10 Decision Making Models For Life & Business Decisions
Let’s face it, making decisions can be tough. Even worse, the hard decisions usually have the biggest impact on life outcome. I’ve been lucky enough to have success in my business and in my life (with plenty of failures and screwups along the way!).
But, as I’ve “aged gracefully” I’ve come upon 10 Mental Models For Decision Making that really help me live a better life and make better decisions.
Let’s quickly define what a decision making model is, shall we?
Decision making means the process of selecting the best choices among various options.From Tough Nickel
That’s about as easy as it gets, right? Our goal here is to make the decision making process easier by giving you a model you can follow and use again and again so you don’t have to waste time creating a framework for every decision.
By reading this post and applying these lessons, I believe you can get the results in life you’ve been looking for.
So, let’s go. This post won’t be fluff, just straight to the point about what it takes and how to make decisions.
Decision Making Models: Yes Or No?
The most usual decision we have to make it a yes or a no decision. Do we do the thing or not? This is a binary decision and many of life’s decisions are binary, whether we like it or not.
Do we turn left or right? Do we go back to school now or not? So, the simple formula I like to use now is this one.
I don’t make the decision a YES OR NO, decision. Instead, I ask myself if it’s an EMPHATIC yes or a no. The no is easy. It’s just a no. I don’t want to do that. But there are many things I would like to do that I really don’t have time for.
I run multiple brands so opportunity for me is in excess. I have to keep my options open, but every YES takes away from another area of my life.
That is why when presented with an opportunity, I only say YES if I am truly excited, bursting out the seams, ready to go, etc.
And if it’s not an emphatic yes, it’s a no.
I first heard this idea from Derek Sivers on the Tim Ferriss podcast. Check it out for more on this great decision making model.
Decision Making Models: Ranking On A Scale Of 1-10
We all love the ranking system, right? On a scale of 1 -10, how likely do you want to do something, etc?
It’s a great way for us to gauge our interest in a subject, and crudely, it’s been a way for people to judge the attractiveness of other people. “The guy is a 3 or this woman is a solid 9!”
I’ll use the attractiveness rating scale in order for this to make the most sense, because it’s the easiest to visualize.
The decision making model here is really simple. When rating a person, you can’t give them a 7. 7’s are a copout. That’s basically saying the person is attractive, but not really enough for you to want to ask them out.
Instead, make this the rule. Again, I am talking about attractiveness here, but this can be used to rank school choice, job opportunities, etc.
Get rid of 7 as an option. There are no 7’s… If you think something is a 7, you must instead choose a 6 or an 8.
And think about that in attractiveness. An 8 is WAY different than a 6, right? Use this in conjunction with the emphatic YES concept to make sure you actually make an informed decision.
Decision Making Models: The Hard Choice
This is a simple maxim, but it really works. If you are faced with a decision, the right decision is usually the one that is HARDER to do.
Should you go to the gym and workout or stay home and relax on the couch? Which is tougher? Go to the gym!
Should I eat healthily or chow down on bacon cheese fries? Which is harder to do? Eat Healthy!
You really can’t go wrong if you make the harder choice. And here’s the thing. If you don’t make the harder choice now, life will force you to make a harder choice later on, anyway.
If you eat crappy your whole life, you’ll most likely develop diabetes and have heart issues as you get older. Life will force you to cut back on sugar and fats, etc. Make the hard choice now and you’ll never regret it.
Decision Making Models: Delayed Gratification
This goes along with the previous mental model, but whenever possible, delay gratification. Delayed gratification is usually the harder choice as well, but it pays dividends.
You can choose to satisfy yourself now or wait. If you wait, you usually receive compounding benefits.
An easy example is saving money. Sure you can spend money now on things you think you want. But then that money is gone. You have spent it on an item and that item only provides so much value.
If you had invested that money and waited to buy the thing you want, you could have earned enough of a return on your investment for the interest to have paid for the item. In other words, it would be “free” in that sense.
If you get the chance to delay gratification, take it!
Decision Making Models: Time > Money
This is an issue I see in a lot of people. They value their money way more than they do their time. This is because they haven’t looked at how much time they actually have left.
Do yourself a morbid favor. Fill out an actuary table and see when you are statistically most likely to die.
I just did mine again and my life expectancy is 87 years. As of this post, I am 39 years old. If all goes to plan, I have 48 years left. That’s 17,520 days. Not a lot.
If that was all the money you had, wouldn’t you spend it a little wiser? That is why I try to spend my money MORE than I spend my time. I don’t buy cheap stuff that breaks and requires me to replace it often.
I don’t drive all around time looking to save 5 cents per gallon my gas.
I also know that because of my copywriting skills, I can make more money with my time than I can by trying to save money being thrifty.
Remember your time is more valuable than your money.
Decision Making Models: Prioritize Relationships That Matter When You’re 80
This one is simple and one that I have gotten better at as I’ve gotten older. I see this trait in men a lot (including myself). But it’s true for all of us. Many times we get caught up in the busy schedules of life and we prioritize work and “things” over people.
The right decision making model is to prioritize the relationships that will matter the most to you when you’re 80. When you’re 80 years old, your job doesn’t really matter anymore, the PTA doesn’t matter, you often find that most of what you spent your time on was frivolous in many ways.
So, make the choice right now to focus on the people closest to you. Your spouse or significant other, your siblings, children, family, friends, etc. No one gets to their death bed and wishes they worked more.
