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Making Decisions

I have been thinking about a possible decision that I need to make. More directly, I have been thinking about the process to follow to make that decision.

Many decisions require very little thought. Certain decisions, like buying a new car or a new house, require more thought. And life-changing decisions, like getting married or starting a new career, require a great deal of thought.

I refer to four models when I need to frame decisions.

1. Intuitive

This is a model that I turn to many, many times for simple decisions. Based on emotion, a decision is framed in terms of how it might feel. The so-called gut-instinct. There is a certain appeal to using this model because a decision can be made quickly without much effort. If you “feel” that the decision is a good one, then other factors are not relevant.

There are limitations to intuitive decisions. Emotions can be fleeting. Consumption, for example, can feel good right up to the time the credit card statement arrives in the mail a few weeks later.

I use intuition for lightweight decisions where there is not much impact. An example might be choosing between sparkling and flat water. I like sparkling.

2. Rational

The rational model is my preferred model for more important decisions like which car to buy or which investment to make.

The basic framework I use in a rational model includes the following:

  • Define the problem and state the purpose of the decision
  • Identify the criteria relevant to the purpose of the decision
  • Weight the criteria for relative importance
  • Generate alternatives
  • Rate each alternative on each criterion
  • Calculate the optimal decision

I found this model very helpful when we were looking for a new house. With the family, we identified all of the relevant criteria such as price range, location, condition and assessed all of the houses we looked at against the criteria. The process made it almost impossible to reach a decision on emotion alone. For me, a rational approach works well for such decisions but often emotion still needs to play a role.

3. Coherence

The Zen of decision-making. Coherence seeks to find an optimal balance based on a set of elements. Elements can be many things: concepts, goals, actions. And those elements can either fit well together or resist fitting well together.

If the elements fit well there is coherence. Coherence is positive. If the elements do not fit well there is incoherence. Incoherence is negative.

By taking all the relevant elements into consideration, a pattern of fit emerges. A choice of university might fit well into this pattern of decision-making. Elements might include the faculty, the location, the cost of tuition, the potential for a scholarship, a place to stay. If the elements fit well or better than the elements of an alternative university, then the decision is made based on coherence. I often use this model for decisions that need to be based on a very wide range of attributes with limited long-term personal impact.

4. Informed Intuition

For more involved decisions with significant personal impact, I turn to the informed intuition model. With this model, the decision problem is set up very carefully — what goals am I needing to consider and what are the range of possible actions to accomplish that goal.

I spend time thinking about the importance of the different goals from a subjective perspective not an objective perspective. This is not to say that I do not rank the relative importance of each decision criteria. I do that. However, I do not assign a mathematical weight. I want to be aware of what is really important and what is nice to have.

I think about my beliefs. To what extent would my actions facilitate the criteria. Are these beliefs well founded? For example, would moving from the city to the country really make me happy? If not, then I revise the criteria accordingly.

After a reasonable time of reflection, I make an intuitive judgment and I sense which one “feels” right. I run the decision past people I know and trust to see if it seems reasonable to them as well.