You’re stuck. You face an important decision, and you’re not sure what to do.
You feel that your success depends on making smart choices, so you want to know how to become a better decision maker.
Let me tell you this: “You’re right!”
Decision making is an essential skill in life. Unfortunately, it isn’t thought in school and there aren’t many resources out there about this topic.
You might wonder: “Rudy, I’m reading this website because I want to learn about money, not how to make decisions.”
I understand your concern, but money and decision-making skills go hand in hand.
I’ve learned the hard way to make better decisions in my personal life, career, and business going through trials and errors.
But experience is a costly, inefficient teacher that teaches us bad habits along with good one.
I wish I had a comprehensive guide to help me making better life-changing decisions.
I would have made better decisions about how to invest my savings, use my time in a better ways and retired a few years earlier from an unpleasant job.
That’s why I decided to write down a step-by-step guide that will help you grapple with tough tradeoffs, clarify uncertainties, evaluate risks, and make a series of linked decisions in the right sequence.
Few of the BIG decisions in life you might face are:
- Should I go to university? If so, to study what?
- What career should I pursue?
- Marry now or wait? Should I have children?
- Should I buy a house or rent?
- What investments are suitable for me? Should I risk more?
Such questions mark the progress of our lives, and the way we answer them determines our place in society and in the world. Our success is directly linked to smart decisions.
Are you ready to make better decisions that will help you to reach your goals – faster and with less hassle?
If so, today, I’m going to show you how to make smarter decisions so you can live a fulfilling life, improve your business and ultimately make more money.
YOU CAN LEARN TO MAKE BETTER DECISIONS BY USING A PROCESS
It’s like cooking your favorite dish or any other dish for that matter. You buy the ingredients, follow the recipe and your meal is ready. It’s a simple 2 steps process.
The only way to really raise your odds of making good decisions is to learn to use a good decision-making process, one that gets you the best solution with a minimal loss of money, energy and time.
Before digging into the “how to”, it’s worth repeating this:
The connection among decisions you make lies not in what you’re deciding, but in how you decide.
In fact, an effective decision-making process fulfills these five criteria:
- Focus on the problem.
- It’s logical and consistent.
- It required the minimal knowledge to resolve a particular dilemma.
- It encourages the gathering of information.
- It’s easy to use while flexible and reliable.
You can make a well-thought decision, but if you’ve started with the wrong decision problem, you won’t have made the smart choice. So, posing the right problem drives everything else.
You just got a baby, and you need a bigger car. So your decision problem seems straightforward. Is it?
- Which car should I choose?
- Do I need a new or used one?
- How much bigger than the present one?
- Or maybe you don’t need to upgrade your car.
- What about rent one for a month to see if you really need to change.
The way you pose a problem profoundly influences the course you choose.
Get it right and you’ll be well on your way. On the other hand, get it wrong and you’ll march out in the wrong direction.
In general, people don’t like problems. They are annoying, scary and sometimes difficult to overcome. However, problems are also opportunities.
When I lost my job during the financial crises in 2008, not only I managed to get a new job, but with a better salary and lifestyle.
Instead than narrow my problem in an obvious way – Where can I get another job in Dubai? – I redefined it more broadly: There are any better opportunities oversea?
In the middle of difficulties lies opportunities – Albert Einstein
DEFINE THE DECISION PROBLEM
Where to get started in defining problems?
Simply, ask yourself two questions:
- What triggers the decision?
- Why am I considering it?
Problems are trigger by your surroundings, and being aware will help you by not making bias decisions. Bias decisions limit your choices, and that isn’t SMART.
For example, I’m considering in which country to educate my daughter.
- My assumption to the problem; where my daughter should be raised considering the quality of education?
- The trigger occasion; my friends with older children are evaluating schools.
- The connection between the trigger and the problem; my daughter will start kindergarten in two years.
In this example, I’m biased to think which country has the best education system. However, there is a different option to this problem; HOME SCHOOLING.
You see, in the case of homeschooling, relocating to a new country isn’t necessary, but still an option.
What I’m trying to say is this; “Don’t narrow the range of alternatives you consider. Instead, look at the probIem from different angles.”
With an open mind, not only you will have more choices, but smarter one too.
An excellent way to look at problems from a different perspective is to ask opinions to friends, family members or field’s specialist.
Listen profoundly and keep an open mind, more often than not a better alternative to the problem will arise.
BREAKING DOWN A PROBLEM
Identify the essential elements of a problem help to focus on the right goal.
If you’re deciding about your next career move, the elements of your decision problem might include any of the following:
- What position is best for future career advancement?
- How much money do I need to earn?
- What’s the best way to develop my skills?
