Humanity has struggled for thousands of years with a seemingly simple question: How can I decide wisely? This question has remained challenging throughout the ages because it is highly subjective, has many dimensions, and choices must be made in the face of limited information, time constraints, and uncertainty about the future. Many classical decision-making models, such as utilitarianism, lead to positive outcomes from some perspectives but not others. To increase the likelihood of making wiser decisions, this article proposes a three-part decision-making approach based on decision-making importance, formulation, and consequences.

Decision-Making Subjectivity

The first challenge to making a good decision is that no decision is absolutely correct at all times and places. This is because many factors relevant to most decisions are constantly changing. These factors include:

• the decision-maker’s objectives
• the decision-making context and circumstances
• available decision-making resources
• the ability to implement the decision; and
• the consequences of the decision when implemented.

Determining whether decisions are good or bad is also challenging because decisions are highly referential: an excellent decision for one person may be bad for another.

• Throwing loud parties may be good for my social life but bad for my neighbors’ sleep schedules
• Tax increases may be good for governments but reduce my disposable income; and
• Biking to work may be good for my health but bad for car salesmen.

Judging decision quality is also difficult because of the at times weak correlation between decisions and results. Great choices may bring about terrible consequences if circumstances change and poorly thought-out decisions may later be viewed as brilliant if events take turns that cast them in a positive light.

Good decision-making is difficult due to subjectivity, referentiality, and weak correlations between decisions and results.

Decision-Making Frameworks

Given the complexity of decision-making, decisions are often made, consciously or unconsciously, by applying some type of default thought framework. This may be a mental framework:

• that others have developed
• that we create ourselves based on our experiences or thought processes; or
• that is situation-specific.

For some people, emotions play a key role in decision-making. Decision-making frameworks are rarely fixed but change over time based on the circumstances, decision-making cues, and our state of mind.

Decision-making frameworks change over time.

Several common frameworks that are used to make decisions are:

Self-interest. This refers to deciding in a way that I perceive as best for me without regard to whether or not it is objectively correct and without concern for my decision’s impact on other people. An example of self-interested behavior is charging exorbitantly high prices for essential items, such as food, in times of scarcity.

Special interest. This refers to deciding in a way that furthers a particular cause, such as a political or ideological cause, without considering whether it is sensible and without regard to the consequences. An example of special interest decision-making is supporting a political candidate, regardless of their qualifications, track record, or character, simply because they belong to a particular political party.

Economic interest. This refers to trying to make a decision that uses the least amount of economic resources for the greatest economic gain. An example of this is paying the lowest salary possible to employees to maximize firm profit.

Utilitarianism. This refers to a decision that targets creating the greatest good for the greatest number of people. An example of this would be a government policy that subsidizes food prices to make food affordable for the maximum number of people.

Altruism. This means making a decision to help other people, even if it is not in our best interest to do so. An example of this would be not charging for one’s work or giving everything one owns away to the poor.

Other decision-making frameworks include reasoning by analogy and reasoning from precedent.

Decision-making often does not fit neatly into any of these categories and decisions can be variations on or combinations of these decision-making guides. Decisions can also be consequences of erroneous attempts to apply these frameworks, such as when a person makes a decision they think is in their economic interest when actually it is not.

Decision-Making Framework Consequences

While these frameworks can help make choices, decisions that are considered “good” within these decision paradigms can all lead to highly negative outcomes. Let’s look at each of these frameworks from a different perspective.

Self-interest. Making self-interested decisions often backfire, particularly in the long run. Self-interested behavior often harms one’s relationships with others. This can cause people who have been harmed by our actions to not act in our interest in the future, including withholding help that we need and in the worst-case scenario engaging in different types of retaliatory behavior.

Special interest. Special interest decision-making often leads to bad decisions because it ignores the broader set of factors whose negative benefits can outweigh special interest decision gains. Reelecting an incompetent politician simply because they belong to a specific political party creates the risk that they will make poor policies that have negative benefits that greatly outweigh the negligible benefits we receive from voting for that politician.

Economic interests. Many economically driven frameworks take a narrow view of economic factors. For example, lowering salaries may increase salaries in the short run, but employees may quit their jobs and go to work for competitors, causing profitability to fall.

