How to Decide

Most decisions have a mix of upside and downside potentials. When figuring out whether a decision is good or bad, you are essentially asking if the upside potential compensates for the risk of the downside.

limitations of pros and cons lists. The good news about a pros and cons list is that it at least gets you thinking about the upside (the pros) and the downside (the cons), the start of Step 2. The bad news is that a pros and cons list doesn’t get you thinking about magnitude, how big a positive any pro is or how big a negative any con is,

Every time you get in a car, you’re risking a big downside: getting in an accident and dying. Of course, you take that risk because the probability is so small that the upside (time saved, increased productivity, etc.) compensates for it.

To figure out whether a decision is good or bad, you need to know not just the things that might reasonably happen and what could be gained or lost, but also the likelihood of each possibility unfolding. That means, to become a better decision-maker, you need to be willing to estimate those probabilities.

When you guess, the gap between perfect knowledge and your knowledge bothers you.

If there’s a right answer out there and you don’t know it, guessing feels bad.

This way of thinking, that there is only “right” and “wrong” and nothing in between, is one of the biggest obstacles to good decision-making. Because good decision-making requires a willingness to guess.

We get hung up on not having all the information, which causes us to overlook all the things we do know.

All your knowledge, imperfect as it might be, means that your guess isn’t random. Although you don’t have perfect information, you have a lot more than no information

You might not get it perfect, but when it comes to decision

Don’t overlook the territory in between right and wrong. Don’t overlook the value in being a little less wrong or a little closer to right.

your job as a decision-maker is to figure out two things: (1) What do I already know that will make my guess more educated? (2) What can I find out that will make my guess more educated?

the important thing is to take aim. Aiming for that bull’s-eye by making an educated guess gets you closer to a precise hit because it motivates you to assess what you know and what you don’t know. It motivates you to learn more.

An educated guess is better than no guess at all.

Mapping out the possibilities and probabilities gives you a better view of the quality of the decision.

Adding probability estimates to the decision tree will significantly improve the quality of your decisions versus simply identifying the possibilities and your preferences.

Much of the focus of this book has been about doing things to help you choose the better option. But your choices can’t guarantee great outcomes, because of luck.

Incorporating preferences, payoffs, and probabilities into a decision tree is an integral part of a good decision process. Preference is individual to you, dependent on your goals and values. The payoff is how an outcome affects your progress toward or away from a goal.

[8] The Three Ps Wrap-up These exercises were designed to get you thinking about the following concepts: Incorporating

Payoffs can be measured in anything you value (money, time, happiness, health, the happiness or health or wealth of others, social currency, etc.).