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Why It Is So Hard to Make a Good Decision

· 2 min read

Due to the spotlight effect: ==Daniel Kahneman says “A remarkable aspect of your mental life is that you are rarely stumped,” and mistakenly believe “what you see is all there is.”== People only see what they see and want to see, making it hard to step outside of their own perspective. Therefore, it's important to frequently ask oneself, "Why do I think this way?"

The author identifies four major challenges in the decision-making process and proposes solutions:

  1. Narrow framing <> Broaden options
  2. Confirmation bias <> Test assumptions with facts
  3. Short-term emotion <> View decisions from a distance
  4. Over-confidence <> Prepare for mistakes

Ray Dalio also states, recognize that 1) the biggest threat to good decision-making is harmful emotions, and 2) decision-making is a two-step process (first learning and then deciding).

Examples illustrating how people often make poor decisions:

  • Career choices, for instance, are often abandoned or regretted. An American Bar Association survey found that 44% of lawyers would recommend that a young person not pursue a career in law.
  • A study of 20,000 executive searches found that 40% of senior-level hires “are pushed out, fail or quit within 18 months.”
  • More than half of teachers quit their jobs within four years.
  • One study of corporate mergers and acquisitions—some of the highest-stakes decisions executives make—showed that 83% failed to create any value for shareholders.

What to do? Solve it with a process. ==In decision-making, process is six times more important than analysis.==

  • Because understanding our shortcomings is not enough to fix them.
  • People’s decision-making processes are generally too simplistic.
    • The final decision maker should be both the challenger and the ultimate judge.
    • Franklin’s moral algebra
    • Pros-and-cons
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