Anatomy of Decision Making

Photo by Prateek Kumar Rohatgi

“Your legacy is being written by yourself. Make the right decisions.”– Gary Vaynerchuk

In the last two blogs (first one and second one), we have seen that “conscious” decision making is an important and urgent need for all of us, however, decision making is tricky due to the cognitive quirks innate to our minds and the dynamism of the world we operate in. In this blog, I attempt to elicit factors that help with assessing and improving decision making ability. Right off, it is important to understand what goes in making decisions.

“Sometimes you make the right decision, sometimes you make the decision right.”– Phil McGraw

Anatomy of decision making

Factors that generally go into making any decision:

  • Understanding of the problem statement
  • Our cognitive heuristics affect how we see the problem, nature and magnitude of its impacts, its causes and its relevance
  • Objective view of the nature and the impact of the outcome
  • Our view of the future — whether we have an optimistic view or a pessimistic view or any of the various hues in between
  • Our expectations of our future
  • Criticality and significance of the issue
  • Time horizon of the outcome — how immediate is the outcome expected
  • How much of the impact of the outcome is expected to accrue to you versus to others (family, friends, society etc)
  • How urgently is the decision to be made
  • Mental and physical energy levels at the time of making the decision

Assessing a decision

“Be open about your thoughts, ideas, and desires and you will be right with your decisions.”– Auliq Ice

The most common way to assess a decision is by the outcome that ensues from that decision. This is one sure way to not improve your decision-making ability. Actually worse, this may worsen your decision-making ability. All outcomes are results of the quality of decisions and luck. So, a good outcome could be a result of good decision despite bad luck or a bad decision but good luck or other such combinations. Not being able to discern between contribution from luck and from decision making skill, will likely result in bad quality and random decisions.

In the summer of 2020, two friends with similar economic backgrounds have come into good money rather serendipitously and find themselves with about Rs 50,00,000/- ($62,000/-) of disposable funds to invest. They earmarked this money to fund college education of their respective elder-borns which was to materialize in the summer of 2021. One of them invested it in a bank deposit and the other in Bitcoin. The one who put money in bank deposit saw her money go up by a measly 2% whereas the one who “invested” money in Bitcoin saw his deposit swell five times (+500%). Which of these two deployment decisions is a better one? Same story but the dates moved by a year forward — so, investment made in May 2021 and money was needed in July 2022. The lady’s deposits grew by 2% but the gentle man’s investment fell by a whopping 60%. So, which decision was better?

If we make our decisions such that they allow us to discern the outcome in terms of contribution from luck and from skill, over time, the practice of consciously assessing decisions against the resultant outcome and then incorporating any lessons learnt, will naturally result in ever-improving decision making ability. Critically, understanding the contribution of luck to the eventual outcome is the real essence of the assessment process, for, decision making ability is many a times, not conscious but instinctive.

What makes a good decision

I think a good decision has following characteristics:

  • Sufficiently objective: so that the problem statement aligns with the real-world parameters that affect it. This also allows for more realistic measurement of actions and the results coming out of the decision
  • Sufficiently subjective: so that it has sufficient personal relevance to you motivating you to take up the action arising out of the decision
  • Informing: Allows you to introspect and understand yourself a little more and also expands your understanding of the world
  • Progressive: Allows you to improve and grow your ability to make decisions
  • May have arisen out of conscious thought process but definitely informed by your instinct or gut feeling
  • Makes you feel assured and confident about the action steps but at the same time, keeps you slightly (somewhat) anxious about the outcome
  • Finally, a good decision gives you a favourable chance for a good outcome

Word of caution

It is estimated that our brain uses up 20% of our energy while it accounts for only about 2–2.5% of its mass. “Thinking” comes with heavy cost in terms of energy expenditure. So, it we were to arrive at a thesis before we make every decision, we would run out of energy pretty soon and then not be able to make conscious decisions. So, it is important to be deliberate and selective as to when to employ conscious decision making — perhaps limit it to impactful decisions and decisions where outcome is measurable and preferably with limited influence of luck.


“Don’t let adverse facts stand in the way of a good decision.”– Colin Powell

Conscious decision making is critical but is tricky. One of the most effective ways to improve decision making ability is to develop a habit of evaluating outcomes in terms of separating contribution from luck and contribution from ability. This feeds back the right lessons learnt and at the same time, insulates the mind from erroneously reinforcing skill when “luck” may have bailed out the outcome (in other words, feed the right kind of neuroplasticity).

PS: I would strongly recommend that you read a book by Annie Duke called “Thinking in Bets” — mainly because of its highly accessible writing style and also because of the credibility that Annie brings to the topic.


Thanks for taking time to read this. In this newsletter, I share my learnings that could help you improve your decisions and make meaningful progress on your goals and desires. I share stuff that I have personally experienced or experimented with. If you find this newsletter worthwhile, please do share it with others — of course, only if you do not mind it.

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