On Decision Making
Frameworks and mental models to use for decision making.
From Jeff Bezos annual letter to shareholders:
Type 1 and type 2 decisions
“Some decisions are consequential and irreversible or nearly irreversible — one-way doors — and these decisions must be made methodically, carefully, slowly, with great deliberation and consultation. If you walk through and don’t like what you see on the other side, you can’t get back to where you were before. We can call these Type 1 decisions. But most decisions aren’t like that — they are changeable, reversible — they’re two-way doors. If you’ve made a suboptimal Type 2 decision, you don’t have to live with the consequences for that long. You can reopen the door and go back through. Type 2 decisions can and should be made quickly by high judgment individuals or small groups.”
“As organizations get larger, there seems to be a tendency to use the heavy-weight Type 1 decision-making process on most decisions, including many Type 2 decisions. The end result of this is slowness, unthoughtful risk aversion, failure to experiment sufficiently, and consequently diminished invention. We’ll have to figure out how to fight that tendency.”
- Think of the most recent decisions you have made and classify them into Type 1 or Type 2 decisions.
From Blink by Malcolm Gladwell
When should we trust our instincts, and when should we consciously think things through?
“On straightforward choice, deliberate analysis is best. When questions of analysis and personal choice start to get complicated — when we have to juggle many different variables — then our unconscious thought process may be superior.”
- Think of some recent examples where the decision was a straightforward choice.
- Think of some recent examples where you might have had to juggle many different variables.
From Thinking in Bets by Annie Duke 1
Human tendency to judge decisions based on how they turn out. In the world of poker, this is known as “resulting,” in which we believe results indicate the quality of our decision: If we succeeded it was a good decision, but if we failed, it was a bad decision.
Seattle Seahawks lost the 2014 Super Bowl when they failed to run the ball, opting instead for a pass that was intercepted. Was it the “worst call in football history”? Not really — we are ignoring the role of luck. In Seattle Seahwaks case, the previous interception rate was 2%.
When the most likely event does not take place, it does not always mean it was a poor choice — it could have been just bad luck.
Success = the sum of decision quality (bets)+ luck.
- Think of the most recent outcomes and evaluate what if anything you would have done different in making that decision.
From Thinking in Bets by Annie Duke 2
As humans, we have a tendency to discount time, and make judgments based on how we are affected right now, rather than how we will feel later.
“the flat tire today, it seems much more dire than the flat tire we experienced a year ago”
How can we shift our perspective among our past, present and futures selves via “mental time travel,” in order to make better decisions?
- Let’s pick a decision to make and see if we can use the 10–10–10 process to make it.
“The road to out-thinking people can’t come from first-order thinking”
Second-Order Thinking: What Smart People Use to Outperform
The Great Mental Models Volumes One and Two are out. Learn more about the project here. Things are not always as they…
Here are three ways you can use to put second order thinking into practice today.
- Always ask yourself “And then what?”
- Think through time — What do the consequences look like in 10 minutes? 10 months? 10 Years?
- Create templates like the second image above with 1st, 2nd, and 3rd order consequences. Identify your decision and think through and write down the consequences. If you review these regularly you’ll be able to help calibrate your thinking.
- (Bonus) If you’re using this to think about business decisions, ask yourself how important parts of the ecosystem are likely to respond. How will employees deal with this? What will my competitors likely do? What about my suppliers? What about the regulators? Often the answer will be little to no impact, but you want to understand the immediate and second-order consequences before you make the decision.
All decisions are not created equal. A decision about what to eat for lunch is very different than deciding if a “10x engineer” who is kind of a jerk is worth keeping.
Gibson Biddle provides a very practical list of 10 Habits for Making Wicked Hard Decisions — How to make tough decisions about products, people, and business.