Decisions, Decisions, Decisions (Part 2)

How can we improve our decision-making?

Source: Quora

Most of us live in “react-mode.” We’re like thermostats – the temperature goes up, and we try to cool things down. It gets a little chilly, and we turn up the heat. We don’t deliberate, we just do something because it makes us feel better. But reacting to circumstances doesn’t change the underlying situation. It just makes us a little more comfortable, for a little while.

One of the best ways to improve our decisions is to slow down. Think about the underlying dynamics of what’s going on. In Thinking Fast and Slow Nobel prize-winner Danny Kahnemann posits that our brains use two cognitive systems. System 1 thinking is fast, intuitive, and emotional. System 2 thinking is slow, deliberative, and logical. System 1 thinking is important for survival. When three deer jump onto the highway 50 feet in front of you, you don’t have much time to figure out what to do. You step on the brakes!

Photo: M Prinke. Source: Animalphotos.info

But usually we have time to pause and reflect. Not all decisions need patient deliberation, but a lot do. Buying deodorant doesn’t require much planning. But buying a pet does: pets are effectively family members, requiring care and attention. A new puppy or kitten can change many aspects of your life – how you travel when you get home, what kind of vehicle you need. The long-term effects can be profound.

So think about the consequences. It may be emotionally satisfying to yell at someone who cuts you off in traffic, but it’s a good idea to close your windows, first. Successful people and organizations don’t react, they act. They pause and think before they take action. The process of stopping and thinking almost always improves the quality of our responses. United Airlines CEO Oscar Munoz probably wishes he had reflected a little more before writing that first email.

Lord Acton once said that if it is not necessary to decide, then it is necessary not to decide. And if the decision can’t wait, you can at least count to ten.

Douglas R. Tengdin, CFA

By | 2017-07-17T12:21:22+00:00 April 21st, 2017|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. –
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