Making Better Decisions

I don’t write often but every once in a while, when I am in the right mood, I will sit down to write something. And I try to write something that would be useful for whoever reads it.

Today, I wanted to write about some methods that I learnt in the past to help me make better decisions. My family used to criticize me for working at odds hours. They would go like, “Why can’t you work like everyone else?”

It all goes back to an economics book I read many years ago. It explains how taxi drivers usually have an expectation to earn $X dollars/day to cover the rental plus some income. So what happens is that during the days where it is harder to find passengers, the taxi drivers tend to drive much longer hours to achieve that $X. On the days where it is easy to get passengers, the taxi drivers would reach $X much earlier and then go home early to rest. Except this behavior is sub-optimal and the optimal way of doing it would be to go home early to rest when there are hardly any passengers and work long hours during days of more passengers. By doing that, the taxi driver will maximize their income per hour worked.

The other story I read about is something called Comparative Advantage and why trade makes both countries better off. If you want to know how the Math works, here’s a good video about it. https://www.khanacademy.org/economics-finance-domain/ap-macroeconomics/basic-economics-concepts-macro/scarcity-and-growth/v/opportunity-cost-and-comparative-advantage-macroeconomics-khan-academy

Both of these concepts is actually why I write when I feel most productive writing and I work when I feel most productive working and why I do less productive stuff on days when my mind is in a bad state. On some days, my mood is so bad that I don’t even want to get out of bed. On those days, I usually try not to work because of something called “Pavlovian Conditioning”. I had already conditioned my mind to associate working with joy and enjoyment and I’m applying them in my life. If I read books and I do not apply what I learnt, then what’s the point of learning?

Having said that, of course a person can only do these if they are not constrained by certain factors. If you are in an office job, then you are bound by a different set of constraints which may not allow you to apply these concepts.

The other technique I use to make decisions is the law of averages. If I am going to make decision X or decision Y, how would the average outcome of decision X or the average outcome of decision Y be? And then I will use these data to guide me with the assumption that I am making these decisions as an average person. Data has shown that most people think they are smarter than average which is statistically impossible to be true. It also reminds me of a quote from Charlie Munger, “If you think your IQ is 160 but it's 150, you're a disaster. It's much better to have a 130 IQ and think it's 120.”

Again, I try to apply these in my life. In spite of my best efforts, there will be lots of mistakes along the way. I have made terrible mistakes even after assuming I am an average person, which might suggest that I’m below average, lol, well that sucks!

And that brings me to something I learnt about life. It is normal to make mistakes. So if I may suggest, that if you had made mistakes, be kind to yourself, because one day you will die, and all these mistakes won’t matter a single bit. Plus it is easier to become a better person by acknowledging the mistake and progress forward rather than carrying it around in your mind like a baggage. Keep moving forward, Godspeed!