Tag: decision making

Bikes and optionality

We bought bikes recently (yay!).

On the day we bought them, we had a choice. We could buy any and all accessories (think: carrier, toddler seat, lights, etc.) for a 15% discount on the day of the purchase. Or we could choose to wait to see which ones we’d really need and forego the 15% discount.

We decided to do the latter.

In the weeks following the purchase of the bike, we ended up purchasing – in batches – nearly all the accessories we’d considered purchasing on the day we bought the bikes. As we fitted the final accessories, I was thinking about the lessons we’ve learnt from the process.

The first lesson is the cost of optionality. When we chose to wait before we made any further purchases, we chose optionality. We could have chosen a bunch of accessories in our first day enthusiasm that we didn’t need. This way, we’ve only purchased things we know we’ll use. That optionality cost us that 15% discount we’d have otherwise gotten.

This is the case with all decisions in our lives. An example here would be a career decision students in graduate school often face. I have had many conversations with students who are torn about whether to go work for a management consulting firm or go into whichever industry they desire. Working in management consulting after graduate school for folks who have a strong hypothesis that they’d like to go elsewhere eventually is an example of optionality one could choose to exercise. It doesn’t come for free.

The second lesson here is removing regret from thoughtful decisions by reminding ourselves of the thoughtful decision making process. It is easy to look back at the purchases we’ve made since we bought our bikes and kick ourselves for not doing this when we had the discount.

But, that is an example of hindsight always being 20:20. We assume, for example, that every purchase on that day would have been the right one. There’s no such guarantee. One needless purchase could have eliminated any gains from the discount.

That, then, gets to the importance of reminding ourselves of thoughtful decision making processes.

I was recently on a panel where we were asked about career decisions we regretted. I explained that I didn’t have any regrets. This wasn’t because I haven’t had decisions with bad outcomes. I have too many to count. Instead, it is because I know that I always made the best decision based on everything I knew then. And, now that I know better, I’ll do better in the future.

We can’t guarantee good outcomes. But, if we’ve run a thoughtful process, reminding ourselves of that process helps eliminate needless and useless regret.

The Joneses

We were in conversation recently about a situation that involved folks making life decisions in an attempt to keep up with the proverbial Joneses. Around the same time, I was reminded of this note from a Dale Carnegie classic.

“People are not thinking about you and me or caring what is said about us. They are thinking about themselves—before breakfast, after breakfast, and right on until ten minutes past midnight. They would be a thousand times more concerned about a slight headache of their own than they would about the news of your death or mine.”

He exaggerates a bit to make his point. But, it is regardless a powerful point.

Eliminating the “but, what would people think?” question makes most decision making processes better.

What a good decision feels like

A lot of my early learning on decision making came from a Poker lesson from a wise friend and the Heath brothers’ book – Decisive. The key lesson? Focus on having a good decision making process first and don’t confuse good outcomes with a good process.

Getting the decision making process right is akin to getting the science of decision making right – it is guaranteed to improve outcomes.

However, the science is just a first step – it improves outcomes on average for anyone who chooses to apply it. The art of decision making, on the other hand, involves figuring out what works for you. And, much of my learning on decision making in the past few years has come from paying attention to what a good decision feels like.

Paying attention to that feeling at the pit of the stomach when making a decision and observing how the smallest doubts actually manifest themselves in reality are ways to school ourselves in the art.

Considering a big part of what we do in a day is make decisions, there are few things we can learn that provide higher leverage.

Decision making speed > accuracy

Most decisions – say 90% – we make in our lives are reversible.

As a general principle for these reversible decisions, I’ve found it helpful to prioritize speed of decision making over accuracy.

This sounds crazy at first – why wouldn’t we try to get decisions right?

It turns out there’s a huge cost in waiting for all the information to appear. So, if we prioritize making the decision quickly instead, we can also go back and change the decision if we see data that tells us otherwise.

Over the long run, two things happen. First, quick experimentation beats deliberation.

And, second, with more repetition, we begin to develop a better gut and nose for the right direction. At that point, decision making speed morphs into decision making velocity (velocity = speed + direction – in this case, a direction that is in the ball park).

Decision making velocity, in turn,  leads us to good judgement.

Choice vs Tension

Choice is the act of selecting or making a decision when faced with two or more possibilities. Tension is the state of being stretched tight. In a decision making context, this stretch is often between two ideas seemingly in conflict. A sign of great decision making is the ability to distinguish between choice vs tension.

There are many time when we need to choose between options. Picking a restaurant, credit card or car require us to choose. However, there aren’t as many situations where we need to choose as we think there are. Most decisions, especially difficult ones, require us to embrace tension rather than a choice.

Should we be push ourselves or be content?
Must we focus or should we diversify?
Should we build toward the long term or the short term?
Must we create profits or value?
Should we pursue quality or quantity?

