🥉 3/5 - The Decision Checklist: A Practical Guide to Avoiding Problems

Read in Aug 2018
Book by Sam Kyle

If you've read nothing about decision-making, this is a great intro. If you have read books such as Decisive, Principles, Farnam Street, or Charlie Munger, this has nothing new and original other than a few examples, which is a shame. As your first foray to break open the literature on decision-making, I can see use in choosing your next adventure. It'd be unfair not to point out the things that Kyle brings up that are "new." This line is fantastic:

“A system is responsible in proportion to the degree that the people who make the decisions bear the consequences.” (Charles Frankel)

This quote captures so eloquently how group decision-making can be dangerous, even though it tells this wonderful story of how everyone sat down and came up with something. But who feels responsible when things go wrong? It's easy to create systems that incentivize the wrong behavior accidentally. For example, recently Wells Fargo (American bank) got in trouble because sales reps were incentivized to set up extra accounts for their customers and charge them fees. This got completely out of hand because it was weaved deep into their compensation strategy. Who feels responsible for that? It depends a lot on how the decision was made. Luckily, Wells Fargo seems to be about as embarrassed about this as they ought to be—so something isn't completely broken about the system of the company, even if the immediate compensation system is grossly wrong. Kyle follows it up with: "The Romans had a similar system: The guy who created an arch stood under it as the scaffolding was removed." Great, of course, he did not resist to include Hammurabi which is, yes, fascinating, but also beaten to death.

Another point Kyle brings up that I quite like is that time spent making a decision is an opportunity cost. I absolutely agree with this, and as the decision-maker, you have to walk a thin line between making the right decision, and making it quickly enough.

“At best, [indecision is] an opportunity cost . . . For every eight hours of indecision, you’re trading eight hours of productivity—hours you could spend actually executing one of the options you’re agonizing over. Add in salaries, hourly rates and attention diverted and the costs are greater still.”

In this context, he says:

‘Let’s wait until . . . , ’ in the hope that new information will make your decision easier. But you can’t always wait for the perfect conditions to set your course."

I like this a lot if you couple it with Heath's tripwires and reversibility. Instead of waffling, make the decision and then set up a tripwire to reverse (if that's easy). However, in some cases, it's too hard to reverse. Also, consider that just because reversing is technically free, the human cost to it is high. Indecision is not this 1:1 opportunity cost that Kyle describes above; during that time you can typically get other things done, but it's also not 1:0.