- Best balance work/life?
Decision In Context
When taking a decision on a problem, understand the effect this one will have on other decisions.
If you move far away for a job opportunity, this decision will impact your personal life.
You’ll not be able to see your parents as often as before. In the case of an emergency, you are alone, etc.
This decision will impact your future decisions too. Thinking through the context of a decision problem will help to keep you on the right track.
Gain Fresh Insights With Different Eyes
As said earlier, approach a problem from a different perspective is very helpful. You might find someone that had a similar problem, offering a working solution.
By doing so, you will save money, time and frustration instead of going for a trial and error approach.
If you can’t actually talk to anyone, imagine how others might think. Ask yourself; How would my accountant see the problem? How my boss would look at it?
Re-examine Your Problem Definition As You Go
You want to create the best possible problem solution on the outset.
Yeah, right. That easier said than done as in most cases your perception about the problem may change as you go.
You want to buy a new PC. But as you dig in you realized that you need a laptop because next year you’re planning to travel for work. In fact, it’s common in decision making to start from A while ending to B.
Chances to redefine your problem are opportunities that often lead to better decisions. So, ask yourself time to time: Am I working on the right problem?
Questioning the problem is important in a fast-changing situation or when new information is available.
It might sound like I’m making a big deal out of the problem definition, and you’re right.
Crafting a good definition pays off handsomely in the end. It increases the odds that you’ll make the smart choice.
Objectives are essential to make balanced decisions that suit you.
How often is happen that you made a decision based purely on financial implications but ignores personal fulfillment?
For example, a career moves for the fat check, but the working environment is dreadful.
“Do you think that is a smart choice?”
Happen often that decision makers don’t take the time to identify all the objectives resulting in disappointment.
A simple but yet widespread example is to enjoy life today while sacrificing having a comfortable retirement.
These missteps occur for two main reasons:
- People feel they already know what they want and need, so they don’t spend enough time and effort in formulating objectivities.
- It isn’t easy. Objectives aren’t always apparent, sometimes buried beneath the desire others have for you, societal expectations and norms.
For important decisions, I highly recommend a deep soul-searching to reveal what really matters to you.
5 STEPS TO MASTER OBJECTIVES
Step #1; Write down all the concerns you wish to address
Don’t worry about being disorganized; this is a brainstorming session. Go Wild!
Steps to work effectively on the list:
- Write in details whatever you want from your decision.
- Think about the worst possible outcome.
- Consider the decision’s possible impact on others.
- Ask people who have faced similar situations what they considered when making their decisions.
- Think about how you would justify your decision to others.
- When facing a group decision, let each member answer individually each point above, then combine the lists.
Step #2; Use simple objective’s description
One verb and an object will do.
Let’s identify objectives in selecting a school for your kids:
- Learn the fundamentals
- Friendly environment
- Develop discipline
- Learn good habits
- Be intellectually challenge
- Learn to function in our society
- Develop lasting friendship
- Learn basic values (honesty, helping others, empathy).
Step #3; Separate ends from means to establish your fundamentals
The challenge is to separate between objectives that are means to an end and those that are ends to themselves. I know it sounds complicated and frustrating at first.
The easiest way to peel throughout the layers is to use a common Japanese saying; “You don’t really understand something until you ask five times – Why?”
Asking “Why?” will lead you to what you really care about (your fundamental objective).
I want to increase my income. Is this an objective to an end or a means? Let’s ask “Why” to find out.
- Why do I want to increase my income? Because it will allow me to create a robust financial net for my family.
- Why is this important? It will allow my family to have more options in future and feel secure.
- Why is this important? Because we want a happy and comfortable future.
- And why is a happy and comfortable future so important? The happy and comfortable future just is important.
The “happy and comfortable future” is the end objective.
Now, I can create alternative means to reach my objective of a happy and comfortable future.
Instead of earning more income, I might learn to invest better our savings. Both alternatives are valid to reach my end objective.
This exercise is a stimulus to generate alternatives on “How” to achieve the objective – better.
Step #4; Clarify what you mean by each objective
Asking a simple “Why” enables you to clearly see the components of your objectives. In return, it will help you to state the objective more precisely.
Some objective will be obvious such as “minimizing costs” = spend the least amount of money.
However, the meaning of other objectivities can be more elusive.
For example; Reduce the criminal problem in New York.
But what type of criminal problem? Robbery, maybe violence on women rackets… Or what else?
Clarifying the meaning of an objective will help you to achieve it.
Step #5; Test the objectives
Imagine to implement the objective and see if you are comfortable living with the resulting choices. If not, refine the objective till they are clear and sound.
