How to make the right decisions? Three models tested and approved! (Book of Decisions, 2018)

Weighing up the pros and cons, weighing up each argument, seeking external advice and expertise… it’s long and tedious. Today, we focus on three decision-making models to help you quickly set limits and objectives, and perform over the long term.

Say “STOP

A useful rule might be the “STOP” rule: formulated in 1935 by the famous American investor Gerald Loeb, it answers the question “When to sell?”. The former Wall Street broker was clear: “As soon as an investment loses 10% of its value, sell without delay! A tyrannical and simplistic rule, you say? That’s certainly why it works so well!

Mikael Krogerus and Roman Tschäppeler, authors of The Book of Decisions (2018), add that simple rules “(…) save you headaches and can save lives, especially when it comes to ensuring retirement while climbing a mountain peak: if we haven’t reached the summit by 2 p.m., for example, we turn back. The last time someone disregarded this law, on Mount Everest in 1996, eight people lost their lives”.

Make a double loop

This decision model allows us to take a deeper look at what motivates our choices and how we make them. “It’s not simply a question of changing our behavior, but of questioning the reasons that led us to act the way we did. What goals and values lie behind our behavior?” ask Mikael Krogerus and Roman Tschäppeler.

This model is based on the idea of observing the facts a second time from a new angle. Change your angle and learn from your mistakes, or better still: apply the lessons you’ve already learned! Taking the time to re-evaluate and re-observe a situation or a decision means finding similarities with other situations from the past, questioning the models we follow, and therefore moving forward. Remember the dialogue between Queen Cleopatra and the architect Amonbofis in the film Asterix Mission Cleopatra:

“Amonbofils! We need to change the crocodiles’ water it’s an infection.”
“Ah, I don’t smell anything. No, but I’ve installed the wastewater drain like we always do.”
“That’s the problem with you Amonbofis, you always do what we do.”
“Yes, well, we’ve always done it this way…”

“A good decision is one that is adapted and re-thought. Not a thousand times, just twice.”

Believing in black swans

The “Black Swan” decision-making model is based on the high number of cognitive biases in human beings. The Lebanese-American author Nassim Nicholas Taleb theorized this “Black Swan” tendency, explaining that “(…) since we only know about white swans, we cannot consider the existence of black swans”. Indeed, if you only come across and observe white swans, you’ll quickly come to the mistaken conclusion that all swans are white. And this is what Europeans believed before observing and documenting Australian black swans from the ^18th century onwards. To counter this belief, it would be necessary to observe and document all the swans on Earth before coming to a conclusion about their colors. This is impossible to do, and quickly leads to the erroneous conclusion that all swans are white.

And if we apply this to decision-making methods? We have to be careful not to jump to conclusions, based on data that seems complete but is in fact fragmentary. The ability to question the obvious remains crucial.

In a nutshell.

Making the right decision rests on three pillars:

Set yourself clear, universal rules,
Dare to change your angle of analysis,
Question the obvious.

Above all, trust yourself!

Sources :

Jézéquel, M. (2020, August 17). We’ve read for you… The book of decisions. Retrieved September 04, 2020, from https://www.revuegestion.ca/on-a-lu-pour-vous-le-livre-des-decisions
Web page, W. (2020, August 29). Black swan theory. Retrieved September 04, 2020, from https://fr.wikipedia.org/wiki/Théorie_du_cygne_noir
Web page, W. (2020, February 01). What is cognitive bias? Definition of cognitive bias. Retrieved September 04, 2020, from https://www.usabilis.com/definition-biais-cognitifs/

** Use of the masculine singular to lighten the text.