6 Steps to Improve Your Decision Making
There is a lot of conversation around decision making and how to best go about making the right choices. Theres a mathematical modeling/decision tree approach, some people have no approach and go with their gut feeling (perhaps a method within itself). I always find myself struggling to narrow down the right choice, I recently bought a car, was it the right choice? I am in the process of weighing some job offers, which should I pick? I found this post extremely helpful in working through my own thought process, and it is very applicable to markets today.
Decision Making amid Uncertainty: Six Steps to Improve Your Process
Perform a pre-mortem: Go through the possible pit-falls and follow them through. See how you feel after each, and weight the costs. Understand why each decision makes you feel a certain way and assign tangible action to each. Understanding the decision you are actually making and the results that come with that decision are key.
Document and use checklists: Document why you made your decision, and what lead you to that point. Keep track of your decision making process.
Stay humble: the market with beat you down some days... if not most. Don't think you're above anything or anyone else. Stay focused on your lane, and come at each decision with a humble perspective. It will help offset the fall if things down workout.
Avoid blame and excuses: You don't always get it right, we've all been at the bad end of a deal before and it's not the time to point fingers. This is a time to reflect and acknowledge what happened. Too often people simply write it off, or blame an easy target when something goes wrong and don't take the time to understand where their decision making took a wrong turn.
Scenario analysis: Helps you prepare for possible outcomes, and most importantly set your fears/worries accordingly. Once you understand the downsides of decision, and exactly what could go wrong, you can prepare for it. This takes some of the power away form your worries.
Make it a habit: Internalize. Turn your process into a a good habit. Go through the steps each time, and don't make wild bets based on emotions. Warren Buffett talks a lot about this, something good to look into.
Now that I'm on the topic of decision making, it's really got me interested. What do you monkeys do to make the right bet, how do you account for all the factors and rationalize emotions through the process? What's your process like?
