I‘ve made a lot of bad decisions in my life.  I’d like to think that I’m older and wiser now, but since I started aging backwards after my 50th birthday, I guess I wouldn’t consider myself too much older – just a bit wiser!

We make millions of decisions over our lifetime, and just like investing a dollar today, even small decisions can compound into hugely positive or negative results.  I ran across some interesting ideas on the decision-making process and wanted to share.

Dig deeper! The lightbulbs in the small circle represent our standard pool of thoughts when we fall prey to the “availability bias.”  It’s not until we’ve dug deeper that the larger matrix of possible solutions is revealed.

Here are three of the biggest decision-making mistakes:

1. Using the “availability bias”

It’s a natural human tendency to think more about things we have recently talked about, seen, or experienced.  The most available option will quickly come to mind as the best and possibly only solution if we don’t spend the time to reflect and dig a little deeper.

This image shows where most people’s heads are at when considering possible solutions… and how many more solutions they are completely missing out on!

2. Relying on brainstorming

Without structure, free brainstorming can collapse into the availability bias, producing very few viable ideas.  One way to combat this is to use “matrix thinking,” or thinking about all the different ways you can attack a topic in a structured way, methodically listing out each perspective on a problem and all the solutions within each perspective.

3. Letting the wrong emotions steer the ship

I recently read an article about the work of one of the world’s greatest neuroscientists, Antonio Damasio.  Throughout forty years of research, Damasio has repeatedly found that there’s no decision we make that doesn’t involve feelings or emotion.  Damasio found that people who had brain injuries or who were otherwise unable to have a normal emotional response couldn’t make even the simplest of decisions, like which sandwich to eat or which pen to use!

I was skeptical.  Being a CEO of a few businesses and manager of multiple real estate investment funds, I have to be very logical in my decisions.  But the more I thought about it, the more I realized that I also have to feel good about an investment and the people I’m doing business with.

But, how do we know which feelings to trust?  Psychotherapist, author, and TEDx speaker Amy Morin says that when we make terrible decisions, it’s because one of four emotions is in the driver’s seat, pushing logic and rational thinking to the back.  They are:

Excitement = Leads to Underestimation of Risk
Anxiety = Creates Cloudy Judgment
Sadness = Causes You to Settle/Set Your Goals Lower
Anger/Embarrassment = Leads to High-Risk, Low-Payoff Situations

One way you can start making better decisions is by keeping a decision journal. It can be as simple as this one.

The idea behind a decision journal is to create feedback.  There is a cycle to learning and improving in life, and it goes like this:

  1. Learn (absorb information)
  2. Reflect (information processing)
  3. Experiment (take action on the information)
  4. Receive feedback (this will tell you if you are on the right path or if you need to adjust)

A decision journal lets you track your decisions and reflect on your decision-making process, just like keeping a journal of what you eat or the number of steps walked in a day.

In Thinking, Fast and Slow, Daniel Kahneman — psychologist, economist, and Nobel Laureate — writes, “Nothing in life is as important as you think it is, while you are thinking about it.”

As Nobel Laureate Daniel Kahneman puts it, “Whenever you’re making a consequential decision, just take a moment to think [and] write down:

  • What you expect to happen
  • Why you expect it to happen
  • How you feel about the situation, both physically and emotionally”

When we make a decision that has a negative outcome, we usually fail to see that we were responsible for making the bad decision and we “reimagine” our past experiences in order to tell ourselves that we made the best decision possible.  By using a decision journal, you will be able to go back and look at what you really thought at the time and see which parts of the decision-making process may have helped or hindered you.

Charlie Munger, Warren Buffett’s business partner, says that Warren automatically thinks in decision trees, like the one pictured here.  Decisions are all about probabilities: identifying relevant variables and attaching probabilities to each one.  These are things you can deliberately think through when making a hard decision.  Luck or circumstance will always play a part, but you want to set yourself up with the best chance to make the best decision you can.

One of life’s greatest gifts

You’ve already made lots of important life decisions at this point, whether investment-related or personal.  Did you know that making hard decisions is one of the greatest gifts you can give yourself?  Philosopher Ruth Chang does a fascinating 15-minute TED Talk on this topic. (You can watch her full TED Talk here.)

Philosophy professor Ruth Chang explains to TED audiences, “When alternatives are ‘on a par,’ it may matter which you choose, but one alternative isn’t better than the other.”

