Decisions, Decisions, Decisions!

Why we make suboptimal decisions and choices and how to make better decisions?

We can't make good decisions from a bad "place".

It is estimated that an average person makes thousands of decisions every day. Researchers at Cornell University suggest that we make around 227 decisions each day on food alone. However, the total number of decisions an individual makes can vary widely depending on our lifestyle, responsibilities, and personal habits. Many of these decisions are minor or routine, but they all contribute to the daily total.

The decisions we make can have a profound effect on our life and we also depend on our leaders who we delegate major decisions to, to make life changing decisions on our behalf.?

Everyday we make thousands of decisions and choices. These may be lifestyle choices and habits or major decision points.

Sometimes they are small and seemingly inconsequential decisions like taking a car ride rather than walking which cumulatively add up to poor health several decades later.? Other times we fail to act and let the default status of inaction take over or we don’t make the right choices because we did not make the headspace for good decisions.

The Science of Decision Making and Choices

We know we have limited cognitive load and thinking is expensive and mentally tiring. Many areas and fields of research cover decision making and how we make choices consciously and subconsciously.

1.???? Behavioural Economics: This field combines elements of economics and psychology to understand how people make decisions. Notable works like Daniel Kahneman and Amos Tversky's "Prospect Theory" and Thaler (Nudge) suggest that people don't always act rationally. They often make decisions based on potential losses rather than gains, indicating a tendency towards suboptimal choices under certain conditions.

2.???? Cognitive Biases: Research has extensively documented various cognitive biases that influence decision-making. For instance, the confirmation bias leads people to favor information that confirms their existing beliefs, potentially leading to poor decisions.

3.???? Heuristics: Heuristics are mental shortcuts that people use to make quick decisions. While they can be efficient, they can also lead to errors in judgment, as documented in Tversky and Kahneman’s work.

4.???? Risk Perception: People often assess risks inaccurately. For example, they might overestimate the likelihood of dramatic, rare events while underestimating more common risks, impacting the quality of their decisions.

5.???? Long-term vs Short-term Thinking: Research in psychology suggests that people often prioritize immediate gratification over long-term benefits, leading to choices that might be considered 'bad' in the long run.

6.???? Social Influence: Decisions are also affected by social factors, such as peer pressure or societal norms, which can lead to either good or bad choices depending on the context.

7.???? Statistical Data: While specific statistics on good vs. bad choices are hard to quantify due to the subjective nature of what constitutes a 'good' or 'bad' choice, there are statistics on specific decision-making scenarios. For instance, in financial decisions, studies show a significant percentage of people make decisions that are not in line with maximizing their economic benefit.

8.???? Individual Differences: It's also important to note that decision-making skills vary greatly among individuals, influenced by factors like education, intelligence, emotional regulation, and experience.

?

Why we make poor decisions?

1.???? Emotional Influence: Decisions are often swayed by emotions, which can cloud judgment and lead to irrational choices.

2.???? Cognitive Biases: These biases, such as overconfidence or confirmation bias, skew our decision-making processes.

3.???? Limited Information: Sometimes, the lack of complete or accurate information leads to suboptimal choices.

4.???? Pressure and Stress: Under stress or time pressure, people may make hasty decisions without fully considering the consequences.

5.???? Social Influence: Peer pressure or the desire to conform can lead to decisions that aren't in one's best interest.

6.???? Risk Misjudgement: People might underestimate or overestimate risks, affecting their decision-making.

7.???? Sunk Cost Fallacy: The tendency to continue an endeavour once an investment in money, effort, or time has been made, even when continuing is not the best course of action.

8.???? Lack of Experience or Expertise: Inadequate knowledge or experience in a particular area can lead to poor decisions.

9. Poor Self Regulation such as physical fatigue, poor emotional self regulation/stress all contribute to sub optimal choices.

How aware are we when we are making decisions or choices that these are suboptimal?

