of human misjudgement that we love to repeat (screenshot below referencing our previous newsletter on the topic).

If it’s a high stakes decision we’re making, we need to explicitly seek out views that contradict our decision or idea.

Step 3. Widen your options

“Should I let this under-performing employee go?” is a thought I found myself thinking on a Wednesday afternoon after a particularly unsuccessful meeting (and many months of performance management).

I quickly reworded the question in my head — “what are the different ways that we can reach our desired outcome with this employee?”

Letting them go might ultimately still be the right decision, but now my frame of mind has widened to consider other options like moving them to part-time, decreasing their scope of work, or having another discussion with them to understand what could have gone better.

“Whether or not” questions are very weak because you have one choice in a mental spotlight.

In the way that I framed the first question (“should I let this under-performing employee go?”), I wasn’t even making a decision between two options (e.g. firing them or moving them part-time), I was simply fixating on an up-or-down vote on a single alternative.

The best decisions or solutions are often creative ones that have an “and” mindset rather than an “or” mindset. They’re unexpected, win-win, and have strong logic to back it up.

How can you expand your set of choices?

Pretend that all the options you’re considering are not possible. Now what options would you consider?

Another way is to ask an expert (or anyone who knows a little more than you) about what other options might exist.

When you only have one or two options, your ego is tied to it.

When you create multiple options, it minimizes the politics and makes your decision making more resilient.

Step 4. Create feedback loops

We started out this article by mentioning that having a decision making process significantly increased your odds of making a good decision. The process is important because it’s a way to systematically check your invisible biases.

But there are 2 parts to this:

1. Set up a couple feedback loops

2. Interpret the results of the feedback: was it due to skill or luck?

For instance, when I’m building a software product, I always set up a system up front to run user interviews every week. Once I set up the processes up, I just follow through on conducting and analyzing for the next several months.

In some interviews, the user has no problem with the prototype or the app and has a pleasant experience.

But I need to have a more discerning eye — did they have a good experience on the app because they only tested the happy path? Would the app have been able to deliver a good experience if they had a question and needed support?

In essence, was the result due to luck or skill?

In life, we need to do the same thing. When we’re thinking about making a career change, we might talk to people, look at Glassdoor reviews and maybe do a couple of job shadows.

Once we make the decision to get a new job, we need to assess whether we made a good decision and what about the decision was good or bad based on the information we had at the time.

Here are some of my favorite ways to incorporate feedback loops IRL:

• Assess statistical odds of whatever I want to try

• Have a go-to person who will think critically and tell me the truth

• Ask someone who’s done it before

• Create small experiments before jumping in

Here are some questions I ask myself to determine whether the outcome was based on my skill or pure dumb luck:

• Were there external factors or unforeseen events that significantly influenced the outcome?

• How much did the outcome depend on factors outside my control?

• Did my prep or knowledge play a significant role in the outcome?

• Is the success replicable, or does it seem like a one-time occurrence?

tl;dr

The more I learn from people who are exceedingly good at what they do, the more I hear about systems.

We are human. To human is to err. But it’s not cute to err when your career or a big life decision is on the line.

If you take away nothing else from this article, it’s that you can create whatever process works for you to check yourself when you make big decisions.

If you do that one thing, you’ll significantly increase your odds of making a good decision without relying on the wispy whims of luck.

❤️‍🔥 

Omg did you actually read the whole thing?

You made it to the end, which probably means you’re pretty committed to growing as a person. Thank you for being here — you’re exactly the type of person who I aspire to surround myself with.

If you know a friend who enjoys being a think boi or a think gorl and might enjoy this article, feel free to share it with them.

Until next week,

🫡