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James Altucher


10 Ways to Learn from a Bad Decision

A bad decision might be in a game (poker, chess, golf, etc), or an investment, or a business decision, sales decision, life decision, etc.

The assumption I am making in this list is that you OWN the mistake. You can't blame it on any external factors since they are all internal to the mistake. And you can't blame it on luck. Even in poker, it's not a bad decision if you lose the hand - it's a bad decision if you did not accurately think about the statistics, the betting patterns, the amount of risk you took, etc.

Even great decisions can have negative outcomes but the key is to be consistent about making good decisions.

    1. What went wrong, what decision could you have made better?

    Here you are not trying to "solve" anything but simply identify the basic mistake. It could turn out that the mistake occurred elsewhere but we have to start at some point.

    For instance, you might have made a bad decision by saying something in a sales meeting but maybe the real problem is not that you said something wrong but that you weren't adequately prepared to sell to this particular company. But again, let's start with the basic problem of when things went awry.

    2. Is this a pattern? Look for the "meta" problem.

    For instance, if this was a bad investing decision the problem might not be , " I should not have invested in this stock" but maybe the problem is you regularly take on too much risk (too big of a position) or perhaps you don't take on enough risk.

    If this was a bad sale, did something make you overconfident (some sort of Confirmation Bias or Dunning-Krueger Effect) that you would get the sale.

    If you missed a tactic in a chess endgame, was the problem with this tactic or do you need to know endgames better in general?

    3. What other things in your life were "off" at the moment of loss?

    e.g. did you not get enough sleep the night before? Were you arguing with someone? Were you stressed about something? If the issue was sleep, can you try to put together a sleeping program for the next time you are going to be faced with a similar situation. And how can you comparmentalize stress when these decisions occur.

    Part of the issue is owning up to the real problems. Don't blame it on the stress. Stress always occurs. But figure out how to deal with stress better when it overlaps with important decisions.

    4. Positives, Negatives

    At the time of your bad decision, what positives did you think you had? Were these assumptions correct (e.g. if in poker, did you think your opponent was bluffing? Why? Did you think your opponent had a flush against your full house? Why?)

    At the time of your bad decision what negatives did you think you had? (e.g. if you made an investment in MSFT, maybe you felt it was a negative that they had earnings later that day).

    There could be several issues:

    - maybe you were wrong about the positives and negatives.
    - maybe you valued the positives or negatives too highly.

    Perhaps a coach (a domain expert) is needed to help you analyze the positives and negatives and analyze if they were what you thought.

    And also perhaps you have to ask if you were overconfident and using confirmation bias when you were discounting the negatives.

    5. What were the Unknowns to you

    Perhaps when analyzing a bad decisions afterwards, you find things you did not consider at all that you should've considered.

    For instance, in a chess game, maybe you should've considered more the importance of giving your opponent a chance to activate one of his pieces.

    In a sales meeting, perhaps you should have found out if the decision maker was at the meeting.

    6. What is it about you, in general, that makes these types of bad decisions.

    For instance, do you take too much risk in all areas of your life. Do you feel overconfident about decisions once you make one. Do you have a backup plan in worst case scenarios?

    Are you too anxious to get the deal, win the game, cash in an investment, because in general things have been taken from you when you thought you were on top of the world?

    Look for patterns between this and other bad decisions.

    7. What in the domain can you learn more about and study?

    For instance, if you make a bet in poker, do you accurately understand the statistics in many situations or is this an area you should study.

    In sales, do you know your competitors' products? In tennis, should you practice more playing at the net. 

    In comedy, should you study more videos of comedians dealing with hecklers?

    8. +. -. = (Plus. Minus. Equals).

    Go over the mistake with a coach (a "plus"), a colleague (an "equal"), and explain it to someone who is not as knowledgable as you in the domain (a "minus")

    9. Develop a training program and a process/checklist

    Develop a training program on what you now need to know about the domain and yourself to know how to:
    A) see similar situations
    B) build a more correct process/checklist of what to do when you are in that situation.

    10. Forget about it and Remember it.

    Forget about the pain you felt when the bad decisions and its outcomes occurred. Instead of saying, "if only... (e.g. if only I had not bet that hand), say, "At least..." (e.g. "At least I know what happened, it gave me an opportunity to learn more about myself and the domain and now I have a process to deal with similar situations").

    Remember how to recognize similar situations, remember the training program you put together in response to the bad decisions, and remember the checklist of what you should do when you encounter a similar pattern.

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