Often, we may not realize that a decision is suboptimal due to:

1. Limited Information: People might not have all the necessary information to make the best choice.
2. Cognitive Biases: Biases like overconfidence, confirmation bias, or sunk cost fallacy can cloud judgment.
3. Emotional Influences: Emotions can heavily influence decision-making, sometimes leading to impulsive or short-sighted choices.
4. Social and Cultural Pressures: Decisions might be swayed by societal norms or expectations, rather than personal values or long-term benefits.

In many cases, the realization that a decision was suboptimal becomes clearer in hindsight, as individuals reflect on the outcomes and what might have been had they chosen differently.

In Hindsight we realise we could have chosen better

1.???? Short-Term Decisions: For less significant choices, the realization might come quickly, often as soon as the immediate consequences are evident.

2.???? Long-Term Decisions: In cases of more significant life choices, such as career paths, relationships, or major financial commitments, the realization might take years, often emerging as individuals reflect on their life's trajectory, missed opportunities, or persistent dissatisfaction.

3.???? Trigger Events: Sometimes, specific events or milestones (like a career setback, relationship problems, or financial crises) can trigger the recognition that a past decision was not optimal.

In what areas do we make poor decisions?

Various studies reflect the complexity and frequency of suboptimal choices people make in significant areas of their lives, such as careers and relationships. While the reasons for these regrets are varied and complex, they often stem from a lack of risk-taking, inadequate foresight, or misaligned priorities.

Making decisions that align with one's values and taking chances when opportunities arise are often only recognised in hindsight. The regrets people have, especially those related to inaction or choices that go against their values, highlight the importance of reflective and value-driven decision-making in key life areas.

Career Decisions

• 78% of people regret not taking more risks in their careers.
• 21% regret not returning to school after starting work.

Relationship Decisions:

• 19.3% regret romance-related decisions.
• 31% of women regret their choice of life partner.

Education:

• 14.0% regret education-related decisions.

Financial Management:

• 9.9% regret finance-related decision.

Life Choices in General: 40% of British adults regret how they have lived their lives, including work-life balance and health-related decisions.

Regrets in General Life Decisions:

• Intense, long-term regrets often stem from poorly made big life decisions.
• A study found the most commonly reported regrets involved romance (19.3%), family (16.9%), education (14.0%), career (13.8%), finance (9.9%), and parenting (9.0%).

Top Regrets of the Dying:

• One of the most common regrets among the dying is not living a life true to oneself, working too hard, not expressing feelings, losing touch with friends, and not allowing oneself to be happier.

Regrets Due to Inaction:

• Regrets are more likely for decisions involving inaction, such as not taking opportunities that could have led to significant life changes.

Regrets and Poor Outcomes:

• Decisions that result in poor outcomes and are hard to justify in retrospect often lead to greater regret.
• Regrets often arise from decisions that diverge from one's values and the ideal version of oneself.

Social Relationships and Regret:

• The most enduring regrets relate to social relationships, highlighting the human need to belong.

Avoiding Regrets:

• To avoid regrets, it's important to make decisions consistent with personal values and life rules, even if the outcomes aren't favorable.
• The biggest regrets often relate to missed actions due to fear or being too busy.

Financial Decisions:

• Retirement Savings: A significant number of individuals do not save adequately for retirement. For example, a report by the U.S. Government Accountability Office found that about 48% of Americans aged 55 and older had no retirement savings in 2016.
• Investment Choices: Studies have shown that individual investors often underperform market indices, partly due to poor timing decisions and the influence of cognitive biases.
• More than 1 in 5 Americans often regret their financial decisions, with credit card debt being the biggest long-term financial regret, followed by inadequate emergency savings.
• Sixty-seven percent of Americans feel regret after major financial decisions. Those with advanced degrees are more likely to experience regret compared to those with less education.
• ·Over a quarter of Americans regret not having more long-term investments, and those with advanced degrees often regret overspending on houses and taking out excessive student loans.
• ·More than 60% of Americans are upset about not negotiating raises more often in their careers, with millennials particularly regretful about this, estimating they could have earned an average of $18,900 more through proper salary negotiations

Career Choices:

• Job Satisfaction: According to a survey by The Conference Board, a global business research association, only 53% of Americans reported being happy in their jobs in 2018. This could indicate suboptimal decision-making in career choices.
• Career Regret: A LinkedIn survey revealed that about 75% of 25-33 year olds have experienced a quarter-life crisis, often questioning their career path.

