As a human, we all want to make better decisions and a book called How We Decide by Jonah Lehrer, Houghton Mifflin Harcourt, NY, 2009 discusses this issue

There is no one method to make decisions although there are some guidelines – often times the expert pundit does not make any better than decisions than a random chance would give. The reason is from Isaiah Berlin’s essay The Hedgehog and the Fox. The hedgehog has only one defense – it rolls itself in a ball is protected by its spines. The fox does not rely on any one strategy, it adjusts its strategy to fit the particulars of the situation. It terms of the pundit –  similar to the hedgehog – one grand strategy is seen as certainty and anything else is rejected. The fox in terms of the pundit – relies on the solvent of doubt. The fox gathers data from a wide range of sources and listens to a diversity of opinion before making predictions and decisions.

Being open minded is not enough, you must study your decision-making process. Asking why did you do what you did? why did others do what they did? what were you missing?

Some simple guidelines to better decision making

Simple Problems Require Reason – for items you do not particularly care about allow reason to give your answer. For more complex items that you care about – allow emotion to dictate. Others you will likely overthink and come up with something you do not really want.

Novel Problems Also Require Reason – think about your past experiences before going forward.

Embrace Uncertainty – hard problems rarely have easy solutions. Before deciding on a hard decision try to have competing hypotheses. When you force yourself to interpret the facts through a different, perhaps uncomfortable lens, you often discover that your beliefs rest on a rather shaky foundation. Also continually remind yourself of what you do not know. Colin Powell said, “tell me what you know. Then tell me what you do not know, and then you can tell me what you think.”

You Know More Than You Know. – to become an expert means you have made many mistakes and learnt from them. The brain always learns the same way – accumulating wisdom through error. Once you are the expert, trust your emotions to help make decisions.

Think About Thinking – whenever you make a decision, be aware of the kind of decision you are making and the kind of thought process it requires. You will make errors, but when you learn from them, the next time about you will make better decisions.

Linking to dividend paying stocks, we all are trying to make better decisions and one of the better methods of investing is try to have dividends attached to stocks. The price if beaten down will rise faster, every year the payment will be received which increases the total return of holding the stock.

There are more questions than answers, till the next time – to raising questions.