From Shane Parrish’s “Clear Thinking”
How can you learn from your decisions?
- “If you’re a knowledge worker, you produce decisions. That’s your job. The quality of your decisions eventually determines how far you go and how fast you get there. If you learn to make great decisions consistently, you’ll quickly move past the people whose decisions are merely good.”
- “No one is smart enough to make great decisions without learning first, though. Great decision-makers have mastered the ability to learn both from their mistakes and from their successes. It’s that ability that sets them apart. It enables them to repeat their successes and avoid repeating their failures. Unless you develop that ability yourself, you won’t improve your decision-making process over time.”
- “A few years ago, a firm engaged me to help them improve the quality of their decisions. As a first step, we needed to find out where they were at. We started by trying to answer a single question: When their decision-makers expected a particular result, how often did that result happen for the reasons they thought it would?
What we discovered shocked them: Their decision-makers were right only about 20 percent of the time. Most of the time when something that they anticipated actually happened, it didn’t happen for the reasons they thought it would. Their success, in other words, wasn’t due to insight or effort or skill. It was more luck than skill. This news was a blow to their egos. They thought that the successes they enjoyed resulted largely from their abilities, but the numbers told a different story. They were like people getting lucky at roulette and attributing their success to having a “system.”
Why do people fool themselves into thinking they make good decisions?
- “Self-serving bias gets in the way of learning from your decisions and improving your process. Our ego default wants us to think that we’re smarter than we are and tells us that we work harder and know more than we actually do. The overconfidence that the ego demon inspires prevents us from examining our decisions with a critical eye. It keeps us from distinguishing skill from luck—what’s in our control from what isn’t. If you get trapped by the demon, you’ll never learn from your decisions and never get better at making them in the future. The first principle to keep in mind when evaluating your decisions is this:
“The Process Principle: When you evaluate a decision, focus on the process you used to make the decision and not the outcome.”
Why do people think they make good decisions when in reality they don’t?
- “Many people assume that good decisions get good outcomes and bad ones don’t. But that’s not true. The quality of a single decision isn’t determined by the quality of the outcome. Here’s a thought experiment that will help illuminate this concept.”
Example: “Imagine you engage in a very thoughtful and intentional decision-making process concerning your career. You have offers from a few different companies, one being a startup and another a Fortune 500. Based on where you are in your life, you decide to go with the Fortune 500 company. The pay is less up front, but it appears to be more stable.
Imagine your friend ends up working for the startup. You watch as he gets raises and more vacation time. Is your decision good or bad?
Now, imagine the startup quickly folds after only a year. Does this affect how you feel about your decision? I hope you get where I’m going with this.
You can’t control whether the startup takes off or not. Nor can you control in the moment how you feel about the startup offering higher pay. You can only control the process you use to make the decision. It’s that process that determines whether a decision is good or bad. The quality of the outcome is a separate issue.” (p. 214) - “Our tendency to equate the quality of our decision with the outcome is called resulting. Results are the most visible part of a decision. Because of that, we tend to use them as an indicator of the decision’s quality. If the results are what we wanted, we conclude that we made a good decision. If the results aren’t what we wanted, we tend to blame external factors. It’s not that our process was lacking; it’s that a crucial bit of information was. (As opposed to when an acquaintance gets bad results, at which point we assume it’s because they made a bad decision.)
- “Obviously, we all want good outcomes, but as we’ve seen, good decisions can have bad outcomes, and bad decisions can have good ones. Evaluating decisions—ours or others’—based on the outcome (or how we feel about the outcome) fails to distinguish luck from skill and control. Because of that, engaging in resulting doesn’t help us get better. The result of resulting is instead stagnation.” (p. 215)
Can a bad process produce a good decision?
- “A bad process can never produce a good decision. Sure, it might result in a good outcome, but that’s different from making a good decision. Outcomes are influenced in part by luck—both good and bad. Getting the right result for the wrong reasons isn’t a function of smarts or skills, but just blind luck.”
- “Don’t get me wrong: it’s nice to get lucky (provided you know it’s luck). But luck isn’t a repeatable process that secures good results over the long term. Luck isn’t something you can learn, and it isn’t something you can get better at. Luck won’t give you an edge.”
- “When you start equating luck with will, you’re bound to make mistakes. You blind yourself to the risks you’re taking, and are bound to be badly surprised sooner or later. And when you start confusing luck with skill, you’re bound to squander opportunities to learn from your decisions, to improve your process, and to secure better results over the long term.” (p. 217)