How we get better at decision making
Inertia — 204
"The quality of our thinking is proportional to the models in our head and their usefulness in the situation at hand."
— Shane Parrish
Last summer, Rob found himself standing in a countryside car dealership, in a good mood under the blue skies but with sweaty palms, having just signed the papers for a new SUV that was stretching his budget to its breaking point. The birds chirped like they were laughing at him. Something felt off, but he kept silencing that voice. After all, he spent weeks researching this exact model. He had culminated spreadsheets comparing features, fuel efficiency, and potential resale value. He’d convinced himself that this was the rational choice.
Three months later, after several unexpected repair bills, Rob realised this exact year and model he purchased had a documented transmission problem—information buried in unchecked forums and overshadowed anyway by the glossy reviews that tipped his decision. When he looked back, with painful honesty, he had to concede he fell in love with the idea of the car, surrounded himself with confirmation bias, and rushed the decision when the salesperson mentioned, at the perfect moment, that another buyer was interested. Expensive mistakes like this aren’t unique. It reflects patterns we all possess that undermine our everyday decisions.
I learned from Farnam Street about the ‘five horsemen’ of bad decisions, and thought to share them because a few bad decisions can leave us stuck in one place or travelling down the wrong road for years on end. It’s not only time you waste. It’s damage to your health, career, and relationships.
1. We’re unintentionally stupid
We like to imagine ourselves as rational beings, always carefully weighing enough evidence before reaching a well-curated conclusion. Reality then tells an entirely different story. Our minds are riddled with cognitive biases, which are evolutionary shortcuts to decision-making. What once helped us survive now sabotages our decision-making, especially now we sit in very different complex modern environments.
Confirmation bias leads us to embrace information that supports existing beliefs while dismaying contradictory evidence. You’re seeing plenty of that in America right now, for example. Or just like the car story I completely made up (although I’m sure there’s a real Rob out there somewhere). Recency bias then gives disproportionate weight to what we’ve heard or experienced lately. Like when we think better of someone because of the funny thing they did the other day—slowly forgetting their appalling behaviour not long before that. And then overconfidence bias convinces us we know more than we do to cement our decision.
Even more troubling are the situational factors that temporarily diminish our cognitive abilities; when we’re tired, our prefrontal cortex—meant for complex thinking and impulse control—functions poorly. We rush and skip crucial steps in the decision process. And when we’re in a group of friends, we can often defer to their judgements rather than thinking independently, creating things such as the left versus right divde we’re seeing at scale at the moment.
Take what Daniel Kahnman said, “We can be blind to the obvious, and are also blind to our blindness.”
2. We have the wrong information
Even the most brilliant minds can’t make great decisions with a broken compass. Information comes in many forms. Sometimes we have too little, like we’re sat in a fog. Other times, we have too much and can’t distinguish the signal from the noise.
Most dangerously, we might conclude with seemingly adequate information that contains critical errors or omissions. See the modern cases of misinformation and disinformation.
Charlie Munger had emphasised this problem: “Part of what you learn is how to handle mistakes and new facts that change the odds. Life, in part, is like a poker game, wherein you have to learn to quit sometimes when holding a much-loved hand”, he said.
Rob’s car purchase illustrated this. He had information—just not the right information. And because he didn’t know what he didn’t know, he carried on with unwarranted confidence.
3. We use the wrong model
Not car model. Mental models are the frameworks we use to understand how stuff works. We’re human, we need simplicity in order to make sense of the world and what’s in it. But when we apply the wrong model to a situation—or oversimplify things—our decision-making suffers dramatically.
Say you apply short-term cost saving to a decision that needs to prioritise the future (climate action, or a lack of). Or you use a competitive framework (trying to be better individually than everyone else) when a collaborative approach would yield better results. Or, as you see in relationships and politics, using an adversarial model (focusing on an opposing viewpoint and pulling at flaws) when an empathetic one (reading the room) would bring better outcomes for everyone.
4. We fail to learn
Experience isn’t the same as learning. People can have the same year of experience repeatedly rather than accumulating wisdom over time. Without deliberate reflection and adjustment, you’re destined to repeat your mistakes. Which is insanity.
Effective learning requires three things most people struggle with: accurately noticing what happened, honestly admitting your role in the outcome, and deliberately implementing changes in your future behaviour. Without this cycle, you’ll simply repeat the pattern. You have to be aware and make the effort.
“Pain plus reflection equals progress”, said Ray Dalio.
5. Looking good over doing good
It’s unfortunately becoming the way the world turns now. And it’s perhaps the most insidious one of all. People have a tendency to prioritise the appearance of good decisions over actual effectiveness (looking at you, Trump). They unconsciously make choices based on optics, politics, and defendability.
Because the desire to look good drives us toward safe and conventional decisions that won’t invite criticism and pain, even if the unconventional approach would serve us better. We’re pushed to follow the crowd than our own judgement and are encouraged to elaborate justifications for decisions we just made emotionally.
Jeff Bezos did highlight this problem in 1997 with his distinction between Type 1 and Type 2 decisions: “Many decisions (Type 2) are reversible, two-way doors. those decisions can use a light-weight process. For those, so what if you’re doing wrong?” Yet our fear of looking foolish often leads us to treat reversible decisions as if they were permanent and consequential.
Breaking the cycle
While we may understand these pitfalls, it doesn’t automatically free us from them. Were it so easy.
From psychologist Jonathan Haidt: “The mind is divided, like a rider on an elephant, and the rider’s job is to serve the elephant.” Our rational mind (the rider) often has limited control over the intuitive reactions and motivations (the elephant).
Awareness opens the possibility to build systems that compensate for our cognitive weaknesses. We can build intellectual humility that then makes us more recptive to contradictory information. We can develop decision journals that force us to articulate our reasoning before knowing the outcome. We can put together a personal ‘red team’ of trusted people who will challenge our thinking.
Most importantly, we can approach decisions with curiosity rather than a desire to prove yourself right. That way, you ask yourself better questions, listen more attentively, and remain open-minded.
The next time you face a big decision, know that the biggest obstacle isn’t usually a lack of intelligence or information—it’s the unconscious patterns behind your emotional behaviour. Freedom lies in recognising those patterns and separating from them.
Decisions are bets on the future, and they aren’t ‘right’ or ‘wrong’ purely based on whether they turn out well on any particular time. The only true wrong decision is the one we make without understanding the forces behind our choices.