14 Mental Models for Decision Making
A Primer for Making Hard Decisions
Making hard decisions is hard. Here is a list of frameworks and thought patterns I found helpful in getting to a decision.
This is in no way comprehensive; I’m still figuring out how to make the best decisions for me. This is just what I feel useful so far and I hope you can find some usefulness in here as well.
Guidance for Decision Making
1. “Invert, Always Invert” - Charlie Munger
It’s often hard to figure out exactly what to want, but terribly easy to figure out what to avoid. Think about what to avoid and its associated factors. Then, do the opposite.
A very useful application is happiness. It’s hard to figure out how to be happy. It’s much easier how to figure out how not to be happy.
2. “In Life We Must Choose Our Regrets“ - Christopher Hitchens
In every decision, opportunity cost is baked in. By pursuing one opportunity, there is the implicit cost of being unable to pursue another. Opportunity costs are high for hard decisions. This is one reason why hard decisions are hard.
One approach is the regret minimization framework popularized by Jeff Bezos when deciding to leave a high level executive position at prolific trading firm D.E. Shaw to pursue Amazon.
Attempt to foresee the regret associated with each alternative and prioritize the ones with the least amounts. Consideration of time intervals 10 minutes, 10 months, and 10 years is a popular approach.
Furthermore, the regret experienced in the long run usually far surpasses any regret experienced in the short term. Weigh it appropriately.
3. To Sleep Best at Night
There are a plethora of reasons to say no for any alternative in a difficult decision.
Making decisions is not about stamping out all the no’s- that could lead to excessive procrastination and unnecessary stress when committing to a made decision.
Instead, a thought can be taken from Morgan Housel’s Psychology of Money: “my personal investment strategy is maximizing for how well I sleep at night instead of maximizing for returns.”
Reach a point where great sleep can be achieved with the reasoning of the decision made. Decision making usually does not have to comprehensively consider all factors.
4. The Endowment Effect
Popularized by Daniel Kahneman and Richard Thaler, the endowment effect is essentially loss aversion: there is 3 times more fear towards losing what is possessed than the excitement equivalent of gaining what is desired.
This has massive implications towards decisions making. The consideration of downsides is higher than that of upsides.
Be sure to be rationally optimistic about the upsides to balance the irrationally weighed downsides of loss aversion.
5. Anxiety Cost
“There is a cost you pay in not doing the thing sooner rather than later because your mind is taken up ruminating about the fact that the thing still needs to be done.” - Chris Williamson.
This is opposite of opportunity cost and the argument against procrastination. There is implicit downside for not making the decision faster- lost time and mind space- which could have been dedicated to other activities.
While important decisions should never be made hastily, they should not be dragged out for an excessive amount of time either.
Make the decision.
6. Be Wary of Advice
Loneliness often works with uncertainty. It magnifies the desire for certainty and creates the illusion that it can be found in the words of someone else.
However, people optimize for different things, are informed by their reinforced set of beliefs, and have different textures of thought patterns.
Thus, their advice may not apply at all.
This does not mean listen to no one, but this does mean always listen to advice with heaps of salt. External expectations and influence should not completely dominate personal decision making processes and considerations.
7. Advice Weighed On Similarity in Optimization Vs Closeness
There is an allure to more closely trust in the advice of close friends. This makes sense.
However, closeness does not always determine similarity in optimization.
I rather not ask a vegetarian friend how to cook the best steak no matter how close I am to this friend.
Advice should be weighed more if optimization aligns. It should be weighed even more if the advice comes from someone who has what is desired. It should then be weighed additionally more if that someone has also advised others to achieve what is being optimized for.
8. Vanity Metrics
There are plenty of readily available metrics that usually do not matter. Depending what is being optimized for, the metrics that usually do not matter include money and status.
But these are also the metrics that are readily available.
How about the hidden metrics which may matter more and be unexpectedly traded away? These may include: peace of mind, time with friends, commute time, and meaning.
Make sure the metrics align with what is being optimized for. Otherwise, external praise may not match internal satisfaction.
9. Solomon’s Paradox
Why is it that we are good decision makers for others but terrible decision makers for ourselves? Solomon’s paradox: our objectivity for others is yielded by detachment of emotional interference.
Interestingly, viewing oneself as a 3rd person gives this emotional detachment and results in more rational decisions for oneself.
A cool post I took this from: Overchoice and How to Avoid It by Gurwinder
10. Locus of Control
There are 3 groups of factors: controllable, influenceable, and uncontrollable. Amount of thought should be given to those factors in descending order.
Focus on what can be controlled and give some attention to what can be influenced. Those two categories have prevailing leverage to transform inputs (consideration, money, time, etc) into the optimized outputs.
It may be helpful to list uncontrollable factors, but recognize that there will always be risk, which is “what's left over when you think you've thought of everything.” (Morgan Housel).
Mitigating Fears in Decision Making
11. “Directionally Correct Rather Than Absolutely Correct” - Alex Hormozi
Another reason why hard decisions are hard is uncertainty. The optimality of a decision will never be known at the time of making such decision.
This may up the stakes and place unnecessary pressure to an already difficult time.
To reduce this pressure, focus on being directionally correct. This takes the pressure away from being perfect and towards “generally correct,” which is much easier to determine.
12. Reversibility
Decisions which are reversible should not be very hard decisions, given the fact that they are reversible. Simply undo the decision and continue if a poor decision is made.
The only irreversible cost is the time invested into executing the decision, which can be far less than the time invested into procrastination and not committing at all.
As such, decisions which are reversible are not as high stakes as initially thought.
13. Things Usually Work Out Eventually
It may feel like it will be the end of the world if a suboptimal or incorrect decision is made.
I felt this many times. And every single time it worked out ok given a long enough time horizon. I’m sure it generally has for you as well.
Time mitigates poor outcomes of poor decisions, which further mitigates the pressure behind present decision making.
To relieve even more pressure: under a long enough time horizon, death is certain and the decision won’t matter then anyways.
Post Decision Action
14. Similarities of Envy and Regret
Envy and regret work similarly: both stem from negative jealously of someone else’s circumstances.
For envy, that “someone else” is some external person. For regret, that “someone else” is another version of yourself who followed a different decision path.
Envy is mitigated by thinking of the unenviable costs that are paid by those who are being envied. Regret is mitigated by thinking about the substantial uncertain downsides which may bring misfortune and render the alternative less worthwhile.
Approach regret in the same method as envy for mitigation.