Chang explains that, when faced with a hard decision, such as whether you should become a lawyer or a professor, live in the city or out on a farm, have children or no children… one decision is not correct or better than the other.  You can’t reduce the decisions to quantifiable values in order to compare them.  The decisions are actually “on a par” with each other, which is EXACTLY what makes them hard decisions.  The only way to decide between two choices that are on a par with each other is to create your own reasoning as to why you are choosing one over the other.  By putting ourselves behind our reasons, our choices become a way of hardwiring our own unique stories, making each of us that much more distinct from everyone else.  It’s a powerful way to shape your own life. •

3. Letting the wrong emotions steer the ship

I recently read an article about the work of one of the world’s greatest neuroscientists, Antonio Damasio.  Throughout forty years of research, Damasio has repeatedly found that there’s no decision we make that doesn’t involve feelings or emotion.  Damasio found that people who had brain injuries or who were otherwise unable to have a normal emotional response couldn’t make even the simplest of decisions, like which sandwich to eat or which pen to use!

I was skeptical.  Being a CEO of a few businesses and manager of multiple real estate investment funds, I have to be very logical in my decisions.  But the more I thought about it, the more I realized that I also have to feel good about an investment and the people I’m doing business with.

But, how do we know which feelings to trust?  Psychotherapist, author, and TEDx speaker Amy Morin says that when we make terrible decisions, it’s because one of four emotions is in the driver’s seat, pushing logic and rational thinking to the back.  They are:

Excitement = Leads to Underestimation of Risk
Anxiety = Creates Cloudy Judgment
Sadness = Causes You to Settle/Set Your Goals Lower
Anger/Embarrassment = Leads to High-Risk, Low-Payoff Situations

One way you can start making better decisions is by keeping a decision journal. It can be as simple as this one.

The idea behind a decision journal is to create feedback.  There is a cycle to learning and improving in life, and it goes like this:

  1. Learn (absorb information)
  2. Reflect (information processing)
  3. Experiment (take action on the information)
  4. Receive feedback (this will tell you if you are on the right path or if you need to adjust)

A decision journal lets you track your decisions and reflect on your decision-making process, just like keeping a journal of what you eat or the number of steps walked in a day.

In Thinking, Fast and Slow, Daniel Kahneman — psychologist, economist, and Nobel Laureate — writes, “Nothing in life is as important as you think it is, while you are thinking about it.”

As Nobel Laureate Daniel Kahneman puts it, “Whenever you’re making a consequential decision, just take a moment to think [and] write down:

  • What you expect to happen
  • Why you expect it to happen
  • How you feel about the situation, both physically and emotionally”

When we make a decision that has a negative outcome, we usually fail to see that we were responsible for making the bad decision and we “reimagine” our past experiences in order to tell ourselves that we made the best decision possible.  By using a decision journal, you will be able to go back and look at what you really thought at the time and see which parts of the decision-making process may have helped or hindered you.

Charlie Munger, Warren Buffett’s business partner, says that Warren automatically thinks in decision trees, like the one pictured here.  Decisions are all about probabilities: identifying relevant variables and attaching probabilities to each one.  These are things you can deliberately think through when making a hard decision.  Luck or circumstance will always play a part, but you want to set yourself up with the best chance to make the best decision you can.

One of life’s greatest gifts

You’ve already made lots of important life decisions at this point, whether investment-related or personal.  Did you know that making hard decisions is one of the greatest gifts you can give yourself?  Philosopher Ruth Chang does a fascinating 15-minute TED Talk on this topic. (You can watch her full TED Talk here.)

Philosophy professor Ruth Chang explains to TED audiences, “When alternatives are ‘on a par,’ it may matter which you choose, but one alternative isn’t better than the other.”

Chang explains that, when faced with a hard decision, such as whether you should become a lawyer or a professor, live in the city or out on a farm, have children or no children… one decision is not correct or better than the other.  You can’t reduce the decisions to quantifiable values in order to compare them.  The decisions are actually “on a par” with each other, which is EXACTLY what makes them hard decisions.  The only way to decide between two choices that are on a par with each other is to create your own reasoning as to why you are choosing one over the other.  By putting ourselves behind our reasons, our choices become a way of hardwiring our own unique stories, making each of us that much more distinct from everyone else. It’s a powerful way to shape your own life. •