Every one of these tough questions (and many more) is a false choice. They look like straight-forward A or B questions. But, they aren’t. Each of these are examples of natural tensions. We can’t do one of these at the expense of the other. We have to do both. So, how do we tell the difference?

A wise friend once shared – “Whenever I am faced with such a dilemma, I ask myself [very deeply] what it would take to replace OR with AND.”

We must embrace the tension.

Downstream effects

Better decisions can be made by taking a moment to think about downstream effects.

When Wal-Mart cut costs by removing store employees, they just ended transferring the massive burden of stopping shop-lifting to the local police.

In an attempt to improve their demographic balance, Russia tried paying women money to have kids. But, they found an increase in abandonment rates. After collecting their pay outs, women were dropping these kids in orphanages. Sweden’s answer to helping improve demographics was to have an incredible range of maternity benefits. A Swedish woman can take 16 months of maternity leave (13 of them paid at 80%) until her child is 8 years old. If she has 3 children, that’s 4 years of leave. Sadly, women in their twenties are among the largest unemployed groups in Sweden.

On the flip side, Google outsourcing TensorFlow, an open source machine learning library, helped a Japanese farmer and former engineer create a system for sorting cucumbers.

And, the African Great Green Wall initiative is likely to have long term ripple effects beyond just preventing the Sahara desert from increasing in size. When 21 countries come together to plant trees, there’s plenty Africa and the world gains from the effort.

downstream effects, externalities, unintended consequencesThanks to The Economist for the image

Every one of these stories is a story about the downstream effects of decisions. In Economics, these are called externalities or unintended consequences. Every decision we make has unintended consequences. In some cases, the negative downstream effects can be so powerful that they can just override any positives from the first order consequences of the decisions.

As a result, we must discipline ourselves to push all decision making conversation into the realm of downstream effects. All company destroying decisions started out as good ideas in the short term… with bad downstream effects.

Making policy decisions

A big part of being a good decision maker is learning how to make good policy decisions. Good policy decisions have, among other things, two attributes –

1. They understand the downstream consequences. You don’t create policy for the short term. So, policy makers spend time thinking about the downstream consequences.
2. They minimize exceptions. In doing so, decision making in the future can go on auto pilot.

As a simple example – a friend once asked me to share a list of the best books I read. So, I put the list down in a word document and sent it. Another friend then asked me for the list with a few notes on the books I recommended. A few months later, I got a similar request from another friend. Every time I got one of these requests, I groaned. Sometimes, I did justice and gave them what they wanted and, other times, I just forwarded them an older version of the list.

It only hit me a few months later that I’d be better off with a system solution. That’s how my book review blog was born. It made sense as it was one of those decisions that had very good downstream consequences. And, most importantly, it put all book recommendation requests on auto pilot.

This isn’t an easy thing to do, however. And, I find myself forgetting to do this regularly. But, if done well, it can help us become better decision makers.

So, every time you have a decision to make, don’t just make the decision. Instead, ask yourself how you should approach the decision by asking yourself how you would treat similar requests. Then, create a system/policy for similar kinds of decisions. Sometimes, all it takes is an extra minute of thought. That extra minute can save a lot of time downstream..

There’s no right path

Every once in a while, you face a decision that has an objectively right or wrong. Most fiction has been written around these black-and-white decisions. Yes, Harry Potter (and I love Harry Potter) had a choice to not go after Lord Voldemort. But, not really.

Most decisions in real life, however, just represent various shades of gray. George R R Martin has garnered an incredible global following by writing books that deal predominantly with the gray. In some ways, his work challenges the very basis of normal fiction – black villains vs. white heroes, as illustrated in the Lord of the Rings trilogy or in the Star Wars series.

The lack of a clear right path means we have 3 options in front of us every time we need to make a decision –

1. Do nothing. This choice can be easy or hard depending on the general speed with which you make decisions. It is easy to do if you can manage to ignore your impulse to act. If doing nothing becomes habitual, then, lethargy becomes the way.

2. Follow what someone else has done. This could be following a parent in their career choice or simply subordinating all decisions to someone else.

3. Make it up. Pretend like you have a clue and keep moving forward.

Every successful leader needs all these options at his/her disposal. There are times when doing nothing is the right thing to do. There are times when you just have to make it up and keep moving. And, then again, there are other times when it is best you follow what someone else has done and run with a “best practice.”

There is no one-size-fits all solution. There is no right strategy. And, as a result, there is no point putting undue pressure on a decision you make.

The funny thing is that simply accepting this fact can make us better decision makers.

3 rules for helping anybody who wants help with a decision

1. The decision doesn’t matter. The process does. It is all about the process.

2. Your biggest value add would be to walk them through a process. My suggestion would be the Decisive process – I carry a small card summarizing this process in my pocket.

3. Offer your point of view ONLY if asked. (I always need help with this)

If you find yourself talking more than them, take a timeout. This isn’t about you, it is about them.

PS: The wording in the title is key – they need to want the help.