Decision making

I read In an Uncertain World by former US Secretary of Treasury Robert Rubin during my first year of college. As its title suggests, its key insight was that we live in an uncertain world. This uncertainty is the result of the complexity of the world and the fact that we’re armed with limited information. The book described how Robert approached the tough decisions that he had to make during his career¬†in the private and public sectors.

The book was the most insightful biography I’d read at the time and continues to be among the best I’ve read to this day. Having just left from the comfort of my parents’ home in Belgium to the US, I had come across the book at the right time. Life had become a lot more complex without my parents around, and the book helped me get comfortable with making and sticking to decisions in the face of this complexity.

So how do you make decisions under uncertainty? Unfortunately, there isn’t a one size fits all answer. Depending on the circumstances surrounding the decision, like what field it’s in, when the decision needs to be made, and who it impacts, a different approach will be called for.¬†However, I use two tricks to improve the quality of my decisions.

The first is to focus my decision making on a specific field. You can’t be a great decision maker in all fields because you don’t have enough time to learn a lot about each field. So your choice is to either be an average decision maker in many fields or to be a great decision maker in one or two fields while minimizing the number of important decisions you take in other fields. You can achieve the latter by lowering the number of decisions you need to make in other fields and getting help from others for those decisions that do need to be made.

The second is to make decisions with a potential impact and corresponding risk (these are usually correlated) that I’m comfortable with based on my decision making capabilities in the chosen field at a given time. This means taking smaller risks and accepting smaller rewards when starting out, and graduating to make decisions involving higher stakes as you see the results of your first decisions. By analyzing where you went right and wrong in the past, you’ll be able to apply these learnings to improve your decision making capabilities in the future. Once you’re comfortable with your ability to make decisions of a certain magnitude, it’s time to up the game.

While these two tricks will improve the quality of your decisions, you don’t always have the luxury of waiting until you feel prepared to make a decision. Sometimes life will force you to make a decision that you don’t feel ready for. In these cases I’ve found that it’s best to go with your gut feeling. Your gut feeling is largely a reflection of your values so pursuing it will make sure that you continue to live in line with those values. If you do pursue your gut feeling and don’t like the outcome, you might want to rethink your values.