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blog  /  

Clarity in Decision Making Process

April 15, 2021

Last time, I ended with: I’ve personally found that the art of making Hard Decisions rests in having great clarity in process, not necessarily facts.

People instinctually hate uncertainty. Uncertainty is risk and risk equals death. Well, perhaps, not to that extreme so quickly but that is the general premise. We want to avoid uncertainty to avoid harm. Less uncertainty prevents harm. “More facts” is the instinctual route to safety, protection, and prosperity.

However, anyone that has interacted with the real world understands that “more facts” is not a luxury you always have access to. And it is in the realm of “less facts” where people can truly shine and advance ahead of the curve.

I’ll use a very simple example and then go to a very complex example. Let’s talk about driving.

The driving process can be summed up into 3 general rules prioritized as: (1) Don’t hit people; (2) Follow all the signs/rules of the road; (3) Be polite to other drivers.

This seems simple enough but this 3 step processes can pretty much handle most if not all cases in driving. First and foremost, don’t hit people. Therefore, you can disobey (2) and (3) if you at risk of hitting people. Second, follow all the signs/rules of the road. They are designed to minimize accidents and if everyone follows them (which is never the case), they should avoid most accidents. If signs/rules are ambiguous, you then can defer to (3) to be polite to other drivers, keeping traffic moving along.

It doesn’t really matter if there’s an accident or construction. The rule even applies if there are zombies running amok! (are zombies people though?). This three-step process can help simplify decision-making process.

However, let’s look at a more difficult example: Investing and Trading. Here, the decision-making process is far more complex. Surely, facts play a huge role in making those hard decisions that can cost a lot of money?

If you learn from professional traders, they too focus on process more than facts. They certainly seek more facts to guide their decision, but they focus far more on creating a process that allows them to make high-quality decisions. This process when refined over and over again is what allows successful investors and traders make consistent progress.

What does this process look like? Let me talk about that next week.

Dr. Eric

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