A technique for making big decisions

​Like the house. Think about the house. Buy the house.

Any decision can be broken down into three stages.

Stage one. Generate inputs.

Stage two. Process the inputs.

Stage three. Decide and act.

You move from input, to processing, to output. The last stage, action, is self explanatory. But stage one and two, less so.

A decision input is any knowledge or information that influences a decision. Examples:

  • Your own experience in similar situations.
  • Other’s experience in similar situations.
  • Historical patterns and precedents of similar situations.
  • Key mental models you use.
  • Instinctual or tacit knowledge.
  • The lens through which you view the world. This includes philosophical and psychological attitudes.
  • Presence or absence of fear.
  • Presence or absence of excitement.
  • Risk accounting: the potential downside and the potential upside.
  • Hidden or incalculable costs.
  • Advice sought or received.
  • The constraints of the situation.

These are the all the things that go into the calculation of a decision. The information they provide make up stage one. 

But stage two is where it gets interesting. How do you prioritise between different inputs? Is tacit knowledge more important than historical patterns? Is other’s experience more significant than the tingling excitement you feel? How do you weight each input? My proposal is this: the use of tiers.

Tier one. Of critical importance to the decision. 

Tier two. Of moderate importance to the decision. 

Tier three. Of marginal importance to the decision.

I was going to assign each input to a tier. But I realise that it’s pointless. For every decision, each input is going have a different weight. If it’s a brand new situation, you might weight other’s experience and historical patterns more heavily. If you’ve been in a similar situation twenty times, your tacit knowledge is going to be a more significant input than someone’s advice.

But no matter how you prioritise the inputs, one thing remains consistent:

Focusing on tier one leads to the best decisions. By identifying the few most important inputs and using them—and them alone—to make the decision, you give yourself the best chance of choosing well. 

Tier one inputs are what allow you to make the best decisions in the presence of fear, doubt and uncertainty.