My Personal Approach to Decision-Making Process

[Reading Time = 10 Minutes ]

Those around me (could be my partners, my team, co-workers, students or family) know I am an enthusiast of mental models. They are so helpful, pragmatic, simple, and powerful. They give us the ability to make sense of the world and to deconstruct complex systems to turn them into simple equations, resulting in a fast, mindful and better approach to anything in life.

When it comes to decisions, there are incredible mental models available. With so many in hand, how and when to put a specific one in place? So I thought to myself:

It would be great if there was a way to combine them all into a framework.

Frameworks are supporting structures around which something can be built. It makes things more understandable, bite-sized, sequential and oriented. Theoretically, anyone with a framework is able to achieve the same result. For example, a recipe is a framework for food. Follow the instructions, use the ingredients in order and get the same desired outcome.

So, I built one. I'm not foolish to believe the work is done, but for sure, an astonishing starting point. The following mental models are built-in in this decision framework:

• Importance vs Urgency
• Make bets (see decision's outcomes as probabilities)
• Visualize All the Dominoes (not only first but second, third... consequences)
• Make Reversible Decisions
• Stay Within 40-70% (informed by no less than 40% and no more than 70%)
• Minimize Regret

Given the short-summary, let's dive in.

The Decision Framework

The Decision Framework has 7 parts:

1. Decision
2. Variables
3. Speed vs Accuracy
4. Probabilities
5. Outcomes (positive and negative)
6. Consequences (Permanents, Punctual, Repairable, Irreparable)
7. Minimize Impact

Starting from the decision

No, the first step is not the decision itself. It is what comes before. The right question is: What is the nature of this decision? Is it important, urgent, or both? Four combinations are possible:

• Important and Urgent (you have to do something right now)
• Important and Not Urgent (allocate time to decide and act on it calmly)
• Not Important and Urgent (delegate, if possible)
• Not Important and Not Urgent (maybe in the future)

Once you have figured out the nature of the decision, the next step is to see it through the lens of probabilities, but... are you really confident to assign probabilities for each outcome accordingly? For any particular decision, there is or there are many variables we should understand in order to evaluate probabilities properly. As we do not know what we do not know, the more blind spots we uncover, the better. Here it is what we could do to avoid blind spots:

• Experiment - Like trying samples in the supermarket before buying something. (Minimize Impact)
• Talk to others - Get different perspectives about a particular subject
• Educate yourself - self-explanatory

Hopefully, we have covered all, or at least almost all, blind spots using the options above. We shall then be able to understand the relationship of cause-effect and the probabilities of occurrence of each variable. Consequently, assigning probabilities to each outcome has become an easier task as well as the identification of polarities, positive or negative (visualize all the dominoes).

1. For the positive outcomes, there are two final results. Permanent or punctual ones. Permanents are the perfect situation, something that lasts forever. Punctual are good ones, but it has limitations in terms of the number of occurrences as it only happens once. The challenge here is: Can I repeat the same punctual result over and over again? If yes, find the pattern and build an action plan (maximize impact)
2. For the negative outcomes, there are also two possible results. Repairable and Irreparable. Repairable means we could do something to reduce or eliminate an undesirable outcome, but we must put resources in place to recover. Such as time, money, physical or emotional effort and so on. Hence, an action plan (minimize impact) must be in place to address it appropriately. For irreparable ones, that is the end of the line. Body, mind, personal image, trust, bank account, and death are among some irreparable examples. Keep away from them. Make sure there are zero or near zero irreparable outcomes in your decision.

Do all the above steps scare you? It does not have to be difficult. And believe me, it is not. We already do everything above consciously or unconsciously.

The last part of the framework considers the following question: Do we need speed or accuracy?

Take for instance reading a book. If you need to go fast it is impossible not to miss something. But undoubtedly we can get the gist. Not perfect, but ok.

Alternatively, calmly reading word by word will give you a lot more information and details.

The same thing applies to decisions. If we need speed, we must accept to be between the 40-70% rule. No less than 40% of information and no more than 70%. If we need accuracy because the impact is significant, then be more patient and run the complete process.

Ok, we are done =o)

An image is worth more than a thousand words, right? So, find below a sketch of this framework.

Role-Playing the Model

Let's see how this framework is applied in a real-life example. I will walk you through each step of the model.

To Buy a Car

1. Filter: It is important, but no urgent.
2. Decision: Buy a car
3. Variables: Cost/Benefit, Brand/Model, Maintenance and ongoing costs, future reselling Price...
4. Variables blind spots actions: do a test drive, find reviews online, talk to someone who owns your preferable brand/model, rent and test for a longer time...
5. Positive Outcome: No more long walks or time spent waiting for bus/subway/taxi/uber (especially on rainy days)
6. Negative Outcomes: Risk of an accident, no ability to pay installments, High maintenance costs related to parking, car wash, petrol...
7. Action Plan for Negative Outcomes: To keep it simple, let's consider no ability to pay installments. We could do the following: (1) Save money to buy the car in cash (2) Save upfront two to three installments...
8. Speed or Accuracy? Is the car needed for a couple of years for example? Thus being accurate is the best decision.

I hope you found something useful here or at least learned a new thing. Let me know what you think or what could be improved on the framework.