Two things that determine the quality of your life: luck – which you have no control over, and the quality of the decisions you make. This highlights why it’s particularly important to have a consistent process in place to help you make quality decisions.

• Yet, people are generally quite poor at explaining how one would go about making quality decisions. This is not surprising since decision making is not taught in K-12 education. The consequences of not being able to articulate what a good decision is can be quite disastrous
• A tool is a device or implement used to carry out a particular function. For example, a hammer is a tool used to drive nails. A good tool has a reliability component to it, meaning if you use the same tool for the same function, you’ll get a consistent outcome. By that definition, trusting your gut is not a good tool. That is because even if trusting your gut helped you make good decisions, you don’t know whether was the case of a broken clock being right twice a day. Your gut is a black-box.
• Using a pros and cons list is not a great way to arrive objectively at a quality decision. We tend to use this tool as a way for us to convince ourselves to go with the outcome we wanted. A good decision tool, on the other hand, is one that allows us to reduce the role of our cognitive bias in the decision making process ( overconfidence, hindsight bias
• Making a decision is in essence making a prediction about how the future will turn out. It is about predicting which option will help you gain the most ground in achieving your goals considering the risk you take. If there’s no good option, it’s about taking the path with the least amount of loss.
• Having a good decision tool is related to examining the quality of beliefs that go into making the decision, the available options, and how the future might turn out given any of the options.
• You can improve the quality of your decisions by improving your knowledge and beliefs, by improving you ability to assess options and how the future can turn out if you choose one of them
• Resulting is a cognitive bias in which we make a judgement call on the quality of the decision based on whether the outcome was good or bad. While there is correlation between the quality of the decision and the quality of the outcome, it is not causal. You could cross a redlight unscathed or you could cross a greenlight and get into an accident. Resulting makes you think that crossing redlights is good and greenlights is bad. In that sense, resulting can make you learn the wrong lessons, and learning from experience is important for good decision making.
• An example of when resulting clouded my judgement about the quality of decisions:
  • Investment decisions. When the first few investments were profitable and quickly, I thought making money in investments is so easy and that I got it all figured out
  • Making it into a flight an hour before the actual flight time makes it seem like it’s okay to show up late at the airport for a flight
• If you want to come up with examples of your best and worst decisions for the past year, note how your mind starts thinking about great and terrible outputs. That is resulting right there.
• You can map out the quality of decisions and the quality of outcome into the following matrix:
  • Earned reward: when you make a good decision and the outcome is good. Example: Traffic light is green, you proceed through the intersection and you pass through it safelty
  • Bad luck: traffic light is green. You proceed through the intersection as you should be then a drive coming onto the intersection crosses his redlights and hits your car
  • Dumb luck: Your traffic light is green but you do not proceed through the intersection because you are reading a tweet on your phone. A car crosses a redlight and proceeds through the intersection. You avoided an accident because you were reading the tweet. This doesn’t make it a good decision, just dumb luck
  • Just deserts: bad decision and bad outcome. You cross a redlight and get into an accident
• Resulting can make us lose sight of the role that luck plays into the outcome of a decision. Once we know what the outcome is, we focus on treating the situation as either an Earned reward or Just deserts. Bad Luck or Dumb Luck go into the shadows. Resulting makes us more inclined to repeat Dumb Luck decisions and avoid Bad Luck Decisions. It may also make us oversee some important lessons from Earned Reward decision category.
• Examples:
  • Earned Reward: Improving health by sticking to a consistent exercise regiment.
    • Evidence-based from science
    • anecodtal evidence backed it up. I was seeing results the more I kept going
    • it provided positive spillover effects to other areas of life
    • Alternatives are not known to proivde any good results
      Reflecting on this decision, I believe I could have obtained a better outcome if I had started down this path sooner. I could have exposed myself to such information sooner and tried it out sooner.
  • Bad Luck: Doing everything by the book only to have luck ruin the result.
  • Dumb Luck: winning 20 dollars from lottery
  • Just Deserts: Investing in an oil company based on an “expert” advice only to have it go down to zero
    • I significantly overestimated the accuracy of the opinion of the “expert”. In another similar example, I also trusted the information shared by the CEO of the company in an interview
    • I overestimated my ability to make good investment decisions. I was riding high off an overall winning streak in the portfolio
    • My approach was too simplistic
• An insidious cost of resulting is that you do not question your assessment when the decision and outcome quality both align.
• While I have been aware for a while that the outcome of a decision is not a reliable indicator of how well a decision was made, I have learned that in order to assess the quality of a decision, I should look at the assumptions and beliefs I made when making the decision, how I assess alternatives, and how the future might pan out. While I was familiar with resulting, I am reminded here of its insidious role in preventing me from revisiting good and bad decisions. We are instead tempted to take a victory lab when the outcome of a decision matched what I perceive to be the quality of the decision. It also made me reflect more on the factors that go into making a decision, and how I can extrapolate from when I made good decisions to other areas in life where I can make good decisions too.
