Decision-Making: Balancing Two Competing Approaches

Two admissions…

I have to start by making two admittedly underwhelming admissions…

The first is that my fascination with the decision-making process has been driven by my interest in scams. Clearly, scammers have always known something about how we make decisions. I’ve always wanted to know what the scammers knew…

My second admission is that I’ve personally found the decision-making process sometimes a little puzzling—and, occasionally, even a tad bizarre. And it hasn’t mattered if I was making a sophisticated business or legal decision; or if I was just trying to decide what brand of detergent to buy; or whether or not I should wear a tie, or socks or underwear…  🙂

What I’ve noticed is this:

At each end of the decision-making spectrum are two quite different approaches—or two extremes. And each gives rise to a particular conundrum. Obviously, there are many approaches between the two extremes, but I thought I’d begin by focussing on the extremes…

Gladwell

The first approach…

At the one end of the spectrum is a deliberative process—preparation, data collection and analysis. Many choose this path because of what they regard as a self-evident truth, namely—

The more time we devote to the decision-making process, the better will be the decision we reach. 

There are only two minor problems with this…

  • This self-evident truth ain’t necessarily true…
  • This approach sometimes gives rise to a conundrum:

The more information we gather, the more information we’ll have to analyze. And the more information there is to analyze, the longer and more difficult it will be to make a decision… And, sometimes, this may lead us into a deadly decision-making quicksand. And this, gentle readers, has become known as “paralysis-by-analysis.”

This is caused by information-overload where we have too much data and too many options from which to choose. For many, the path of least resistance here is either delaying making a decision or deciding not to decide.

This, incidentally, is why scammers will never give us too much time to decide. For them, there is always an urgent need for speed. What they know with an absolute certainty is this—

The more time we have to decide, the less likely we are to make the decision they want.

The second approach…

At the other end of the spectrum is to make decisions very quickly. Here we rely almost exclusively on our “feelings” or “instincts” or “intuition.” Detractors will unkindly characterize this as “leaping-before-you-look.” 

There are at least two problems with this approach—

  • The first problem is that this decision-making process is often quite difficult to articulate, explain or justify. Sadly, this can also leave you feeling idiotic when you are asked to explain why you decided as you did.
  • The second problem is that this approach takes “blind faith” to new levels. It seems to be place unjustifiable faith in your ability to stumble into correct decisions for no apparent reason.

What works for me…

From time to time, I’ve tried both extreme approaches—and many variations in between. And what’s worked best for me?

I have no idea. What I do know is that the answer lies somewhere between the two extremes—and that, sometimes, NOT making a decision can be the best decision we can make.

Two observations…

Here are two observations that we’d do well to keep in mind—

  • There are some people whose first instincts are almost always WRONG. Sometimes, this was even funny. For example—

If they tell you to turn right, you can safely turn left…
If they tell you to jump, don’t!
If they tell you not to jump, jump!

No matter what, they all seem to cling consistently to their initial flawed instincts. And none could ever even begin to grasp this profound thought—

Never ignore...

To my total and absolute astonishment and relief, all somehow survived their initial flawed instincts. Go figure!

  • In crossing paths with scammers and their marks all around the world, I’ve noticed this—

Scammers all seem to understand that their marks have something in common. Each has an overwhelming and incredible capacity for self-delusion. Each wants to believe so badly in what the scammers are pitching that they’ll believe almost anything. And, in the process, they have no problem in suspending their common sense.

Again, go figure!

A test for you…

Years ago, dozens of sophisticated investors were pitched a deal. Initially, many of those who accepted the opportunity received quite significant returns on their investments. I’m curious as to whether or not you’d invest in the same project. And whether or not you would, I’m curious how you’d make your decision…

Here’s the pitch they received–

“I understand you know one of my investors, Bob Smith, quite well. He asked me to make this opportunity available to you. He wanted you to be a fellow-investor with him.

Bob and my other investors have done quite well by investing in my project. Some spaces have unexpectedly become available in my program and I can now offer one of these to you. I can offer you the same return on investment that Bob and his fellow-investors have received. I can offer you a return of 50% in 45 days, or 100% in 90 days.  

If course, you may cash out and withdraw your investment at any time. Or you may reinvest it and grow your original investment. This is completely your choice…

You may wonder how I can offer you this…

We buy a large number of ‘international reply coupons.,’ which we then  exchange for more expensive priority airmail postage stamps from countries in Europe. By doing so, we make a profit of more than 400% on each of these exchange transactions.

Because I have only a few places available for new investors in my project, you will have to decide quickly. By all means, please take the time you need to speak to Bob.

Finally, this project has been very good to me. It has made me very rich. It allowed me to buy a mansion in Lexington, Massachusetts. And, even though it is 1910, my mansion has air-conditioning and a heated swimming pool. I make $250,000 a day.

Please let me know if you have any questions.

So, gentle readers, would you have invested in the deal? And how did you make your decision?

In making your decision, what weight did you give to the investment experiences of other investors? And were you swayed by the fuzzy explanation of how the deal generated funds for its investors? And just how badly did you want to believe those other investors?

And if you decided to invest, worry not. You’d be in very good company…

So, who was this guy who conceived of this deal and pitched it? His name was Charles Ponzi, whose name is now attached to some of the biggest financial scams in modern history.

The gift this story offers…

Be careful about wanting to believe too badly and, in the process, suspending your common sense. If the ‘international reply coupons” scheme sounds a tad weird to you, maybe it is. Maybe you should trust yourself and ask for more information until the weirdness dissipates…

Sometimes, not making a decision isn’t all bad. And, sometimes, understanding that your first instincts may be be wrong isn’t all bad either.

How you make your decisions is all about balance—and avoiding both the option of “paralysis-by-analysis” and “leaping-before-you look”…

The value of experience and common sense…

In another post, I’ve told two stories from the world of fine art. I believe show the extraordinary value of experience, common sense and in sharing our stories…

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