Posted in Value

How Successful People Make Decisions

ABOUT THIS LESSON

In this video I talk about how successful people make decisions.

The quality of your life is determined by the quality of your decisions.

The problem is, most people are never taught how to make effective decisions.

This video covers 3 “mental models” you can use when making a decisions. As well as 3 “mental biases” to avoid when faced with any choice.

If you enjoy this video be sure to subscribe on YouTube for more content like this.

#Instincteducation #instinct #connormarriott 

FULL VIDEO TRANSCRIPT

In this video I’ll be showing you how successful people make decisions. So the quality of your life is determined by the quality of decisions you make. If someone is progressing at a faster rate than you, it’s not because they have more time, everyone has 24 hours a day, it’s that they are able to spend their time on activities that are yielding better results. Ultimately they’re making better decisions about what to do.

So how do you know where they’re spending their time or how do they know how to make good decisions? Well, you need a framework. And most people don’t have a framework for making good decisions. They take each new decision as it comes. However, what I’ve learned after studying many successful people is that they all have a specific framework that they use to make decisions. By doing this, they’re able to shortcut their decision making process and increase the likelihood that the decision they make is going to be an effective one. By doing this, we’re able to reduce emotion and improve logic, which ultimately leads to better decisions. So in this video, I’m going to be breaking down what that mental framework is, as well as giving you three mental models to use when you’re facing decisions, and as a bonus, I’ll be giving you three things to avoid when making decisions, which if you’re not avoiding them may be keeping you stuck.

So the framework for making good decisions is quality data multiplied by mental models. And so to break that down, quality data means how good is the data or how good is the information you’re using to make good decisions? If you don’t have high quality information, you can’t make a good decision. An example of this would be, if I showed you a very pixelated image, and I said, “What’s in this photo?” Chances are you wouldn’t be able to tell me. On the other hand if I showed someone else the same image except this time it was high resolution and clear, they might be able to tell me, “Oh, it’s a dog.” So they were able to make a better decision, not based off being more intelligent, but because they had high quality information. And so the first thing to understand when trying to make decisions is how good is this information? And is there a way to improve the quality of data that I’ve got? You can’t make a good decision with low quality data.

The second half of the equation is mental models. And so a mental model is a mental framework that you use to make a decision through. You can run any decision through a series of mental models, and typically the more you use the better. By doing this, you’re able to shortcut your decision making and ultimately come to a better conclusion. So I’ll be giving you three mental models that I use every day, and these are the mental models that many successful people use to make good decisions.

So the first is called second order consequences. And so second order consequences talks about when you’re facing a decision don’t just think about the immediate first order consequences. Think about the second, third and fourth order consequences of your decision. An example would be if I decided to eat pizza, the first order consequence would be that I eat something that tastes good. However the second order consequence is likely that the next day I’m going to feel bad. I’m going to feel sluggish and tired. And so understanding second order consequences in everything you do is very important. Just because something might be good in the short term, chances are it may be detrimental in the longterm. And the things that may seem negative in the short term, for example, giving up the pizza in exchange for eating something healthy, ultimately leads to better results longterm. So the first framework is second order consequences.

The second framework is called asymmetries. And so typically when we’re trying to make a decision, it’s easy to decide between something that’s good and something that’s bad. Where we get stuck is when we’re trying to decide between two things that are good. And so an example would be, let’s say you’re trying to grow your business and you’re trying to decide, should I post on social media or should I write an ad? Both of these things could be seen as beneficial. However, only one of these things is the most beneficial. And so the thing about decisions and the thing about time is that if you’re spending time on one thing, by default you’re not spending time on everything else. And so just because something is beneficial, if it’s not the most beneficial thing that you could be doing, it may actually be slowing you down.

