The Art of Making Decisions
Is your decision-making science? Art? Or both?
Are our decisions actually in our hands, or, are they part of something bigger, a process which helps and guides us towards getting to know and define ourselves a little bit better with every decision we make along the way?
Decisions and Choices
Sometimes decisions come in the form of simple choices which look like they are small in consequence. “What do I eat for breakfast?” for example. Some decisions like “Who should I marry?” are without a doubt big in consequence. What actually defines small and big decisions? The breakfast example looks straightforward - but what if the menu decision taken leads to food poisoning? The moment you start thinking about it, each decision takes on a life of its own and even decisions which may seem fast, easy, and simple on the surface can quickly become complex.
I know people who struggle with decisions regardless of their complexity. But I also know people who treat decision-making as an extreme sport. In either case, I believe the process of decision-making is a skill that can and should be practiced consciously and that we can all get better at it.
Science/Data and Conscious/Subconscious
I was born in Germany, where we have a running joke for decision making:
for simple decisions — create a sheet listing pro's and con's on each side respectively;
for more complex decisions — develop a table with multiple sheets, using as many data points you can possibly think of, so that a proper, rigorous analysis can commence.
In our increasingly data-driven world, decisions come with an exponentially-increasing amount of data for consideration. We source such data to help us make decisions, because we believe decisions are made on a conscious level. However, most of our decisions are governed by our subconscious — triggered by stored emotions and past memories.
Further complicating decision-making is the near-impossibility to accurately predict the outcome of all possible options. Especially in business or politics, we rarely have the luxury of the specific, timely, and contextually relevant data (and the personal and organizational ability to process it) within the timeframe the decision requires.
So how to make decisions?
An independent German EU parliament politician takes a vigorously practical approach to his decision-making. Being independent, he votes “yes” 50% of the time and he votes “no” 50% of the time on almost all of his votes. His logic? The sheer volume of information is not able to be digested, so wouldn’t — necessarily — lead him to making better decisions for the people he represents. Of course, with major issues and when opinion polls are available, the bigger parties pull him over to their side. But for him, his 50/50 rule is a good solution for managing his high volume of decisions.
In a world of ever-increasing (and often less digestible) data, heuristic techniques are one way to deal with information overload. This TED talk shows how heuristics can help all of us to better navigate decision making when there’s a near-infinite amount of data.
Heuristics in Investments
Heuristics can also be applied to investment decisions.
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