A survey revealed that 78% of respondents regretted not taking more risks in their career. Among these, 28% regretted not pursuing their careers more aggressively, 26% regretted not negotiating for a more competitive salary, and 24% regretted not initiating pay raise negotiations.

Gender differences in career regrets were notable: 40% more women than men regretted not negotiating for a raise, while 42% more men than women regretted not joining a startup.

70% of respondents preferred a satisfying job over a high-paying one, but still, 30% chose higher pay over job satisfaction.

21% of respondents regretted not returning to school after starting work, and 28% regretted not pursuing their passions. Among those who did follow their passions, 88% were glad they did, and 74% loved their job

Relationships and Marriage:

• Divorce Rates: While not a direct measure of 'bad' choices, high divorce rates in many countries suggest that people often face challenges in making lasting partnership decisions. For instance, the American Psychological Association notes that about 40-50% of married couples in the United States divorce.
• Friendship and Social Circles: There's limited statistical data on the quality of choices in friendships, but research in social psychology indicates that people often form and maintain relationships based on proximity and convenience rather than long-term compatibility.

·A nationally representative study found that 19.3% of 270 Americans reported regrets involving romance, highlighting the frequency of suboptimal choices in relationships.

·Another survey found that 44% of women had romantic regrets, compared to 19% of men, suggesting a gender difference in regret over relationship decisions.

In a separate survey with 2,042 women, a significant 31% regretted their choice of life partne

Health and Lifestyle Choices:

• Diet and Exercise: The CDC reports that only about 23% of Americans get enough exercise, and obesity rates are high, indicating suboptimal choices in health and lifestyle

General Decision Making:

• Researchers at Cornell University estimate that we make 226.7 decisions each day on food alone.
• TalentSmart found that only 36% of people can accurately identify their emotions as they happen, affecting decision-making since 64% of people aren’t good at managing or recognizing their emotions, which can trigger countless decisions.

Life Choices:

A survey of 2,000 British adults showed that four out of ten people regret how they have lived their lives so far, with common regrets including spending too much time at work and not traveling enough.

Other prevalent regrets were neglecting health and not spending enough time with family, with many wishing they had been better parents.

More than half of the respondents believe it’s not too late to change paths and accomplish more in life, but regret mainly stems from inaction, with three in four adults regretting things they wanted to do but never got around to.

Nearly half regret focusing too much on financial success over more meaningful endeavours.

In a comprehensive look at life regrets, romance (19.3%), family (16.9%), education (14.0%), career (13.8%), finance (9.9%), and parenting (9.0%) were the top areas of regret for Americans.

Another survey found that 23% of Americans regretted changing jobs, mainly due to missing their old boss or coworkers.

·A staggering 90% of people aged between 21 and 65 regretted rushing their career choices, often due to lack of clarity in choosing a university course or career path.

Why we don’t’t admit our mistakes to ourselves or others?

1.???? Cognitive Dissonance: Admitting a bad decision conflicts with the natural desire to view oneself positively, leading to discomfort or cognitive dissonance.

2.???? Fear of Judgment: Concern about how others perceive them can prevent individuals from admitting mistakes, especially in cultures where there is a strong stigma around failure.

3.???? Self-Justification: To protect self-esteem, people may rationalize their choices and convince themselves that the decision was the best one under the circumstances.

