“Success is rarely the result of one thing, but failure can be.”
-- James Clear
Being a good decision maker isn’t about being smart.
It's about making sure none of your decisions are stupid. Warren Buffett and Charlie Munger, built their business empire by making great decisions. Their secret?
“It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.”— Charlie Munger
Below are tools you can start using right away to avoid stupid decisions. Used by Jeff Bezos, Arnold Schwarzenegger, Warren Buffett, and Charlie Munger.
Let's get started making better decisions!
Buffet and Munger's favorite
“Avoiding stupidity is easier than seeking brilliance.”— Charlie Munger
“All I want to know is where I’m going to die, so I’ll never go there.”
Approach the problem backwards, start by listing the outcomes you want to avoid (“where you’ll die”). Now make sure that your decisions avoid the unwanted outcomes. Once done you know that even if your decision isn't brilliant, at least it won’t kill you or your business.
Arnold takes care of business
A surprising amount of people forget that any number multiplied by zero equals zero.
Arnold Schwarzenegger marketed Conan the Barbarian like crazy. He understood that bad marketing will kill the movie, so he didn't leave it in the hands of someone else. Arnold knows the equation of a content businesses:Content * Distribution = successIf Content OR Distribution equal zero, no success.
So Arnold took care of business and made sure they are no zeros in the equation. The movie was a hit, and Arnold's career skyrocketed.
Gary Vaynerchuk says the same thing (and suggests focusing on distribution).
Let's go further down:
- Content = Quality * Amount
- Distribution = Reach * Consistency
If any of the variables equals zero you won't have the success you want.Don't risk wasting time and energy on a stupid decision.
Model your decision as a multiplication equation, and make sure they are no zeros. This can be done with pen and paper.
Keep in mind that not all systems are Multiplicative Systems, some are Additive, but that's a different post 😉
Jeff Bezos used this method to decide if he should start Amazon
In 1994 Jeff Bezos had a decision, should he stay at a cushy position, or start a risky venture?
Bezos used Regret Minimization to make a decision.
Which of the choices in front of you will you regret doing OR not doing when you’re 80 years old?Focus on the long term over short term. Bezos missed a sweet yearly bonus to start Amazon, "bad" in the short term, but an amazing decision in the long term.
Aim to minimize the number of regrets. I dare say this decision worked out pretty well for Jeff.
Applying in your life
"Your entire life runs on the software in your head. Why wouldn’t you obsess over optimizing it?"-Tim Urban
It's like going to the gym.
After the first 20 times, you don't see results, but one day you notice your muscles are bigger. After a year, you're in the best shape you've ever been. The power of Consistency and how it creates compounding effects in our life is a topic for a different post.
Things that will help integrate these tools into your decision making:
- "Ask a friend" - Ask yourself what would your "friends" Warren or Jeff do? This will trigger using the models. (Inversion for Buffet, Regret minimization for Bezos, Multiplicative for Arnold).
- Be judgmental - Look at decisions people and companies make, did they avoid stupidity? Examine them through the tools you learned.
- Templates - When writing a document, add a section about worst case scenarios, it'll remind you of these tools.
- Write your thought process - Writing will ingrain this in your brain 10x faster.
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