I find the following simple framework useful when making decisions.
There are two dimensions which characterize each decision. The first is the importance of the decision (what’s at stake) and the second is its urgency (how fast the decision needs to be made).
For decisions that are unimportant, it doesn’t really matter how fast you make the decision. So it’s best to not spend too much time on it as this takes away from the time that you could spend on more important decisions. And since there isn’t much at stake, it’s often possible to reverse the decision later if necessary.
For important decisions which also necessitate urgency, you have to act fast. I’m a soccer fan so I’m going to use an analogy from soccer. If the score is tied at the end of regular time, the penalty shootout begins, and you’re up to take the next penalty, you need to decide which part of the goal you’re going to shoot towards pretty fast. You don’t have a lot of time to think about your decision before acting on it.
Fortunately, most important decisions aren’t urgent. They don’t require that you take immediate action. In our personal lives, we’re used to taking our time before making important decisions. Examples of such decisions include who to marry, where to live, and whether to have kids. However, this behavior doesn’t always translate to our professional lives.
In business, we have a tendency to act fast. We make fast investment decisions, fast partnership decisions, and fast hiring decisions. I think it has to do with the fact that our minds associate doing business with competition (what others are doing) and external measures of success (what others think about us). Thinking about what others are doing and what they think about us impairs our judgment.
Let’s take some examples.
In investing, most investment decisions don’t need to be made on the spot. An asset’s price is unlikely to change overnight.
The same is true for a startup’s partnership decisions. There are only so many companies operating in a particular sector who could partner with the same company that you’re thinking of partnering with. If you spend an extra week thinking about the pros and cons of the partnership and how to structure it, your partner candidate is unlikely to walk away.
You can also take your time with hiring decisions. If a candidate isn’t willing to give you a few days to check references, you probably shouldn’t hire them.
In addition to not necessitating urgent action, each of the decisions in these examples is difficult to reverse. Depending on the liquidity of the asset class you’re investing in, you might not be able to reverse your decision for several years. This is certainly the case for venture capital. Partnerships are often long-term plays with significant penalties for those looking to exit the partnership. Among these examples, who you hire is the easiest decision to reverse. But even then, there’s a financial cost to parting ways and, especially for early stage companies, there can be an even greater cost to your company’s culture.
The next time you find yourself rushing to make an important decision, you should ask yourself whether you really need to be deciding so fast.
Also published on Medium.