Source: Qilehui
Author: Annie Duke

Before making a decision, it is important to clarify any misconceptions in our thinking.

Fundamentally, any decision is a prediction about the future.

However, many people fall into two serious thinking errors during the decision-making process: being outcome-oriented and suffering from hindsight bias.

Being outcome-oriented means that people judge the quality of a decision based on its outcome. In many fields, the outcome often determines whether a decision was good or bad.

You bought a stock and its price quadrupled - a great decision! You bought a stock and it almost went to zero - a terrible decision!

You started working out, and after two months, your weight has decreased and your muscles have increased - a great decision! But, if your shoulder dislocates in the first two days of working out, that's a terrible decision!

There are many factors that can affect the outcome, in simple terms, apart from the decision quality under personal control, there is also the random parameter of 'luck'.

Due to the intervention of luck, the decisions you make (which can lead to a variety of results) will produce actual results. By combining decision quality and results, four outcomes can be obtained:

• Good decision + good result, is deserved;

• Good decision + bad result, is bad luck;

• Bad decision + good result, is dumb luck;

• Bad decision + bad result, is a self-inflicted injury.

If trapped in a 'results-oriented' mindset, dumb luck will be understood as one's brilliant decision, leading to the continued use of incorrect decision-making methods.

It is not easy to give up the idea that "good things must be my fault", but in the long run it is worth it.

Just by slightly changing the attitude of ignoring luck, it will have a huge impact on your lifestyle. These small changes are like compound interest, which can bring rich rewards to your future decisions.

Another cognitive bias, the "hindsight bias", is a fallacy brought about by memory.

We constantly narrate the whole event based on the logic that can justify it after it happens, and we adjust our memory according to the rationality of the narrative. This is what we often call "hindsight bias".

When making a decision, there are things you know, and there are things you don't know. And among all possible outcomes, the one that actually happens is definitely something you don't know.

But afterwards, when you know that this thing really happened, you will feel like "I knew it" or "I knew it". The actual outcome distorts your memory of the decision-making process.

If there's anything worse than regretting "I should have known" for a lifetime, it's regretting while also listening to others say "I told you so".

To overcome the obstacle of "hindsight bias" in improving our decision-making, we should faithfully record our thinking, factors to consider, and predictions of possible future outcomes as an auxiliary memory tool during significant decision-making processes. Then, when the results come out, we have an objective and clear record without needing to struggle with our memory.

Second, the "6-step decision-making method" that is easy to get started.

Our life is a continuous process of making decisions. What we need is to master a good decision-making framework, which can improve our decision-making level and the overall decision-making results in the most favorable range in terms of probability, rather than pursuing the best result for a specific decision, which cannot be guaranteed by anyone.

Duke divides the decision-making framework into 6 main steps.

• Find a reasonable set of possible outcomes and list all the possibilities as much as possible.

• Determine preferences by comparing the returns brought by each outcome - from a value-oriented perspective, how much do you like or dislike each outcome?

• Evaluate the likelihood of each outcome occurring (probability thinking).

• Evaluate the relative likelihood that candidate decisions will produce outcomes that you like or dislike.

• Consider other candidate decisions and repeat steps 1 to 4.

• Compare these decision options.

The quality of the results and the degree of goodness or badness depend on your goals and values.

No matter what decision you make, you will always expect some results and reject others. Almost every result will have its gains and losses. These gains and losses are the rewards, and they will determine preferences, because you clearly prefer gains over losses.

In a set of possible results, the rewards of some results will give you something you value, which makes up the positive side of a decision.

The rewards of some results will make you lose something you value, which makes up the negative side of a decision. Most decisions have both positive and negative aspects.

Step 2 is to judge the 'rewards'. You can measure rewards with anything you value: money, time, happiness, health, others' happiness, health or wealth, as well as social currency, etc.

When you determine whether a decision is good or bad, you are actually asking whether its potential on the positive side can offset the risks on the negative side. Evaluating the quality of a decision requires comparing whether the benefits are worth the risks you take.

Step 3 is to estimate the 'probability' of each result occurring, including summarizing and analyzing the information you already have, as well as recognizing what important information still needs to be collected.

Without information, you know nothing. Complete information means you know everything. For most matters that require estimation, you won't lean towards either the lack of information or complete information, but rather somewhere in between.

Making informed guesses is significant. The more willing you are to make guesses, the more you will think and apply the knowledge you have mastered. In addition, you will begin to consider things that can bring you closer to the answer.

Step 4 requires weighting and averaging all possible outcomes listed in Step 1 based on return and probability, obtaining the expected value brought by this optional direction. This expected value quantifies mathematically whether you "like" or "dislike" this option.

Many people believe that things only have two sides - right and wrong - and there is no middle ground. This "middle ground" refers to the probability or likelihood of things happening. You need to make bold guesses, just like aiming at the bullseye when shooting an arrow, but hitting other parts can also earn you points.

