The Difference Between Good and Bad Decision Making

Have you ever made a decision in the moment that you regret? Have you ever made the case for something but you can’t quite put it into terms why? We all have, and almost every single instance it’s born out of our harmful emotions that disrupt what Dalio refers to as the natural decision making process.

First, learning.

Then, deciding.

Dalio believes this is why it’s so important to use evidence-based decision making that’s based on knowledge and reasoning, not gut. Accumulating knowledge, observing the evidence of what’s happening, and then making an informed decision. It sounds like it’s all common sense, and it is, but as humans we so often bypass this because what we know of the world shapes our opinions. If you’ve only ever watched Vietnam war documentaries then what you know about Vietnam is very different from someone who’s traveled and spent time there.

So, if we never learn, we never change what we know, and we always make the same decisions. This is dangerous for two reasons. One, if you’re doing well then you will hit your natural capacity for success at some point based on what you know and that will be it. Two, if you’re not doing well then you’ll never stop not doing well because you’ll never acquire the knowledge as to why that is. Ego and narcissism will blunt progress out of natural self protection.

To make better decisions we need to let the following guide our process according to the behaviorists:

• Past data
• Present evidence
• Facts: Subjective input can be helpful but should never drive decisions.
• Informed opinions: Trusted colleagues, those who study the same data but experience it through a different lens.
• Time allowance: Emotion acts quickly. Reason takes time.

Poor decisions result from over using the following:

• Emotion
• Uninformed opinions: As Dalio puts it, “Opinions are a dime a dozen and nearly everyone will share theirs with you. Many will state them as if they are fact.”
  
• Bias confirming opinions: “Opinions are especially deadly when an inferior opinion confirms your own bias.”
• Single data points: Cherry picking a single point on the curve or interaction and not looking at the whole scope or relationship.
• Deciding too quickly

Like any person, I have made too many bad decisions in my personal life to count. Every single one of them the result of that second list. Ever had a friend who always seems to make the wrong decisions? They never progress and routinely self inflict wounds in the same patterns? Emotion, surrounding themselves with uninformed bias confirming opinions, and failure to see the whole scope are what likely guide them.

Our decision making at Performance360 typically follows this pattern: Someone will observe something, check the data and the evidence, bring it up for group discussion, sit on it for a given amount of time period, revisit and re-discuss, and then decide only if there is complete or majority agreement. There are no decisions in isolation or in the moment, and we find that this often leads to the best outcome many more times than not. In a pandemic, sticking to these principles has been crucial for us in not getting completely lost in opinions and enabled us to stay true to our vision.

We find this list extremely helpful and frankly, I can’t recommend it strongly enough.

-Dave

References:

Principles, Dalio