So, to go back to the example, if I decided to spend an hour doing a post on social media, that post may get seen by 100 people. On the other hand, if I spent an hour writing an ad, that ad might be seen by 1,000 people every single day. And so looking for the asymmetries is ultimately looking at, what has the smallest input for the greatest output? So in this example, they both have the same input. They both have one hour a day put into it, but the output is 100 people seeing the posts on social media versus 1,000 people seeing the ad every single day. So when you’re facing decisions that are both beneficial, you want to look at the asymmetry. Which input is going to give me the greatest output? And if you’re spending your time on things that are beneficial but are not the most beneficial thing you can do, it may be slowing down your progress.

The third mental model is called first principles. And first principles is breaking things down to the most fundamental truths. And this is an incredibly useful mental model to use. Let’s say, for example, you decided to run Facebook ads, and you’re running an ad and it’s not working. You might think all sorts of things. You might think that my market’s not on Facebook. It might be that Facebook ads don’t work. You might think a whole number of things. But if you use first principles, you can break it down to its fundamental troops. What is advertising? Advertising is putting a message in front of people. And so if your Facebook ads aren’t working, it’s either the wrong message or it’s the wrong people. That’s really as complicated as it needs to be. And so by understanding that and using first principles, you can break that down and you can figure out, am I saying the wrong thing in the message, or am I saying it to the wrong people?

So you can break it down to the fundamental truth. And from there, make a more accurate decision about how to solve the problem. So they’re the three mental models that you can use when making decisions. If you’d like to learn more mental models, I’d suggest the book it’s called Super Thinking. It is an entire book filled with mental models. And the more mental models you’re able to understand and use, the better your decisions will become. So learning these different mental models and using them every time you have a decision is a very beneficial thing to do.

So now let’s talk about the three things to avoid when facing a decision. And these are called mental biases. So every human has inbuilt cognitive biases, and these will affect your ability to make decisions. Again, there are more than three, but I’m going to give you three of the main ones that may be causing you to make bad decisions.

So the first is called availability bias. So as humans, we rely on information that we’ve seen recently, and we weigh that information greater than information we’ve seen previously. So an example of this would be if you’re doing sales calls. And let’s say your last three sales calls, everyone told you no. It’s very likely that your mentality around sales calls will be that you’re not good and people tell you no. Even if before those last three calls you were actually doing quite well. It’s because the most recent information is weighing heavily on your decision. You have an availability bias based on the recent information you’ve seen. So when making decisions, understand availability bias and look at information holistically. Don’t just look at the most recent information you’ve got, but look at all of it. And by doing this you avoid availability bias.

The second is called discomformation bias. And this is ignoring information that proves you wrong. As humans we don’t like to be wrong. And so if we encounter information that might prove us wrong, often we can ignore it so that we believe that we are right. However, by doing this, we can go down the wrong path. And so not attaching yourself to your ideas or your opinions is an important skill to have. If you want to test a new idea or test a new strategy, remove yourself from that strategy and look at it as a third party thing, it’s completely outside of you, and then you can see if it’s working or not. Often what happens is we have ideas, and we think that this is a really good idea. Even though there’s information that’s saying it’s not. This is discomformation bias. And so it’s really important that we avoid this to avoid costly mistakes and spending time and effort on things that aren’t actually moving us towards our goal.

The third mental bias is called loss aversion. So as humans, we get more displeasure from losing something than we do from gaining something. And the ratio is three to one. Which means you would rather not lose $10 than you would gain $20. So understanding this when you’re making decisions is really important because sometimes we will sabotage our ability to succeed because we’re trying not to lose something we already have. So there are just three of the mental biases. There are a lot more, if you’d like to learn more about them, I suggest the book Poor Charlie’s Almanack by Charlie Munger. It’s a great book and it covers over 21 of these mental biases which you can learn more about. But ultimately that is how you can make better decisions.

Number one, make sure you’re getting as high quality data and information as possible. Number two, use mental models to run that information through to come to better conclusions. And number three, avoid mental biases which could alter or affect your abilities to make effective decisions. If you enjoyed this, be sure to let me know in the comments below as well as subscribe and like, and stay tuned for more videos like this coming soon.

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