The Importance of Being a Good Decision Maker:
How do you explain the fact that Jeff Bezos/Amazon makes 5 billion+ per week and there is someone somewhere who can’t afford the pack of cigarettes that he is addicted to?
How do you explain the distance between these two realities?
It certainly isn’t the level of brightness, it certainly isn’t the environment that they grew up in, it certainly isn’t the difference in the amount of work that they put in, it certainly isn’t the level of discipline between both of them.
Although all these matters and definitely have some level of impact on the disparity between Bezos & the guy who can’t afford a pack of cigarettes.
I personally think it comes down to the DECISIONS they made + a bit of luck/bad luck.
One example of an incredible decision from Amazon: When amazon was growing, Bezos decided to reinvest all the profit within the business and not be profitable.
He used the revenue to invest in building the infrastructure of products/services Amazon needed to successfully run.
Instead of doing what most business owners do which is take profits out of the business and go buy a Lambo, he decided to allocate capital in starting new departments like AWS which provides on-demand cloud computing platforms and APIs to a lot of people, businesses, governments, etc - currently generating over 40 billion dollars and being the largest source of operating profits.
Why do you need to start paying attention to the decisions you make?
The level of success you’ll achieve in your life and business will be solely dependent on the decisions you make.
You may spend the next 10 years learning about sales, learning about Facebook ads, learning about how to book more meetings, or how to niche down but all that won’t get you at the top of the game if you keep making bad decisions.
Once you realize how important this is, you’ll understand how hard it is to make the right decisions. You’re a few decisions away from being a 7 figure earner, an 8 figures earner even a 9 figures earner.
Most people want to complicate things, just so they can sell you their new tactic but really all you need is to be good at making decisions and knowing the best next step.
Making decisions is the hardest part of running a business for me.
2nd, 3rd order consequences: refers to the idea that every action has a consequence, and each consequence has a subsequent consequence.
Making decisions becomes hard because you have to be thinking about not only the first-order effect of your decision but also the 2nd, 3rd, 4th order consequences of that decision.
What can you do to become a better decision-maker?
Find asymmetries:
The difference between a good decision and a bad one is the outcome that is produced by the decision.
If you’re looking to become a machine at making good decisions, especially in business, it is important that you focus on INPUT and OUTPUT asymmetry.
You need to make decisions that create huge asymmetries between the input and output, meaning your decision requires you to put in 1 unit of an input but you end up with 10 or 100 units of output.
Examples of decisions with Low asymmetry:
- Being hungry and going to buy food/cooking the food, eating the food or ordering the food.
- Making money and saving the money in your bank account for the next 10 years at 0.0001%
- Starting a business and deciding to stick with a team of 3 people.
- Needing a new operations person, a new media buyer, a new sales rep and hiring the cheapest one on the market.
- Growing the business and keeping 80% of the profits to yourself
Examples of decisions with High asymmetry:
- Being hungry and hiring a chef or subscribing to a meal kit company.
- Making money and investing in courses/programs over the course of 10 years to level up skill sets.
- Starting a business and deciding to hire 3000 people.
- Needing a new employee and having 100 interviews to find the right person and incentivizing them properly
- Growing a business and redistributing 50% of all profits to team members.
Long Term thinking - Long time horizon: Making good decisions is already hard but it becomes even harder when your goal is to win this week, this month, or this year.
Extending your time horizon is one of the biggest levers you can pull if you want to improve your decision-making.
It automatically puts you 10 steps ahead of the competition, since most of your competitors are worried about hitting a new record month this month, while you’re building something that will make it Unreasonable for you to not hit record months consecutively 1,2,3 years from now.
Amazon gives itself 5-7 years to make any new project succeed, the reason they do it that way is because they know that no one else will be that patient with something new that is just costing them money to build, and this gives them an unfair advantage over everyone else.
Whenever you’re making decisions try to make decisions that will not simply make you money this month but try to make long-term decisions that will take care of you, your family, and your business even when you aren’t here anymore.
Remove small - inefficient decisions from your life:
Take into consideration how long the effects of your decisions will last for and how fast they will decay!
Most people are stuck making the same decision every single day for the rest of their lives and this costs them so much of their energy/ cognitive bandwidth and time.
You’ve probably heard or seen really successful entrepreneurs wear the same clothes every day, this is the main reason why they do it.
You have to start keeping track of all the decisions you make that could be easily removed by one single decision.
- FOOD: Instead of having to think about what to eat or going to the grocery store every week, just make a few extra sales and invest in a chef/ meal kit company that will take care of everything for you. The return on your investment will be major.
- Clothes: Instead of trying to wear crazy new outfits every day, try to get the same shirt, pants, shorts in the same color or different colors and just wear the same thing every day. Free up some decision-making horsepower.
- Employees: Instead of trying to find the cheapest person (because you want to remain highly profitable) to join your team and who will quit or get fired after a month, focus on making less money now and hiring the best person(s) who will take your business to the next level.
There are many more of these decisions that we make every single day that could easily be solved by one single decision.