Alternatives are the cornerstone of decision making. Because of their central importance, you need to establish and maintain a high standard for generating alternatives.
Two important points to keep in mind:
- You can’t choose an alternative you haven’t considered. What you don’t know, you can’t act on it.
- No matter the number of alternatives, your chosen one can be no better than the best of the lot.
Now, let’s have a look at common pitfalls in alternatives.
The most common shortcoming alternatives are:
- Business as usual – Because many decision problems are similar to others that have come before, choosing the same alternative beckons as the easy course.
You want to go out with your girlfriend, but where? In the previous 3 times you went to the cinema, so let’s go to the cinema tonight too.
- Choose default alternatives – You just graduate from science school but you don’t have any job opportunities just yet, probably because you didn’t try hard enough.
However, your family is running a department store and want you back. You feel trapped, so you take the family job, the default alternative.
- First possible alternatives – Your friend recommended highly a doctor to you, so you make an appointment without considering other alternatives.
What is good for others might not suit you.
My recommendation her is to develop a new habit; once you find one possible solution, look further.
- Choose an alternative presented by others – You get a call from a headhunter offering a better job than your current, so you accept before evaluating possible other alternatives.
- Being stuck with what is left – Waiting too long to take a decision might decrease the alternatives available.
Generate Better Alternatives
It might sound intimidating to come up with sound alternatives but isn’t all that difficult.
Try some of these techniques:
- Ask “How?” – Since your objectives drive your decisions, use them to guide your search for good alternatives. Ask yourself: “How can I achieve the objectives I’ve set?”
- Challenge constraints – Decisions problems have constrained that limit your alternatives. Some are real and other assumed.
For example, you want to buy a new car but it can’t fit into your garage. This is a real constraint.
Another example is that you need to replace a manager in your department. In the past, you always have promoted within the company without ever consider to hire someone from outside.
This is an assumed constraint, representing a mental rather than a real barrier.
- Set high aspirations – One way to increase the chance of finding good and unconventional alternatives is to set targets that seem beyond reach.
This forces you to think in an entirely new way, challenging the status quo.
- Do your own thinking first – Sometimes ignorance is bliss, and you might come up with creative ways to solve a problem.
So, before consulting someone else or do research, think how you could solve the problem on your own.
- Learn from other’s experience – Use someone else experience facing a similar problem. However, don’t let their advice to constrain your thinking.
- Ask others for suggestions – After you’ve thought about your decision, is wise to get a different perspective from people distant at the problem. Keep an open mind during these conversations.
- Never stop looking for alternatives – As the decision process moves on, each stage will become clearer and more precise.
- Win-Win alternatives – You’ll be faced with problems that required someone else approval.
The key is to step back and analyze their decision problem and come up with an easy solution for them.
For example, you want a long vacation leave, but your boss is unlikely to let you go because you have tasks to complete.
A solution would be that you work extra hours for the next six months to complete all the tasks ahead so you can go on vacation.
We sometimes overthink while searching for solutions to our problems, but the unfortunate truth is; the perfect solution seldom exists.
Obsessing over them take a toll on mental and emotional energy, so be careful
You might wonder: “How will I know when enough is enough?”
Good question, Pal.
You need to balance your effort/gain of your decisions.
You’ve defined your problem, structure your objectives and established the set of alternatives.
Now, to make a smart choice, you need to compare the merits of the competing alternatives by assessing how well each satisfies your fundamental objectives.
If you assess consequences well, your decision will often be obvious without the need for further reflection.
NOTE; be sure understanding consequences of your alternatives before making a choice, or you will understand them later but not be happy with your choice.
In fact, the more deeply you understand these, the more likely you are to make smart choices.
I’m going to show you how to describe consequences the right way so you can make the smartest choices.
THE PITFALL IN DESCRIBING CONSEQUENCES
You’re planning a dinner with friends before watching a movie at the cinema. You only have one hour to eat before the movie start.
You have identified two alternatives:
- Restaurant 1; Good food, average setting, and the service can be slow. Only 10 minutes from the cinema.
- Restaurant 2; Excellent food, good setting, and fast service. 25 minutes from the cinema.
Neither alternative offer what you want – Unfortunately life is a bitch. Describing accurately the consequences of your alternatives might look simple in this case, right? Not really.
Describing accurately the consequences of your alternatives might look simple in this case, right? Not really.
We assume to have accurate and complete information while considering those two alternatives, but what if the restaurant 1 actually offer a fast service?
Maybe your friend is been there only one time, told you the service is slow, and you assumed this information to be accurate.
The three biggest consequence’s pitfalls are:
- Inaccurate; The information is misleading.
