At the basic level, my job is to help clients make better decisions with their money so they have more time to focus on the things that are important to them–the things that will help cement their legacy. For that reason, I’m always looking for new material on the subject of decision-making. In Decisive authors Chip and Dan Heath explore some interesting new research around decision-making. And a recent Q&A with the brothers really drives home the most salient points of this interesting book. Here are the most compelling takeaways:
“If you’re feeling indecisive,” they say, “chances are you don’t have the right options yet.” The authors describe four key “villains” of decision-making—common shortcuts and biases that impede us from making a rational choice. While these shortcuts may be helpful for routine decisions, they can be very harmful when applied to more important decisions. Among the most problematic traps is “narrow framing” whereby we get stuck in one way of thinking and simply ignore alternatives. With a little effort, say the authors, we can “break out of a narrow frame and widen our options.” How do you know you’re falling prey to narrow framing? Be wary of decisions you make that involve the words “whether or not.” That indicates you are considering only two options.
When asked about his decision “process,” Dan stresses that he is “not interested in complex decision models or elaborate decision trees.” Often, he says, the best advice is the simplest, such as the suggestion to “sleep on it.” He advises, “That’s great advice—it helps to quiet short-term emotion that can disrupt our choices.” However, he does acknowledge that sleeping on it takes time and doesn’t always resolve the dilemma.
And that’s where this gem applies: “Being decisive isn’t about making the perfect decision every time. That isn’t possible. Rather, it’s about being confident that we’ve considered the right things, that we’ve used a smart process.”
Certainly that’s true for the investment decisions we have helped our clients make through the Tech Bubble, 9/11 and Great Recession.