Decision Making Frame Work

By: Exclusivia Team

Key Takeaway: We believe that everyone needs a set of guiding principles to use as their decision-making framework.

In November of 2022 there was very large crypto currency exchange that went bankrupt. When something like this happens, it is always surprising to the public to see the number of highly intelligent, well respected, and “sophisticated” investors who were exposed to the losses. It’s not the first time something like this happened: Enron, Theranos, 2008 Real Estate and Banking crashes, ect. We do not want to discuss that actual investments themselves, but to dive a little deeper into the rationale, thinking, and decision-making processes that can help people avoid these scenarios across multiple aspects of their lives.

One of the harsh realities that we all face is that excessive amount of information and distraction in our world. It makes it difficult to make clear, rational decisions and can lead us astray from the path that we’d like to follow. Whether we admit it or not, the information we consume and people we interact can have a significant directional pull on us. It effects the way we think, behave, respond emotionally, and a number of items sometimes for the positive or negative.

A good analogy of this: If the speed limit is 65 mph but all the cars around us are driving 90 mph, does this make it right for us to also drive 90 mph? It’s a fact that driving 90 mph significantly increases the risk of dangerous situation; yet, when the people and noise around us indicate something different our judgement and decision making becomes clouded. Our perception changes and we justify things we ordinarily would not. I would imagine this is what happened to those “sophisticated” investors mentioned earlier.

Comparisons also contribute and affect our emotions. We hear about our neighbor who isn’t as smart as us, talk about how much money he or she made in a risky investment. “If they can do it, anyone can do it.” Jealousy, envy, fear of missing out, hope, being overly optimistic, and a number of other emotions spring into action. We behave in ways that don’t make sense to our rational minds, but that’s the point. We’re no longer rational. We’ve allowed our perception to shift due to external circumstances.

This happens across every aspect of our lives: Our family, faith, spouse, business, finance, health, ect. We are all constantly at the risk of being influenced and subject to cloudy judgement from the external. So, in a world of unlimited information and noise, it’s our firm belief that we all need a set of guiding principles to use as decision making framework.

Guiding principles will serve as a compass to navigate the decisions that you’re faced with on a regular basis. By keeping your principles front and center, they serve as a baseline for you to come back to in your decision making.

The 10 Commandments are essentially 10 principles for living. Perhaps we should have commandments for investment decision making, parenting, business, ect. Each individual must decide what principles they will use for their own situations and lives.
“Does the decision that I’m about to make align with my principles for ___________?”

There are no guarantees that everything will work out perfectly but following clearly defined principles will help cut through the noise, make the decision making process more clear, and keep us moving in the direction we wish to go.