How to Decide: Simple Tools for Making Better Choices

The premortem reduces the natural tendency toward overconfidence, the illusion of control, and other cognitive biases that cause you to overestimate the chances that things will work out. The backcast evens out the view if you are pessimistic in nature or underconfident.

That’s how Dr. Evil makes you fail. He gets you to make small, poor choices that hide in the shadows, keeping you from seeing how repeatedly making those decisions guarantees failure. You see each instance as unique and justifiable and don’t see how they fit into a larger scheme.

Ulysses contracts can involve three types of advance commitments: Like Ulysses, you can physically prevent yourself from making poor decisions. You can raise barriers, making it harder to execute on actions that will defeat your goals. When you raise barriers, you’re not physically preventing yourself from acting, like when you tether yourself to a

A common practice of successful professional investors is to make category decisions to avoid investments outside their circle of competence. In facing an opportunity outside of their realm of expertise, particularly one that promises juicy returns, investors run the risk of fooling themselves into thinking that they can make a winning decision.

When people result, they look at whether the result was good or bad to figure out if the decision was good or bad. (Psychologists call this “outcome bias,” but I prefer the more intuitive term “resulting.”) We take this resulting shortcut because we can’t clearly “see” whether the decision was good or bad, especially after the fact, but we can clea

We can think about the relationship between decision quality and outcome quality like this:

The combination of motivated reasoning, the propensity to mislead yourself, and an overconfidence in intuition makes smart people less likely to seek feedback. When they do seek feedback, their ability to spin a persuasive narrative makes other people less likely to challenge them. That means that the smarter you are, the more vigilant you have to

You’re not going to remember what you knew at the time of the decision. That makes it hard for you to judge whether a decision was good or bad. To assess the quality of a decision and learn from your experience, you need to evaluate your state of mind honestly and recall what was knowable or not knowable as accurately as possible.

SIX STEPS TO BETTER DECISION-MAKING Step 1—Identify the reasonable set of possible outcomes. Step 2—Identify your preference using the payoff for each outcome—to what degree do you like or dislike each outcome, given your values? Step 3—Estimate the likelihood of each outcome unfolding. Step 4—Assess the relative likelihood of outcomes you like and