When making decisions, our goal is to select the most favorable option for achieving our own ideals, based on a willingness to take certain risks (if there are no good options, our goal is to select the option with the least damage).

3. How to improve the accuracy of guessing?

How to improve the accuracy of these "informed guesses" and make our guesses closer to the bullseye?

The tool Duke gives us is to consider both the "internal perspective" and the "external perspective" at the same time.

Internal perspective refers to viewing the world from one's own point of view, beliefs, and experiences. We are not good at discovering things we don't know and judging whether our beliefs are wrong. We are overconfident in what we think we know. Many common cognitive biases are, to some extent, products of internal perspective.

External perspective refers to how others perceive your situation outside of your own viewpoint, or it can refer to the true nature of the world. To compensate for the internal perspective, one must overcome the influence of personal experience and strive to understand others' viewpoints and the true nature of the world, as they are the source of corrective information.

Your intuition serves the internal perspective. The sixth sense is the same. Both intuition and the sixth sense can be influenced by your wishes to come true. The external perspective is the 'remedy' to remove this influence.

Understanding others' viewpoints is valuable not only because they know useful information that you don't know and can correct inaccuracies in your existing knowledge, but also because even if they have the exact same information, they may come up with different opinions. The information is the same, but the conclusions can be vastly different.

The external perspective can correct errors and biases in the internal perspective, so when dealing with problems, it is important to start from the external perspective.

Allowing different viewpoints to collide and accepting different ways of looking at things from others will bring you closer to objective facts. The closer you get to objective facts, the less garbage information you will use in decision-making.

Four, three modes of thinking in decision-making

1. Happiness test: the 'barometer' for long-term goals.

In a broad sense, happiness is a "barometer" for evaluating whether a decision will affect the realization of long-term goals.

When you find that the potential benefits or losses (measured by happiness) are insignificant, it indicates that this decision belongs to the low impact category and can accelerate the decision-making speed.

There is a type of decision where, regardless of your choice (whether it's chicken or fish, watching "Austin Powers" or "The Princess Bride," wearing a gray suit or a blue suit), in the long run (or even in the short term), the outcome will not have a significant impact on your happiness.

If something you are considering passes the happiness test, then you can speed up the decision-making process because there is no significant loss in being less "perfect."

Although many decisions do not significantly impact long-term happiness, a bad outcome can still result in a short-term cost: regret.

Regret (or fear of regret) can almost make you hesitate in every choice. After a bad result occurs, almost everyone immediately regrets it. The concern of regret leads to "decision paralysis" because you naturally think that spending more time making a decision is less likely to lead to a bad outcome and less likely to make you taste the pain of regret that comes with it.

If you are stuck in short-term feelings without considering the long-term impact (which is what truly matters), then you will be unable to make a decision due to the fear of regret. The cost of fearing regret is time.

Repetitive choices help to diminish the feeling of regret.

The so-called repetitive choice refers to being able to make the same choice again after making a decision. This is especially useful when decisions need to be made quickly and repeatedly. You may truly regret the dishes you ordered at the restaurant during lunch, but a few hours later when you are having dinner, you have the chance to order again. This helps alleviate the pain of short-term regret.

Choosing university courses falls under repetitive choices.

Selecting the person for a first date is a repetitive choice.

Choosing a driving route is a repetitive choice.

Deciding which movie to watch is a repetitive choice.

Repeating decisions also provides you with the opportunity to try things you are not sure about, such as eating new food or watching unfamiliar shows, without facing severe consequences. With just a small cost, you can understand your preferences and even discover pleasant surprises.

2. But why not try: Make quick decisions when the loss tends to zero.

"But why not try" is a useful thinking pattern that can help you seize opportunities quickly.

The key feature of "but it's worth a try" is limited downside risk, which means that there is not much loss (but there may be a large gain). When you are in a "but it's worth a try" situation, speeding up decision-making usually does not increase the possibility of generating worse results.

To determine if the downside risk of a decision is limited, you can ask yourself the following two questions:

• What is the worst outcome?

• If the results are not as expected, will I be in a worse situation than before making the decision?

If the worst outcome is not that bad, or even if the results are not as expected, your situation will not be worse than before, then this decision can be "but it's worth a try". In other words, you can speed up the decision-making process because the cost of sacrificing accuracy is limited.

You might think, "But it's worth a try" sounds good, but in reality, how often does such a situation occur? However, once you pay attention and observe, you will find that the situations where "but it's worth a try" apply are far more common than you imagine.

You are applying for college. The dream university you want to apply to is difficult to get into, and your chances of being admitted are low. Should you still apply? Assuming the application cost is not high and your situation will not worsen if you are not admitted, but if you are admitted, you will enter your dream university.

