In my previous post, I described a possible decision making scenario, and how things might progress. However, there are a lot of motivations I left out. Below are some of my main principles when trying to decide optimally.
- Make sure you are asking the right question. This is the main premise of the blog; If you don't ask the right question, you are unlikely to get the right answer. In the gym example, I was choosing the best gym for me. The process would have been completely wrong if I was picking a place to work out with a friend or to make a recommendation to my parents.
- Figure out the range of possible outcomes. If all of the choices lead to the same outcome, why waste any time deciding between them? If the outcomes are on a wide spectrum from terrible to fantastic, it will be worthwhile to spend some time eliminating possibilities (or defining criteria for an acceptable choice. More on that later).
- Keep in mind what "approximately the best" means. If you are making a decision with a lot of uncertainty, trying to find the absolute best choice is likely to be a waste of time since you don't know how the options truly compare.
- Target low-hanging fruit first. If you start with a set of possibilities, the order you eliminate options matters (at least when you are trying to decide optimally). In the gym example, we put off the time-consuming task of calling each place to find out if they had a pool until after we had made a short list of those within a two mile radius of us.
- Know when to stop. Once you have a set of options that are approximately the best, it is no longer worth it to spend a lot of time making your final selection. I will sometimes pick an arbitrary criteria to justify whichever choice I want to make at that point (they were the only gym with pretty paintings in the changing rooms).
- You don't have to consider every option. "Satisficing" means you choose the first option you come across that satisfies a set of requirements. This technique can be used at any point in the decision-making process. In the gym example, you might visit gyms that passed the distance and pool criteria, and pick the first one you liked.
Those are the main tricks I use, whether I am deciding which type of lettuce to buy at the grocery store, or which graduate school to go to. The last tip I have is to try to develop a process you can be happy with ex-poste (after the fact). Occasionally I participate in economics experiments. While I might actually be somewhat risk averse, I usually choose to maximize my expected value since that is objectively the 'best' decision.
Post your tips in the comments!