This also includes focusing and spending time with your parents if they are still around. Even though they most likely won’t’ be there when you’re 80, you’ll have plenty of time to think about them. Make sure you look back on your life knowing you spent as much time with your parents as you possibly could.
Decision Making Models: Family Is More Important Than Opportunity
This goes along with the previous mental model for decision making. When given a choice between family and opportunity, I’ve made the choice to choose family.
Now, this may not be right for you. I haven’t met your family – they could be crazy! But, in general, this goes with my theory that it’s better to prioritize people over profits. Money only does so much and really after a certain amount doesn’t affect your happiness level much.
According to CNBC:
A 2010 study out of Princeton University found that there’s a correlation between happiness and wealth, to a point of about $75,000 per year. When people make more than $75,000 a year, their happiness doesn’t increase, but the lower their income is the worse they feel, the study found.
So, if you have to choose one or the other – choose family. You will be a lot happier in the long run.
Decision Making Models: Outsource As Much As Possible
This is a mental model I’ve had for a long time thanks to my natural business-like personality.
If you are presented with a task, you should only do that task if at least one of the following is true:
A. You can’t afford to have someone else do it
B. You are the BEST person to do this job.
C. You will learn something valuable that will help you over the long-term.
D. You get immense satisfaction out of performing the task
If you don’t meet at least one of those criteria, then you should outsource it. Give the task to somebody else that likes doing it or that needs the money. You’re creating jobs that way, which has such an incredible impact on people’s lives.
I know that early on you can’t outsource and that’s fine. But, as soon as you can, start getting rid of as many things as you can. This goes with the Time is greater than Money Mental Model as well.
If you haven’t read the 4 Hour Work Week by Tim Ferriss, it’s a great place to start learning all about how to outsource.
Decision Making Models: Process Over Outcome
It takes a while to get used to this decision-making model. But it’s so worth it. This is more about how to prioritize what to focus on and for how long.
The gist is this.
Never concern yourself with the outcome, other than to decide what the best outcome would be and make that into a goal. That’s great and very helpful.
But after that, forget about it. You see, we can’t control the final outcome of anything. Our lives are left up to fate and luck in many ways. Yes, with skill and determination we have a great say in what happens.
But never 100%.
So, I have learned to not put pressure on myself to achieve a certain outcome “no matter what”. Instead, focus on the process.
Focus on what you control. Everything else is an illusion that you create in your own mind to give you a false sense of security. The world is a scary place in many ways. We are like a ship at sea in a violent storm.
All we can do is focus on the process. If we are the ship at sea, we can navigate around the rocks, we can hoist the sails, and prepare the boat… plug holes and hire a great crew. But we can’t control the storm. We can’t control if we hit a rock we can’t see.
The important lesson here is to make decisions where you feel like you will enjoy the process no matter what the outcome is. If you would only do the project IF you get the result you want, then don’t do it.
The goal is that by doing the project or task, the process is enjoyable and educational enough that just gaining the experience is rewarding enough.
Decision Making Models: Invest Like A “PIMP”
I’ve saved the most interesting for last. This is one of the criteria I look for when I’m going to invest in a company or project. Or if I decide to take on a consulting project or not. Because I’m a nut for acronyms, I’ve come up with this (maybe now culturally insensitive) word PIMP.
It helps remind me to look at my investment options with a certain order of ranking. The ranking goes like this:
P – People
I – Idea
M – Market Size
P – Product
Here’s my rationale behind this. Firstly, people are everything. If you put 5 smart people in a room and give them a business model, they’ll most likely make it work. Especially if they are smart, experienced people. So, I’ve got to LOVE the people and believe in them 100%
The idea is very important, but again, not as important as the right people. But, it’s # 2 for me. I want to make sure that the idea of the company makes sense and is exciting. I want to see a BIG IDEA that is attempting to solve a big problem.
Because of my marketing background, I also want to see how the marketing idea plays with the company idea. I like ideas that spark multiple campaigns.
Then there’s market size. Some investors look at this as a really big deal. Obviously, I like to see an addressable market to start with, but I don’t always have to see a MASSIVE market. My reasoning for this is simple.
We never really know the market size. Think about Facebook. When it started the market size was Harvard, then other Universities, then basically the world. Very few investors could have ever know the that total addressable market for Facebook was everyone with an internet connection or smartphone.
As a matter of fact, smartphones didn’t even exist when Facebook started up, so no one could have predicted it.
Same with the automobile.
My point is a great product aimed at the right people will eventually find or create a large market. But, I do like to see at least some addressable market so it’s not a complete moon shot.
And finally, we have the product. Why is this last for me? Basically, because the product can always be fixed and updated. Once you start selling into the market, you’ll get lots of customer feedback and they will let you know what they want.
I’ve seen this firsthand with Roam Research. The user community has helped take the product to incredible heights. So, I look for a good product and a good idea, but it doesn’t have to impress me at first.
I know it will get better over time.
I hope you enjoyed this post. It’s always important to think about thinking. Become aware. Use these mental models to guide you as you face decisions.
The other benefit to having mental models is found in a test question I’ve seen:
What effect do mental models have on the decision-making process?
Answer: They allow decision makers to maximize the potential of their decision making.
This is key. You want to maximize your decisions always. You can do this by having a chosen framework you use when it comes time to decide. If you know that you always make the harder choice, think about how easy it becomes to make a lot of decisions.
This is how you create habits. Create a system that basically does the work for you. Over time, you won’t even think about it. It will become the way you are.
What sort of decisions are you facing right now? Leave a comment and ask away and we can work together on what decision making models are right for you.
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