3 Principles for Decision Making
- Some decisions are easy, but many require some thought.
- If the decision is difficult or will affect something important, it’s helpful to have some tools to help guide us.
- Here are three helpful principles we can look to when making a decision.
How do you make a decision? If it’s something simple, such as where to go for dinner, you might flip a coin. But if it’s a serious decision, a coin flip won’t do. Instead, there’s a good chance you’ll talk it through with others, do some research, and take some time to come to a decision.
In doing so, are you thinking objectively or are you falling back on old habits, letting biases guide you, and only consulting with people who hold the same viewpoint as you? If you have an important decision to make, it’s helpful to have some guiding principles to follow along the way.
Author James Surowiecki, in his 2004 book, Wisdom of the Crowd, stated that, when faced with a decision, a group of people will make a better decision than will an individual. The group’s collective intelligence is superior to an individual expert’s ability. This goes to show that consulting with others is an important step in the decision-making process.
We may not always have a group of people to help us make a decision, but there are other ways that we can help ourselves make good decisions. Ray Dalio, well known for running a hedge fund called Bridgewater Associates, states that there are principles to consider in order to make the right decision. We’ll examine three of them here.
1) Listen to people who disagree with you. Find those who are the most believable and credible, then listen to or read what they have to say. By doing this, you’re triangulating your decision. This is a version of pulling from the wisdom of the crowd.
2) Don’t allow harmful emotions to lead you to a bad decision. We’re all biased in many ways, and oftentimes those biases cause us to make emotionally-driven decisions. Typically, this is not a good way to make a decision. Be honest with yourself about your biases and try setting those emotions aside.
3) Follow a two-step process as you make your decision. First, learn about it, then make your decision. As you decide, think like a chess player by thinking one or two steps ahead. What do you think the result will be if you choose to go one way? What if the opposite result occurs? What will you do? Many times, we can become married to a decision, not thinking through how we’ll handle things if we don’t get our desired result.
Throughout our lives, we can become accustomed to certain ways of making decisions, but as you can see, those habits may not always serve us well. So, next time you’re faced with a decision and you’re not sure how to handle it, consider these principles to help you out. Until next time, enjoy.
If you’d like to read more on this topic, here are a few of our past Coyle Blog posts that you might enjoy:
Gary Klaben serves as a Financial Advisor, and visionary for Coyle Financial Counsel. He has over 30 years of experience and is the author of Changing the Conversation, Wealth of Everything and co-author of The Business Battlefield. Whether advising his clients, mentoring his team, or coaching entrepreneurs, he is always simplifying complexity and motivating others to take the next action that’s right for them.
Learn more about The Coyle Process, approach designed to get your arms around the big picture, so you can make informed financial decisions. Ask Gary about The Coyle Process and schedule a complimentary consultation and start living the Good Life Managed Well™.
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