Most Crucial Factor in Any Decision

There is one principle that drives your decision making or rather it should if you want to not end up in precarious situations.

Before deciding we all naturally and innately decide upfront whether it is a high involvement decision or a low involvement decision, for instance, deciding what to eat on a particular day may not be high involvement, if you have a regular repertoire of meals that you contemplate, it is just a matter of choosing one from what you have already narrowed down.

A higher involvement decision will incorporate more of your mental faculties, because the decision will have a much larger impact on your life, for instance, like buying a house, or a new car, or deciding whether you will ask someone to marry you.

The high involvement decisions bring with them sacrifices like time, money, emotional energy, etc.

Therefore, you need to think through these decisions and apply the one decision-making technique to these decisions.

What is this technique? It is all about assumptions. What are assumptions?

We can define assumptions as “something that you accept as true without question or proof” according to the Cambridge English Dictionary..

source https://dictionary.cambridge.org/dictionary/english/assumption

But in the same dictionary and looking at the same definition of the same word, there is another definition “assumption of power, responsibility, etc.

the act of taking a position of power, responsibility”

This intrigued me, because if you combine the two you realise that by accepting the something without question or proof, actually puts you in the position of power or responsibility. Your assumption of acceptance will lead to your assumption of power.

Now, in business there is saying to ‘assume’ is to make an ‘ass’ out of ‘u’ and ‘me’. They use the word broken up in this little riddle, because often in business, when things go awry, the defence usually is “But I assumed….”

That is why assumptions are so important in any decision, particularly with decisions that are going to affect your life.

Rather than just assuming, the technique should be to test your base assumptions in any big decision. Often we want a certain outcome and decide based on the expectation that the outcome we want will be forthcoming, without testing our base assumptions prior to deciding.

Having made many silly decisions in my own life, I would implore anyone who has a decision that will affect their life profoundly to be vigilant in weighing up the base assumptions.

Remove the emotion and try to be as objective as you can. For each assumption you make on outcomes, question yourself what you are basing it on.

For instance, I wanted to buy an investment property. They attracted me to an investment that would bring in twice as much rent and they guaranteed the rent for 10 years. It was dual income property, a duplex, and they guaranteed the rent for 10 years at market rates. A ‘no brainer,’ right?

My assumptions were that the property would grow in value over 10 years, and the rent would more than cover the extra debt I would incur in terms of a mortgage I would require for the property.

This would be a brilliant investment for retirement.

Then I analysed my base assumptions. I assumed that the area where the location of the property was would increase in value. I assumed that the guaranteed rent had no strings attached. I assumed the builder was reputable and did quality work. I assumed that the location of the property was in an area with little risk of weather events.

I assumed no hidden costs associated with running the property, such as maintenance, etc.

It’s only when I started thinking through the detail of what an investment property purchase means did I get a more realistic picture.

I assumed that the price I was buying at was the average for that real estate market. Was I surprised when I realised the asking price was $100,000 more than similar properties at that location.

The key principle is to rethink your base assumptions and remove all emotional projections from the decision. Once you delve deeper into each base decision and ask yourself why you are assuming what you are, only then can you expose the weaknesses in your assumptions.

Never decide under pressure, or be impatient. Uncovering the base assumptions and questioning yourself has a lag effect on exposing facts about your assumptions.

Question all your base assumptions always, and then decide whether to take the risk. At least this way you take a calculated risk, not an impulsive emotional risk.