• When making a decision, we can rarely guarantee an outcome (good or bad). Instead, we should focus on the option that leads to the most favorable range of outcomes.
• When we make a decision, we do not know which outcome will pan out. However, once a certain outcome occurs, we convince ourselves that we had knowledge of it being the likely outcome. Our mind distorts our memory of what we were thinking at the time we made the decision.
• Resulting makes us link the quality of the decision to the quality of the outcome while hindsight distorts your actual memory at the time of the decision making with the memory to conform your post outcome knowledge. It makes you believe that you should or could have known what could happen to the point of predictability or inevitability.
• Any single outcome doesn’t tell us much about the quality of the decision. When you make a decision, you look at the possibilities that could pan out. Once you have made a decision, the mind discounts all other possibilities and leave only the branch you took. You forget about the other possibilities. There’s only many possible futures but only one possible past: The allies had to win WWII, AMZN had to become this big, etc.
• Say you took a job in Boston and quit after 6months. In analyzing the decision, consider creating a decision tree, the list of possible decisions that you could have taken. The outcome that you took is rarely the best or worst outcome. What this tree shows is that it was not inevitable that you would love or hate Boston. It might feel great to accept that a great outcome is a result of your doing but you miss learning from such outcomes. We have to explore all outcomes. We are more eager to put bad outcomes in context than great outcomes but doing
• Decision tree component:
  • Identify the deicsion
  • The acutal outcome
  • Create a tree with all the possible outcomes
  • Explore the other outcomes to see what you can learn from this situation
• 6 steps process to assess past and future decisions going forward.
  • Identify the reasonable set of possible outcomes. Focus should be on “reasonable” outcomes. Do not try to cover every single possible outcome out there. The outcomes can be general or focused on certain aspects such as staff turnover. In that case, you can have the following possible outcomes: less than 3 months, 3-6months, less than a year, 1+
  • Identify your preferences given the values of each outcome. To what degree do you like or dislike each outcome depending on your values?
    Identifying a set of reasonable outcomes is already a stepup from your bias. List the potential outcomes on the decision tree from most to least preferred outcome. Goals and values determine the desirability of each of the options. Two people might share the goal of providing for their families. The first would mean providing financially for their family while the second would value spending time with the Family. The first would take a higher-paying job even if it means spending less time with the family while the latter would do the opposite. Seeking advice is good as long as you state your values.
  • Estimate the likelihood of each outcome: for most decisions, we can’t objectively estimate the likelihood of an outcome occurring. Good decision making requires willingness to guess and not have perfect knowledge. Although you don’t have perfect information, you have more information than just pure guessing. Once you say “I’d only be guessing”, you’re giving yourself an excuse not to dig into the knowledge you have or acquire some knowledge to help make a decision. You need to ask yourself what do you know and what do you need to find out to make your guess more educated.
    When estimating probabilities, it’s best to provide percentages and ranges. More accurate than using terms such as “likely” “fairly good chance” is ambiguous.
    If you use a range, aim for the smallest range and where you’re confident that the correct answer will be 9 out of 10 times, and you’ll be shocked if the correct answer is not in range – the shock test.
    Incorporating Preferences, Payoffs, and probabilities is important in your decison-making process.
    Preferences: up to you
    Payoffs: expected utility of the decision.
    Probabilities: express how likely it is something will occur
  • Assess the relative likelihood for outcomes you like and you dislike for outcomes under considerations. Once you’ve combined probabilities with your preferences for each payoff/outcome, you will be able to evaluate and compare options more clearly.
  • Repeat the same steps for other possiblities
  • Compare the options to one another
• When you use ambiguous terms, you feel that you have a leeway in case people hold you accountable for it. To get high fidelity feedback on the decisions you make, you have to use the same language as the person giving the feedback. Eg: if you say that something has a “real chance” of happening, this may lead to miscommunication. Precision uncovers disagreements and that might be a good thing because it helps you uncover when there’s something wrong.
• Experience in a specific dominion in life is valuable only if you have multiple experiences in that area. A single experience might bias your outcome since it is not likely to be representative of what is likely to happen in a similar situation.
  • Engage in counterfactual thinking by considering the alternative possibilities of outcomes that you did not pursue. Doing so will help you understand the role that luck played into your decision, letting go of the feeling of inevitability and improve the quality of lessons you get from experiences
• Part of making better decisions involve learning from the decision you have made. You can do by recreating the decision tree. You take a decision you made, and the outcome that occurred. You then go through the potential outcomes that could have resulted from that decision. From there, you can understand the role that luck played in your outcome, and this would happen for both good and bad outcomes.
• We are happy to know that bad outcomes are not entirely our fault but are less happy to know that great outcomes are not entirely owned by us either. It’s important though to recognize the role that luck played in both great and bad situations because it will help you understand how to better improve your decision in similar future situations.
• Decision tree checklist
  • Identify the Decision
  • Identify the outcome
  • Identify the tree of reasonable outcomes that were possible at the time of the decision
  • Explore the other possible outcomes to better understand what it is to be learned from the outcome you got