PRINCIPLES (To Make DECISIONS Effectively) [Part 4 of 4]

Here's the last in a series from Ray Dalio's Principles!

To Make Decisions Effectively…

190) Recognize the Power of Knowing How to Deal with Not Knowing ...

191) Recognize that your goal is to come up with the best answer, that the probability of your having it is small, and that even if you have it, you can’t be confident that you do have it unless you have other believable people test you. ...

192) Understand that the ability to deal with not knowing is far more powerful than knowing. a) Embrace the power of asking: “What don’t I know, and what should I do about it?” b) Finding the path to success is at least as dependent on coming up with the right questions as coming up with answers. ...

193) Remember that your goal is to find the best answer, not to give the best one you have. ...

194) While everyone has the right to have questions and theories, only believable people have the right to have opinions. ...

195) Constantly worry about what you are missing. a) Successful people ask for the criticism of others and consider its merit. b) Triangulate your view.

196) Make All Decisions Logically, as Expected Value Calculations ...

197) Considering both the probabilities and the payoffs of the consequences, make sure that the probability of the unacceptable (i.e., the risk of ruin) is nil. a) The cost of a bad decision is equal to or greater than the reward of a good decision, so knowing what you don’t know is at least as valuable as knowing. b) Recognize opportunities where there isn’t much to lose and a lot to gain, even if the probability of the gain happening is low. c) Understand how valuable it is to raise the probability that your decision will be right by accurately assessing the probability of your being right. d) Don’t bet too much on anything. Make 15 or more good, uncorrelated bets.

198) Remember the 80/20 Rule, and Know What the Key 20% Is ...

199) Distinguish the important things from the unimportant things and deal with the important things first. a) Don’t be a perfectionist. b) Since 80% of the juice can be gotten with the first 20% of the squeezing, there are relatively few (typically less than five) important things to consider in making a decision. c) Watch out for “detail anxiety.” d) Don’t mistake small things for unimportant things, because some small things can be very important. ...

200) Think about the appropriate time to make a decision in light of the marginal gains made by acquiring additional information versus the marginal costs of postponing the decision. ...

201) Make sure all the “must-do’s” are above the bar before you do anything else. ...

202) Remember that the best choices are the ones with more pros than cons, not those that don’t have any cons. Watch out for people who tend to argue against something because they can find something wrong with it without properly weighing all the pros against the cons. ...

203) Watch out for unproductively identifying possibilities without assigning them probabilities, because it screws up prioritization. ...

204) Understand the concept and use the phrase “by and large.” a) When you ask someone whether something is true and they tell you that “It’s not totally true,” it’s probably true enough.

205) Synthesize ...

206) Understand and connect the dots. ...

207) Understand what an acceptable rate of improvement is, and that it is the level and not the rate of change that matters most. ...

208) If your best solution isn’t good enough, think harder or escalate that you can’t produce a solution that is good enough. ...

209) Avoid the temptation to compromise on that which is uncompromisable. ... 210) Don’t try to please everyone.