Tim Ferriss' Mental Models and Heuristics That Help Him Make Better Decisions
Tim Ferriss recently released a video about how to make better decisions. While you can watch it on YouTube, I summarized his key points below and have added a few of my own. I'm certainly not in the league of Tim Ferriss, but the other mental models and heuristics can help you make better decisions (and they don't cost you anything so why not give them a try too?).
Photo by Jens Lelie on Unsplash
Tim talks about the following heuristics/mental models:
- Don't spend energy on reversible decisions
- Conducting a risk/benefit analysis
- Whole-body yes
- Helpful and unhelpful intuition
Don't spend energy on reversible/fixable decisions
What kind of toilet paper should I buy? Should I rent this AirBnB or another? Should I purchase this now or shop around on Amazon?
Many of these decisions are easily reversible. If you don't like the toilet paper or what you buy at the store, you can refund it. Renting an Airbnb is not easily reversible, but if you rent a bad Airbnb, you can complain, get your money back, and rent another AirBnB.
The time and energy you do have should be spent on big decisions that are not easily reversible. Whether or not you should marry someone. Do you move to a new city for a job opportunity you are not sure of? Do you rent or put an offer in for a condo? These are not easily reversible or fixable if you make a bad decision, so you will want to spend the time and energy analyzing and making a better decision.
Risk/benefit analysis
In Tim's experience, a risk and benefit analysis is better than a pro and cons list. Why? Because a pro and cons list does not give you a sense of what your downsides are in the decision. Imagine you are trying to decide on purchasing $50,000 worth of bitcoin. The con is you could lose money. But the risk is you could lose $50,000 the next day.
Tim conducts risk/benefit analyses with the idea of understanding downsides and whether they are capped or not. So for example, a small investment in bitcoin ($1,000) can potentially have a huge upside, and if bitcoin falls to $0, that means Tim has only really lost $1,000 (and a bit of time).
There are many decisions with potentially high upside and capped downside in life, and those are the decisions you always want to make if you are comfortable with the capped downside. Decisions with a high upside and no downside should obviously be a no-brainer.
###Whole-body yes
The whole-body yes is similar to Derek Siver's Hell Yeah or No article. My notes from his book of the same name are also useful in understanding this concept.
Essentially, the whole-body yes is about the yeses or the nos that come from your head (rational), heart (emotional), and gut (instinctual). To make a 'yes' decision, all three parts of your body should also be a yes. Tim reverses this to make it easier. If there's a no anywhere (and he describes it as contractions or tightness or an uncomfortable feeling), i.e., there's a no in your head, or heart, or gut, then it's a no from Tim.
Knowing the difference between helpful and unhelpful intuition
Tim describes two types of intuition - one is helpful and the other is unhelpful.
Helpful intuition is the one where after analyzing all the data, getting the yes from your whole-body, and knowing the risk-benefit analysis, you get the sense that you should make the decision, even though something (even a small thing) might be pointing towards a no. Your intuition is your way of telling you you may have missed something that could blow the decision way in favour of the positive. It might be saying yes to an opportunity, even though you don't think you have the time or energy for it. Or saying yes to a blind date despite having gone on hundreds of terrible dates.
Unhelpful intuition is one where you use your intuition to rationalize the decision you have already decided on. You use your intuition as a way of grouping together unknown analyses, thoughts, and feelings, and give yourself a reason to make a decision you likely have already made.
One way to know the difference is how much time and analysis you have spent on the decision. Usually, the more time and analysis you have done, the less unhelpful intuition you will have.
As I mentioned at the beginning, here are a few more heuristics and mental models I believe can help you make better decisions.
For complex decisions, never jump to the first (or third) idea
After working for a while at your company, your boss tells you there are promotions and opportunities in another city. Except you have already bought a home and have a partner and kids in your current city. You think the decision is between you commuting or moving your family over to the new city. But there are alternatives if you just stopped to think about them. One alternative is negotiating a remote work opportunity and only flying to the other city one or two days out of the week. Another alternative is leveraging the promotion and opportunity to get a better job at a competitor.
By not jumping to the first or third idea, you give yourself time to develop alternatives that may be even better than the ideas you first came up with.
Identify the worst-case outcome of making a decision, and then figure out a way, if that happened, to deal with the bad outcome
Also known as Tim Ferriss' fear exercise, for any complex decision you make, you can think of the worst outcome that might result if everything was against you.
For example, imagine you are trying to decide on starting a business. The worst outcome might be that you lose all of your initial money, and have to refinance your home or assets. But you also recognize that you can get your old job back, pay the bills, and get back on your feet if that happened.
What you think might be the worst-case outcome of decisions are really not as terrible as you make it in your mind.
How would your decision change if you thought back to this decision ten years later?
In my latest published book, Strategies for Long Term Success, I talk about the idea of the long-term view and how it applies to the habits you do every day. If you look forward ten years later, some things are always going to be important no matter what job you have, or what you are doing: family, your health, finances, mental well-being, to name a few. So if those things aren't going to change, then the habits that you build today should focus on those things (exercise, investing, meditation, eating healthy, spending time with your kids).
Have a complex decision that you are trying to make? If it were ten years later, and you were looking back at this decision, what would you have wished you made? Or in other words, what decision would you wished you had made to minimize regret?
Now, between a job opportunity in a big city, and a better job opportunity, but in a smaller city, you may look back and regret taking the job because of the lifestyle you will end up having. Or that you should have taken the better job in the smaller city because your finances would be in much better shape than taking a so-so job in a bigger city.
You and only you, are responsible for making your life choices and decisions - Robert Kiyosaki