- Incomplete; You don’t know everything you should know. What if the restaurant you choose might not have a liquor license and you want a glass of wine?
- Imprecise; How much restaurant 1 is slower than restaurant 2?
Gather proper information for defining consequences is vital for an effective decision process.
The most effective way is to use these 4 steps:
Step #1; Mentally put yourself in the future
Just imagine having taken a decision. What will be the consequence of your decisions in the future?
If you’re planning to move abroad for work, how your typical daily life will look like? How your family will feel without seeing you for a long time?
This practice is very helpful in visualizing long-term consequences instead of the easier immediate one.
Step #2; Create a form with measurable alternatives
Use words and numbers that best capture the alternatives.
|OBJECTIVES||JOB A||JOB B||JOB C||JOB D|
|Skill Development||High||Moderate||Very high||Low|
As you can see, a consequences table puts information into a concise and orderly format. It gives you a clear framework for making comparisons.
Step #3; Eliminate inferior alternatives
It’s a fast and reliable system that will save you time.
Select one alternative as the tentative king.
Compare it with other options by analyzing pros and cons.
If one alternative emerges as clearly superior, eliminate the other and use the survivor as the king for your next comparison.
CONSEQUENCES TABLE TO LIVE WITH A NEWBORN BABY
|Quality of Life||Food|
Cost of living
|Distance from my family||Flight hours||0||1||1||1.30|| |
By using this table you can get a clear picture of the different consequences. Remember, your alternatives are as good as your information.
At this point, you might have eliminated some poor choices. Those that remain will seem to nearly balance each other, but none is going to be optimal.
I know it’s hard for you to accept this, but you need to give up something on one objective to achieve more in term of another. In other words; Make a tradeoff.
Complex decisions have multiple objectives which required balance tradeoffs.
Rarely a decision has only one objective like buying the cheapest air ticket to London. One objective = Cheapest.
How do you make tradeoffs among complex objectives?
Step #1; Eliminate dominated alternatives
The fewer the alternatives, the easier the decision will be.
So, if alternative A is better than B on some objectives and no worse than B on others, B can be eliminated from consideration.
When the alternatives aren’t clear, you can use ranking to give values.
|OBJECTIVES||JOB A||JOB B||JOB C||JOB D|
Step #2; Concentrate of the amount of the swap, not the perceived importance of the objective
Looking at the above example, you might say that salary is more important than vacation time to you.
But if the salary of the alternative jobs are similar and the vacation times vary widely, then the vacation objective is more important than the salary objective.
Concentrate not on the importance of the objectives but on the importance of the amounts in question.
There are situations in which there is an uncertain factor no matter how much thought or time you expand.
In fact, when choosing, you may know what might happen, but you won’t know what will happen.
It’s important to make calculate risks part of your decision process (it’s a must in investing).
First, acknowledge the existence of risks.
Second, understand the various outcomes, their likelihoods, and their impact.
SMART CHOICES WITH GOOD AND BAD CONSEQUENCES
We evaluate smart choices by the quality of the outcomes, which is an enormous error.
A smart choice – a bad consequence. You buy a house because you feel that by renting, you are wasting your money.
Suddenly, the economy goes into a recession, you lose your job and aren’t able to pay the mortgage. You lose the house.
A poor choice – a good consequence. You buy a stock acting on a tip from your friend. The stock drop for few months, but suddenly, the company patent a new drug and your investment triple in value.
Decisions under uncertainty should be judged by the quality of the decision making, not by the quality of the consequences.
Uncertainty makes decision making more complex. To mitigate these challenges, we need to build risk profiles.
I’ve four key questions to answer for managing risks:
- What is the key uncertainty?
- What are the possible outcomes?
- What are the chances of occurrence of each possible outcome?
- What are the consequences of each outcome?
Uncertainty; Reader response to the launch of a new product
|Less than 100 sales||Somewhat likely||Bad. I will not recoup my time investment|
|Between 100 – 500 sales||Most likely||Good. I will increase my profit 50%|
|More than 500 sales||Least likely||Great! I will double my income|
The chances are favorable and well worth the risk considering the outcome. I’m going to launch this product.
BECOME A WISE DECISION MAKER
To recap this loooong guide, it should be clear by now that the art of good decision making lies in systematic thinking.
A systematic approach helps you to:
- Address the right decision problem.
- Clarify your real objectives.
- Develop a range of creative alternatives.
- Understand the consequences of your decision.
- Make appropriate tradeoffs among conflicting objectives.
- Deal with uncertainties by making calculated risks.
But making a smart decision is one thing. Become a smart decision maker is another.
In this last section, we move from the process to the person, so you can become a master decision maker and be successful in life.
