Better Decision Making

The quality of a decision depends on the information available at the time of the decision, not the actual outcome that occurs later. As long as we decide consistent with our values, given what we know at the time, we’ve made a good decision.

A couple of weeks ago, my wife bought a new laptop (her first MacBook Pro!). She chose to buy the extended AppleCare warranty. The sales assistant (oops, I mean “Genius”) helping us said, “Good choice. I declined coverage on my last laptop and the screen went bad shortly after the basic warranty ran out. I’ll never make that mistake again!”

Really? Why? Have the odds of the laptop failing suddenly changed? Of course not. So why would it now make sense to buy an extended warranty for every laptop you purchase for the rest of your life? It doesn’t.

If you walk into a casino, bet the number 31 on the roulette wheel, and win, would you keep doing that all night? You might, but it wouldn’t mean that you were any more likely to win than when you started.

We like to think of ourselves as objective, rational beings. But we’re not. We can’t help but be influenced by our past experiences, not to mention our emotions, biases and other decision-distorting preferences. Awareness of these natural weaknesses is the first step to making better decisions.

Better data helps, too.

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