The ability to make decisions is a crucial skill in financial planning and in life generally. Think about the dead squirrels who could not make up their mind to continue or go back.
The inability to decide is the result of a single obvious flaw and likely several mental biases. The single obvious flaw is some people cannot be wrong without damage to their self-image. Their defense is to make no decision until they know more. For people who do not like making a mistake, no decision is odd because waiting for perfection is likely the biggest they can make.
Perfect decisions on complex matters will never come to be. The key is to make proto-decisions early on. Before much information is at hand. These should start when you have an instinct about the problem and are looking for refinement or to discover unknown-unknowns. Usually about 40% of the data is in hand.
More complete and durable decisions will start to appear around 70%. There is no 100% sure.
The decision maker expects to be wrong, but because they have that awareness, they keep track and look for ways to improve their decision based on new information or new conditions. Maybe even on new priorities. They don’t wait, they use decisions as part of the information gathering process.
Top-down decisions are usually wrong because they try to be right. Bottom-up decisions tend to be right, eventually, because they use more information and contextual conditions than top-down does.
You can see how large organizations like governments and big businesses get caught up in the best decision possible error. American businessman and entrepreneur Ross Perot speaks about his time on the General Motors board after starting, developing and selling Electronic Data Systems (EDS)
“I come from an environment where if you see a snake, you kill it. At GM, if you see a snake, the first thing you do is hire a snake consultant. Then you get a committee on snakes and discuss it for a couple of years”
Decision making is how we discover meaning. People who make many decisions that gradually evolve a solution tend to have better outcomes and hardier egos. People who are insecure want the one final and ideally unaccountable decision. Top down decision making might work for the big corporations or the government; they have near infinite resources. But it won’t work for you.
Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.
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