Mental Models for decisions

Deciding to start a company, join/resign a job, or marry someone, or put all your money in bitcoin/stocks/gold/deposits, can all be life-changing decisions with risk of ruin. We all struggle with the burden of decisions in our everyday lives. Decisions can be facts or emotions driven, subjective or objective, lucky or risky, good or bad, the key is in understanding the entire picture and connecting the whole puzzle before making a decision.

In the last two months, I have been reading several books like psychology of money, Thinking in Bets, Black swan and Fooled by Randomness which brought a great deal of clarity about cognitive biases and how our two brains control our life.

Not the destiny, but our mind is driving our life whether we realize it or not.

Ever noticed when we are driving a car, our subconscious mind does all the driving while our conscious mind is busy processing other cognitive complex things, like what are the sales numbers this quarter, presentation slides, planning your year, or listening to an audiobook. Driving is the most dangerous thing to do if you consciously calculate all the statistics around road accidents, and yet our subconscious mind is?trained?enough to take all the right turns and take us smoothly to our destination.

• All decisions are bets.
• Bets are as good as our beliefs.
• Our beliefs are formed by the things we see, read or hear.

The quality of our belief depends on the quality of our source. A man threw turkeys from a helicopter because he?believed?turkeys can fly. People are obese because they?believe?low-fat food is healthy.

Humans have a need to have an opinion on things we know nothing about - Moral Panic

We form opinions and beliefs about things and people at the speed of light and once our brain makes an opinion or a belief, it takes great cognitive power to break that belief or opinion.

A king use to shoot the messenger who brought bad news. After that he stopped getting bad news.

His kingdom was destroyed by an enemey attack which nobody dared to inform him about. Dont be that king, if you come across contradicting beliefs, or paradimgs, instead of defending, or taking an offence, try to understand what is in it for you to learn. Dont shoot the messenger.

Neither our conscious mind nor our subconscious mind is trained to see the truth.

Humans tend to fool themselves more towards wishful thinking rather than facts -Motivated reasoning

Good Decision vs bad decision

A decision will be good or bad, not based on the outcome but the process. if you drink and drive and still survive that doesn't mean it was a good decision (bad process, good outcome, you got lucky). You invested in a stock that crashed, doesn't mean you should stop investing. (good habit, bad outcome)

Bad outcomes can be due to bad luck or our ignorance of facts or truth. A great deal of thought process should be invested in understanding if our process was good or bad, outcome should least matter for a good decision.?

Our ability to make a good decision is capped by our beliefs, assumptions, and perspectives.

Trivia - If we spot a?shy guy Tom?on campus, given an option he can either be a Maths Ph.D. or MBA student, we assume he might be Maths Ph.D. as an MBA student tends to be more confident and extroverted. Now if we bring the statistics into the picture, we come to know that on average there are only 10% of students going for Maths Ph.D. while 90% for MBA. Given this information, the odds of Tom being an MBA student increases. Just like the odds of bumping into an engineer in Bangalore. Our assumption got invalidated with statistics.Bayes rule

We live in a statistical world now, but our brains are not wired to process statistics on the go.

Know yourself-

Freud's child development theory suggests, personality is mostly established by the age of five. Early experiences play a large role in personality development and continue to influence behavior later in life. Why we behave the way we behave, what are the core driving factors for our fear, anger, guilt, motivations, how can we break from those fixations, biases and develop a holistic true belief about ourselves and the world?

Imagine marrying someone, before even knowing who you are, what your values are, and what you expect from your partner. Or starting a company without knowing it will be tougher than the tough job you are in currently. 9 terrible reasons to start a business

Talk to your future self

Whenever you are taking any big or small decision. How will your decision affect your future self in 1 day, 10 days, 10 months, 10 years. If you have an exam, or a presentation tomorrow and you decide to binge watch a netflix series today, will your future self be happy with you tomorrow, or will you be happy about your eating and exercise habit in 10 months, your investment habits in 10 years. What you are doing today will have long term effects on your happiness.

It is a long journey towards becoming a good decision maker, which starts with knowing yourself with continuous self awareness, mindfulness, medition and then seeing the world as it is without blinded by our beliefs or perceptions.

If you have any other mental models for decision making please share them in the comments. Check out Mental Models for Planning in the knowledge pursuits series. If you like to dicuss about books, mental models or first principles, lets chat on knowledge pursuits club on clubhouse sometime.