Life throws a lot on our plates and it can happen anytime. Sometimes, we are at our peak energy and have our sharp mind as a side-kick. In those cases, challenges can be fun and our decision-making tools are eager to prove the entropy wrong. Other times we might be blind-sided while in a state of exhaustion, low mood or intoxicated by optimism. In life more generally, and in those cases in particular, a rule of thumb or heuristic is an optimal course of action. While it still requires some thought and decision making as every situation is unique, it gives a thinking framework that has intrinsic quality control by design. It requires less cognitive load, saves time and, most importantly, increases chances of making a smart decision. Heuristics, or MindTools, do not ensure correct decision but rather increases likelihood of satisfying outcome, both in situation under pressure and more generally in life. Some of these tools I have borrowed from other people, extracted from the facts in the world or conjured from past experiences. Until today, I had these MindTools stated as phrases, sometimes as a mnemonics, but more recently I started experimenting by placing them in a form of a question. It seems they serve even better in that format, as questions have intrinsic potential to kick start mental activity. Here is an example of a MindTool, expressed as a statement and as a question.
“Avoid Ruin” or “Can I stay in the game if this goes ‘wrong’?
To explain why this is useful wording, we firstly have to understand how a more complete due diligence process would look like for evaluating and mitigating risks.
Full(er) due diligence process for risk-reward evaluation and risk mitigation.
A fundamental question we are wired to ask is one of survival. Is it likely that this activity, actor or circumstances will take us out of the game? It is an impossible question even in a sterile environment, where we can calculate most of the probabilities, as everything inherently can put you out of the game. Crossing the street without checking the road has a violently apparent heighten risk of a ruin, but so does eating an apple. While risk and reward ratio of those two activities are wildly different, both activities carry an inherent risk of dying or other serious consequences. We cannot, and should not want to be purist in terms of risk aversion by trying to avoid all possible adversity. Firstly, its impossible. Secondly, its not compatible with good life. But we do need to put an effort to identify and circumvent avoidable and plausible (key word) ‘game over’ scenarios. To do that, one can go through the following process when doing something new and unknown:
- Do you really want or need to do “X”?
To answer this critical question, you must start by identifying what is your desired end state or goal. Let’s say you are crossing a street. What ‘game’ are you playing? Are you playing ‘crossing-the-street-for-sake-of-it’ game or are you playing ‘I-want-to-get-to-Y’ game?. Clarifying what is your actual intention or desired end state will help you answer the question at the start of this step. If answer can be ‘No’, that would remove the risk. But it would also remove a potential for a reward. This threshold is passed often, intentionally or otherwise.
- What is most likely outcome if an average person does this?
Couple points about this. Firstly, we want to take outcome for an ‘average person’ and not you particularly, because of all the biases of “that will not happen to me”. Secondly, the more variables you accurately identify and weight correctly, the more accurate your prediction will be. In reality, a few variables disproportionally influence an outcome so at least identifying those is key. In example of crossing the street, the variable doing “80%” of the lifting is geography – are you crossing a highway in the middle of Hanoi, Vietnam or a dirt road in the middle of the forest. Thirdly, all of the above should ideally be supported by data and statistics. In practise, we only tend to use statistics for actions with most perceived risk (or at least I hope we do).
- Do you still want or need to do this?
Always be open to changing your mind in face of new data.
- Can I improve my odds with a reasonable effort?
This consists of two aspects – what are all the things that could be done to improve the probabilities and which of those things you can or are willing to do? Are you willing to wait for correct signalling and/or checking the street for cars? Hopefully yes. Are you willing to only cross the street in the night when streets are empty? Costs would likely outweigh the benefits for most people with such an option. And remember, often you only care about the goal (e.i. getting somethere in the example of crossing the street), so think outside the box for how to accomplish it – can you grab an Uber instead of crossing multiple busy streets? A separate risk-reward analysis might be needed for the alternative action as well.
- Did the odds improve?
Quality control check that whatever you thought will improve odds actually improved the odds (e.g. after traffic signalling change cars did abide and stopped moving)
- Do it.
Taking a shortcut
Such risk and reward analysis will take a relatively long time and have high cognitive load. While it is recommended for critical irreversible decisions (type 2) and situations, it would be impossible to operate like this for every encounter and decision. In the times when you cannot afford a luxury of thinking through an issue (hopefully this happens very infrequently in the context of high-risk situations), just doing a quick gut-check by asking yourself “Can I stay in the game if this goes wrong?” can do a lot of lifting.
Just to elaborate a bit on the wording and reasoning behind the wording. I was split between using words “wrong” and “pesimistically” in the question. I decided to go with “wrong” for couple of reasons. Firstly, cognitive load. In situations that demand forced rapid decision, evaluating what is ‘pesimistic’ is harder than evaluating what is ‘wrong’. And making things harder means they are less likely to be done/considered. Secondly, it is always good idea to have healthy margin of safety/level of contingecy in case you are missing some critical information (and we usually are). Thirdly, it sounds better and is easier to remember. While this is the weakest point, in the moment of stress, every bit counts.
‘Wrong’ is not completely perfect phrase without its caveats. As explored early in the post, everything can go not just wrong but catastrophic. This has to be kept in mind when using this MindTool. While it is not flawless, performing this swift quality assurance assessment to envision the potential magnitude of a catastrophe and your ability to bounce back from it represents an incredibly potent first principle.
Just check the street before crossing.