You are house-hunting. As expected, with the help of a real estate agent, you have found the house you like, but the asking price is 20% higher than your highest offer. Should you still make an offer? If you make an offer at your own price and the seller rejects it, you will not suffer any loss. But if the seller accepts it, you will be able to buy the house you like at a low price.

Once you confirm "but it's worth a try", you don't need to consider whether to seize this opportunity too carefully, but you still need to spend time executing this decision.

Deciding quickly whether to apply for a low chance of admission to a university, but taking time to ensure the high quality of the application materials. Deciding quickly whether to make an offer to buy a desired house, but taking time to ensure the reasonableness of the offer.

The faster you make a decision, the less likely the opportunity will slip away. The faster you seize the chance, the higher the possibility of discovering the potential of the decision.

Difficult decision-making = easy choice.

Next year, you have a week off and you decide to go on a long trip. You have narrowed down the destinations to two cities: Paris or Rome. (You can also replace these two destinations in this thought experiment with places you really like or places you really want to go but haven't been to yet.)

In general, you will be worried about decisions like these. After all, deciding whether to go to Paris or Rome doesn't pass the happiness test. A vacation like this will definitely affect your happiness for a week, a month, or even a year. Unless you travel abroad frequently, this is not a repetitive choice but a once-in-a-lifetime choice. If the decision is wrong, the cost will be high.

We all face many high-impact decisions like where to vacation in Europe. You may be accepted by two desirable universities, find two great residences, or get two ideal jobs. Then you start to worry about how to choose and want to figure out the subtle differences between two or more good options.

Let's do a weird thought experiment: What if you were choosing between Paris and a canned salmon factory? Would you feel difficult or anxious?

I think the answer is no.

This indicates that the reason for slowing down the decision-making speed is the similar options. If you choose between options with significantly different potential benefits, you will not feel difficult, for example, spending a week in Paris on vacation or spending a week immersed in the 'Fish in Water' pile.

That's why you can and should speed up when faced with such decisions.

Something that slows down decision making, namely multiple options that are very close in quality, is actually a signal that can speed up the process - since two options have similar upside potential and downside risks, there is no way to go wrong no matter which one is chosen.

If you consider the decision based on the relative quality of the compared options, you will have an advantage. Instead of spending a lot of time looking for subtle differences between the options, it is better to reevaluate the decision and ask yourself, 'How wrong would I be if I choose randomly?'

This question will make you think proactively and recognize that the potential of each option is what affects the quality of the decision, rather than which possible outcome happens by chance. This question will show you that both options are great, so no matter which one you choose, it is unlikely to make a big mistake.

Therefore, these types of decisions actually fall into the hidden 'But Trying Won't Hurt' category. Because the options are similar, you can try them at will, and there is no way to go wrong no matter how you choose. This unlocks a powerful decision-making principle: it is actually easy to choose when it is difficult to decide.

When you are struggling with similar options, you are usually wasting time doing useless work. You spend a lot of time trying to find the negligible differences between the two, and at best, you can only see the slight difference in potential benefits.

4. Breaking the Deadlock: The Only Choice Test

In his book 'The Paradox of Choice', Barry Schwartz points out that the more choices you have, the more difficult it is for you to make a decision; the more difficult it is to make a decision, the more time you spend on 'analysis paralysis'.

This is the paradox of choice: the more choices you have, the more anxiety you have.

If you have to choose between Paris and a can of salmon, anyone would be fine. But what if you have to choose between Paris, Rome, Amsterdam, Santorini, and Machu Picchu?

You can use the 'Only Choice Test' to break the deadlock. When making a decision, ask yourself, 'If this were the only choice, would I feel satisfied?'

The 'Only Choice Test' can clear away the clutter of information that hinders you from making decisions. If you can only go to Paris and feel content, or if you can only go to Rome and still feel content, then no matter what you choose, you will be happy.

This strategy of choosing what to order from a menu can be widely applied to general decision-making. Take your time to differentiate between what you like and what you don't like. Then, you can make a quick decision.

Categorization, which means finding the 'good' choice based on your values and goals, is the greatest benefit that decision-making time can bring you. Categorization is the starting point of decision-making and the value of slowing down.

When you have finished categorizing and selected one or more good options, speeding up will not result in significant losses. If the options are very close, you might as well choose randomly. Spending more time picking among the standard options usually does not increase the accuracy of the decision much compared to random selection.

This is why distinguishing low-impact decisions, especially those repetitive decisions, is so important. These low-risk decisions allow you the chance to experiment. Experimenting will tell you what is feasible, what is not, and help you understand your preferences. Through these experiments, you can gain more information and receive rewards in more accurate categorization.

From a long-term perspective, you should view all the decisions in life as managing an investment portfolio, with the goal of making the overall return of the portfolio satisfactory for yourself.

Instead of adhering to the success or failure of each individual investment, because the role of luck cannot be accurately estimated in a single investment.

Editor / jayden