3 Important Decision-Making Techniques Everyone needs
Decision making is a complex subject. We make decisions all the time – from deciding whether or not to go out with friends on a weekend to switching careers. While some decisions are easy to make, others need deep considerations.
For instance, deciding whether you should watch your favorite TV show on Friday night won’t take as much energy as it would when you want to change your career.
How do you ensure that you make concise decisions every time regardless of the situation?
We’ll take you through 3 important decision-making techniques that will change the way you execute your decisions. Let’s dive in.
1. Understanding how the brain functions during decision-making processes
Two systems of thought exist. Before we get into these systems, let’s look into the brain a little bit. The brain gets exhausted like any other body part and will always look for ways to conserve its energy. How does that happen? It seeks shortcuts so we don’t have to think through everything.
The two systems of thought are the results of these shortcuts. One focuses on speed and energy conservation while the other on precision and analysis.
So, how does the brain absorb and react to different information? Professor Daniel Kahnemanexplains in his Thinking, Fast and Slow book how the brain functions when processing information.
Professor Daniel Kahneman uses a model to explain two systems that he names them system 1 thinking and System 2 thinking.
System 1 thinking
It’s fast, automatic, and instinctive thinking. We use it every time we stumble upon things, we’re familiar with and we don’t have to process such information.
A good example is putting on your jacket or switching off the lights.
System one thinking is effortlessness and does not require much consideration or analysis. Do you ever stop and think before greeting a friend or take water when you’re thirsty?
No, it happens automatically. You don’t need to analyze anything.
System 2 thinking
It’s slow, contemplative, and analytical. System two comes in every time we’re learning or taking in a new experience. It requires more mental work and effort. The system is activated during a decision-making process that could result in serious consequences.
System two requires critical and skepticism thinking. It’s methodical and conscious. You often use it when the thing you’re doing needs more effort and focus – such as when you want to quit your job, get married, or trying to remember something you read three weeks ago.
Both systems of thinking are imperative to us and we use them in unique situations. Understanding these two systems of thinking is crucial during the decision-making process.
For instance, you can’t use system one when making a family budget or studying calculus. Likewise, you can’t use system one for things you encounter regularly like taking a shower or go on a green light.
While system one is quick, it’s not always the best. Our brain prefers the easier path and we often try to simplify things. For instance, you tried to scan through this article instead of reading through.
System two, on the other hand, is exhausting and we can’t constantly use it. However, we should practice how to balance between the two systems and eliminate bias.
Quick take away
- Understand we have two thinking levels and be conscious of which you use the most. Are you making the right choices? In which situations should you prefer speed to the truth?
- Work toward transforming your system two thinking into system one through intentional repetition. In other words, master a subject or a skill and be good at it.
- It takes time to master critical and analytical thinking.
1. Understanding Opportunity Cost
Everything you do will always call for something from you. That something is sacrifice. While our choices have consequences – positive and negative, we tend to focus on the benefits only.
However, there’s an enormous difference when we think in terms of sacrifice and opportunity cost. Although we tend to pay attention to the main prize, the truth is we’re sacrificing something else for the prize.
Going to that college means not going to the other one. Buying this house means not buying that one.
Weighing all the options at your disposal can help you in making concise decisions. Sometimes being shallow can result in giving up on something more important than what you’re choosing.
Understanding the opportunity cost will change the way you perceive the choices before you. Below are four quick steps to help you with opportunity cost calculations.
Step one
Start by identifying your priorities in life and define your values. Arrange them in order of importance. Values play a significant role in decision-making.
Step two
What is the end goal of your decision? Record every little detail that you think should be part of your decision. What are you trying to gain and will it move you closer or away from something? Be specific by listing these things. What values are you trying to emphasize?
Step three
Now list all the opportunities that you are likely to forgo if you decide to implement the decision. Any possible regrets?
Step four
Compare your lists from steps two and three and ask yourself the following questions: which of the costs in step three matter the most? Are you giving up anything essential in the long run in step three?
Cross out things that are less important and you can live without. Be sure to take actions that make you happy according to your values. Also, you must aim toward the right decision.
Finally, ensure that your list three and two are identical. Anything else means you should re-evaluate your steps. Go back to step two and tweak your costs and decisions to define your priorities.
What are we aiming at, anyway? We want to ensure that our final decision has greater benefits and minimal sacrifices.
2. Use a WRAP technique to foresee possible consequences and adjust accordingly
We know to make critical decisions require time. However, we often take mental shortcuts that mislead us.
Some of these shortcuts include incomplete information, overconfidence, relying on assumptions, laziness, emotions, among others.
Instead of putting in the work, we look at available optionsand pick what’s appealing then hope for the best. WRAP technique helps eliminate such shortcuts and spend little time in making the right decisions.
What does WRAP mean?
- Widen your options
- Reality-test your assumptions
- Attain distance and,
- Prepare to be wrong
Widen your options
Avoiding settling for what is immediately available. Instead of stopping at yes or no, X or Y, consider the possibility that the decision or answer could be maybe or Z. Look at all the options you have before making a decision.
However, note that widening your options means delaying the process. But always aim at going seven levels deep if you want to get the best option. Scratching the surface might reveal a world of options.
Reality-test
This is where you insert your options into the real world and try to find out what might happen. You want to imagine how the future would unfold and what that could mean. Try to find holes in your assumptions and see whether you can defend them with actual arguments.
Avoid putting anything on the backburner at this stage. Do not say you’ll sort things when the right time comes. Face them there and then and fix everything.
Ensure you consider the following: who, what, when, where, and why.
Attain distance
Now that you have everything laid out – it’s time to remove yourself from the process. Take a few hours or days off to avoid emotions deceiving your decision.
Come back and see whether your options and reasoning still hold. You might be surprised to find out that they don’t. It’s easy to get trapped inside a short-term victory if you do not distance yourself from your justifications.
Prepare to be wrong
Here, we want to ensure that we’re ready in case things don’t go as planned. Sometimes assumptions don’t turn out to be what they seemed to be. So, how do you prepare to be wrong? Have a plan B because uncertainty is inevitable.
Create your plan B around the areas that plan A is likely to flop. This is where maybe come in handy. Ensure you define your plan B in a cleaver way so that you can turn to it when the initial plan fails without wasting time.
Over to you
The above techniques apply to everyone regardless of your job title or age. It takes time to master all of them – but committing to them will change your decision-making process.
The techniques are crucial whether you want to increase your company’s revenue, buy a new car, or ask some to marry you.
This article is just a tip of the iceberg – do further research if you want to delve into the topic of decision-making. Search for professor Daniel Kahneman Thinking, Fast and Slow book for more insights.
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