avoid bad decisions
Abstract
There are several reasons why we make bad decisions:
- we unintentionally do something stupid (e.g. because we are tired, in a rush or distracted)
- we solve the wrong problem (e.g. someone else define the problem for you, you are thinking through a narrow lens)
- we use incorrect or insufficient information
- we fail to learn (e.g. too busy to reflect, don’t keep track of your decisions)
- we focus on optics over outcomes (e.g. thinking about how to defend your decision, saying what your boss would want)
Sometimes success is just about avoiding failure.
At FS, we help people make better decisions without needing to rely on getting lucky. One aspect of decision-making that’s rarely talked about is how to avoid making bad decisions.
Here are five of the biggest reasons we make bad decisions.
1. We’re unintentionally stupid
We like to think that we can rationally process information like a computer, but we can’t. Cognitive biases explain why we made a bad decision but rarely help us avoid them in the first place. It’s better to focus on these warning signs that signal something is about to go wrong.
Warning signs you’re about to unintentionally do something stupid:
- You’re tired, emotional, in a rush, or distracted.
- You’re operating in a group or working with an authority figure.
The rule: Never make important decisions when you’re tired, emotional, distracted, or in a rush.
2. We solve the wrong problem
The first person to state the problem rarely has the best insight into the problem. Once a problem is thrown out on the table, however, our type-A problem-solving nature kicks in and forgets to first ask if we’re solving the right problem.
Warning signs you’re solving the wrong problem:
- You let someone else define the problem for you.
- You’re far away from the problem.
- You’re thinking about the problem at only one level or through a narrow lens.
The rule: Never let anyone define the problem for you.
3. We use incorrect or insufficient information
We like to believe that people tell us the truth. We like to believe the people we talk to understand what they are talking about. We like to believe that we have all the information.
Warning signs you have incorrect or insufficient information:
- You’re speaking to someone who spoke to someone who spoke to someone. Someone will get in trouble when the truth comes out.
- You’re reading about it in the news.
The rule: Seek out information from someone as close to the source as possible, because they’ve earned their knowledge and have an understanding that you don’t. When information is filtered (and it often is), first consider the incentives involved and then think of the proximity to earned knowledge.
4. We fail to learn
You know the person that sits beside you at work that has twenty years of experience but keeps making the same mistakes over and over? They don’t have twenty years of experience—they have one year of experience repeated twenty times. If you can’t learn, you can’t get better.
Most of us can observe and react accordingly. But to truly learn from our experiences, we must reflect on our reactions. Reflection has to be part of your process, not something you might do if you have time. Don’t use the excuse of being too busy or get too invested in protecting your ego. In short, we can’t learn from experience without reflection. Only reflection allows us to distill experience into something we can learn from to make better decisions in the future.
Warning signs you’re not learning:
- You’re too busy to reflect.
- You don’t keep track of your decisions.
- You can’t calibrate your own decision-making.
The rule: Be less busy. Keep a learning journal. Reflect every day.
5. We focus on optics over outcomes
Our evolutionary programming conditions us to do what’s easy over what’s right. After all, it’s often easier to signal being virtuous than to actually be virtuous.
Warning signs you’re focused on optics:
- You’re thinking about how you’ll defend your decision.
- You’re knowingly choosing what’s defendable over what’s right.
- You’d make a different decision if you owned the company.
- You catch yourself saying this is what your boss would want.
The rule: Act as you would want an employee to act if you owned the company.
Avoiding bad decisions is just as important as making good ones. Knowing the warning signs and having a set of rules for your decision-making process limits the amount of luck you need to get good outcomes.