GET STARTED; PROCRASTINATION IS YOUR ENEMY
Did you ever drug a decision for days, even moths because the problem seems hopelessly complex? You aren’t alone.
However, deciding by default, by not deciding, almost always yields unsatisfactory results. So, you need to get started.
The sooner you start, the more likely it is that you’ll give your decision adequate thought, rather than being forced to decide under pressure.
To jump-start the decision process, answer the ten diagnostic questions so you can move forward to make a smart decision.
The Diagnostic Questions
- What’s my decision problem? What, broadly, do I have to decide?
- What are my fundamental objectives? Have I asked 5 times “Why”?
- What are my alternatives? Can I think of more good ones?
- What are the consequences of each alternative? Can any alternatives be safely eliminated?
- What are the tradeoffs among my more important objectives?
- There are any uncertainties? If so, they pose any serious problems?
- How much risk am I willing to take? Can I minimize risks?
- Have I thought ahead, planning out into the future? What are the potential gains and the cost in time, money and effort?
- By now, can I improve the decision?
Don’t let yourself get bogged down on these steps. Move on quickly from one to another, without wasting time on aspects of the decision problem that later might turn unimportant.
Avoid this issue by beginning with a fire-drill analysis.
For a simple decision, imagine having few minutes to complete the task. For a complex decision a few hours.
Quickly run through all the decision elements:
- Risk Tolerances
- Future Consequences
See how the pieces fit together. This rough sketch should enhance your understanding of your problem.
Later, you can go back to specific points, trying to improve your decision. However, in most cases, you’ll be surprised to find that the fire-drill analysis solved your problem.
For most decisions, you’ll know right away what you need to focus on. But what’s important isn’t obvious, ask yourself:
– What’s blocking me from making this decision?
– Why I can’t just decide now?”
The answer will indicate where you need to focus your attention.
Another important point that I would like to stress is to establish basic decision-making principles. These usually are related to your belief and values.
For example, what you are going to eat for dinner tonight is relative inconsequential, but what you choose to eat over time adds up to determine your overall nutrition.
So, by establishing principles for your decision-making process, you’ll be able to make routine smart decisions in autopilot reflecting your long-range value and belief.
You’ll notice that over time, you develop a decision-making style; a set of habits that governs your decision making.
You should constantly improve your decision-making style so to be effective in making smart decisions.
Few simple questions will help you to review your decision style:
- Are you happy with your style?
- Is it effective in achieving what you want?
- What would you change, if anything?
- What can you improve?
Review your decision process twice per year to help you to make better decisions.
To do so, you might ask a friend or family member to provide feedback on your past decisions. Offer to reciprocate.
But be careful not to judge your or your partner’s decisions solely by the desirability of the consequences.
As said earlier, distinguish between smart choices and good consequences.
FROM DECISION PROBLEMS TO DECISION OPPORTUNITIES
People who do poorly in life, usually wait for decision situation to come to them.
Decision problems are often dropped onto their shoulder by others such bosses, competitors, and family or by circumstances such mother nature, accidents and financial markets.
However, the best approach is to be proactive by taking the initiative in your decision making rather than waiting for decision situations to come to you. Therefore, it is better to proactively create your decision problems.
Therefore, it is better to proactively create your decision problems. Decision problems created by you are decision opportunities, not problems.
I was drinking way too much coffee years ago. Instead of waiting for any problem to arise, I took a decision opportunity to switch to tea which doesn’t have any negative effects even if drunk in large quantities.
The spark for identifying decision opportunities is clarifying something that you want.
There is a systematic way called value-focused thinking. As you noticed, it focuses on your values which are what you hold to be of worth, useful, and desirable.
Begin by defining a high-level set of objectives – your values – specifying what you want from life such career, marriage, family, lifestyle and so on.
Then use these values to seek out and create decision opportunities.
YOU GOT THIS
My friend, now you need to work on your decision process after reading this. Yes, only reading isn’t going to help in taking better, smarter and sound decisions, but practice will.
As you come to use the method routinely, you will notice:
- Most tough decision problems have one, or maybe two difficult elements.
- Many of your tough decision aren’t hard as they look.
- Describing the problem, clarifying objectives and coming up with sound alternative your decision will develop naturally and easily.
- Identifying and eliminating poor alternatives keeps you from making foolish choices.
- When there is uncertainty, you can’t guarantee good consequences. But over time, smart choices will result in a majority of positive outcomes.
Remember, you are the result of your choices, so be proactive in taking charge of your decision making and you’ll be rewarded with a happy and successful life.
Do you have a tough decision to make? Share it in the comment below! Let’s chat.