Utilitarianism. Utilitarian decisions are hard to make because it is often very difficult to determine what create the greatest good for the greatest number of people. This is because, as noted earlier, decisions are highly referential and what is good for one person is not good for another. Even if it were possible to determine what would be in the best interests for the greatest number of people, utilitarian arguments overlook the damages that can be caused by negatively affected minority factions.

Altruism. Decisions made based on altruistic motives may not work because what we believe is for the benefit of another person may, in fact, not help them.

Building a Decision-Making Heuristic

Having set forth some limitations of fixed decision-making models, this part of the article will propose a framework for making good decisions. Wise decisions are those that are not made based on the specifics of the decision-making choice but on a broader consideration of larger objectives, decision-making context, and decision-making consequences.

Wise decisions do not only consider the specific choice presented but also the broader objectives, the decision-making context, and decision-making consequences.

Three steps can help improve the likelihood of making wise decisions.

Step 1: Determine Decision Importance and Time Frame

The first set of factors relates to the importance and the timing of the decision.

Determine key objectives. The very first factor in making a wise decision is situating the decision within a broader value or objective context. What is the most important priority of a decision-maker, independent of the decision they have to make? Key priorities can range from making money to saving the environment to helping one’s family. People all have different values, and none are absolutely right or wrong. However, without defining key objectives, there is a great risk that decisions made will negatively affect more important interests.

Evaluate decision impact on key objectives. The second factor is to determine what the impact of the decision will be on the key objectives. If the decision could reasonably have a significant impact on key objectives, a much greater amount of time needs to be spent on making the decision.

Timeliness. The third factor is determining the time frame to make a decision, which is a function of urgency and the impact on the key objective.

Step 2: Formulate the Decision

The next set of factors to make a good decision are related to decision formulation.

External and internal clarity. Two types of clarity are vital to making good decisions. The first type of clarity is external clarity. This means having a good understanding of all the circumstances related to the decision.

The second type of clarity is internal clarity. This means trying to formulate a decision free of emotions that distort the decision-making process (positive and negative) and free of biases. While it is not possible to make any decision completely free of emotion or biases, consciously recognizing these influences on the decision-making process and trying to counterbalance them significantly improves decision-making quality.

Decision-making options. A key part of the decision-making process is to set forth decision-making options that make a good outcome as likely as possible. On many occasions, simple yes or no decisions are not the best way to resolve the issue at hand and do not do the most to further key objectives at the least cost and with the least negative consequences.

Advantages and disadvantages. Every decision has advantages and disadvantages. Decision-makers should list these advantages and disadvantages and weigh them. These advantages and disadvantages can be related to:

• ability to resolve the issue
• ease of implementing the decision
• how long it will take to implement the decision; and
• resources that will be needed to implement the decision.

If the disadvantages outweigh the advantages, the decision should be reversed, or a different decision-making option should be explored.

Step 3: Consider Decision-Making Consequences

The third set of factors involved in making a good decision relates to decision-making consequences.

Understand decision consequences. Decision-makers must carefully think through what the results of their decision will be on themselves, the key people the decision is intended to affect, and other people who likely will be indirectly affected by the decision. This means understanding:

• how the decision will be perceived
• the resources that will be used to implement the decision
• the positive and negative changes that will be brought about by the decision; and
• how those changes will affect the decision-maker and the broader decision-making circumstances.

Be able to live with decision consequences. Decision-makers should be willing to live with the consequences of their decision for the long term, for themselves as well as for others. If they are not, they will likely lack the commitment to make sure that the decision is implemented and resolve challenges that arise after a choice is made. These challenges include misinterpreting the decision, decision push-back, and not following decision guidelines and timetables.

Decision-makers should be willing to live with the consequences of their decision for the long term.

Conclusion

This article discussed how to make better decisions. After analyzing common decision-making frameworks and their limits, it set forth three steps to make better choices. These steps involve considering the importance and urgency of the decision, formulating the decision, and evaluating decision-making consequences. The next article in this series on decision-making will discuss how first principles reasoning can be used to make better decisions.