4.???? Sunk Cost Fallacy: After investing time, effort, or money, admitting a decision was bad can be difficult because it means acknowledging that these resources were wasted.

5.???? Lack of Awareness: Sometimes, individuals may genuinely not realize their decision was poor until much later, if at all.

6.???? Social and Professional Repercussions: Admitting to a bad decision can have real-world consequences, like damaging relationships or harming career prospects, which can be a strong deterrent

7.???? Ego and Self-Esteem: Some individuals have such fragile egos and brittle self-esteem that admitting a mistake or being wrong is too threatening for their egos to tolerate. In extreme cases, their defense mechanisms may distort their perception of reality to maintain the belief that they were not wrong or at fault.

8.???? Psychological Rigidity: This is not a sign of strength but an indication of psychological weakness. People who repeatedly refuse to admit they're wrong may suffer from an ego so fragile that they cannot tolerate the notion of being wrong. Instead of sulking and getting over it, they need to warp their perception of reality to defend their position.

9.???? Emotional Influence: Bad choices often involve acting out of emotion rather than reason. Strong emotions can cloud thinking and lead to actions that are not rational. This emotional influence can cause people to justify their choices, even if they prove disastrous.

10. Commitment and Hope: People may feel they have made a commitment and need to stick with it, especially in relationships. They might hold on to the hope that things will eventually change for the better, making it hard to admit a mistake.

11. Resilience and Emotional Management: Resilience involves being able to deal with strong emotions without letting them solely drive decisions. Balancing emotion with rational thought is crucial in making and accepting decisions

How to Make Better Decisions & Choices?

The art of making optimal decisions is a blend of rational thinking, emotional intelligence, and continuous learning. By systematically applying these strategies, one can significantly enhance one's decision-making skills, leading to better outcomes in personal and professional life.

Strategies for Better Decision-Making

1.???? Gathering Information: Acquiring comprehensive and relevant information is foundational to informed decision-making.

2.???? Viewing Multiple Perspectives: Exploring different viewpoints ensures a holistic understanding of the situation.

3.???? Consulting Experts: Advice from knowledgeable individuals can provide insights that you might overlook.

4.???? Awareness of Cognitive Biases: Recognizing and mitigating biases like overconfidence and sunk cost fallacy can prevent skewed judgments.

5.???? Emotional Regulation: Decisions should be made in a calm and balanced state, rather than under the influence of intense emotions.

6.???? Analyzing Pros and Cons: A thorough analysis of advantages and disadvantages aids in understanding the implications of each option.

7.???? Long-Term Outlook: Focus on the long-term impact rather than short-term gains.

8.???? Balancing Intuition and Analysis: While trusting gut feelings, it's essential to back them up with logical reasoning.

9.???? Avoiding Decision Fatigue: Important decisions should be made when you are mentally fresh and not overwhelmed. (ego Depletion)

10. Learning from the Past: Reflecting on past decisions helps in identifying patterns and areas for improvement.

11. Setting Clear Objectives: Clearly defined goals guide the decision-making process and provide a benchmark for success.

12. Prioritizing Decisions: Concentrate your efforts on decisions that have significant impacts.

13. Limiting Options: Narrow down choices to a manageable number to avoid confusion and indecision.

14. Taking Regular Breaks: Breaks are essential for maintaining mental clarity, especially during complex decision-making processes.

15. Using Decision-Making Tools: Tools and frameworks like decision matrices can structure and simplify the decision-making process.

16. Practicing Mindfulness: This enhances self-awareness and the ability to make balanced decisions.

17. Planning for Personal Bias: Being aware of personal inclinations and prejudices that could influence decision-making.

18. Testing Decisions on a Small Scale: Where feasible, pilot testing a decision can reveal its viability.

19. Staying Informed: Continuous learning and staying abreast of new information can influence or alter decisions.

20. Flexibility and Adaptability: Be prepared to modify your decisions if new information or circumstances warrant a change.

Love to get your thoughts and feedback.

?