Decision making systems

Definitions

You can define decision-making systems as ”A set of principles or procedures for the action or process of making a resolution or conclusion.” You can also define them as ”A set of principles or procedures for the thought process of selecting a logical choice from the available options.”

Human decision making systems

I will only concentrate on the individual´s point of view in human decision making systems in this text. There is no reason why you shouldn´t use any other tools than your brains while making the decisions. For making things easier, you should separate your own decision making systems into two parts: Intuitive and Rational systems. These systems really work together and both of them are always on, but it is easier to think them as separate systems. Intuitive system works faster and rational system slower.

Examples

You see a flying object getting closer to us and you decide to dodge it or you see a beautiful lady watching you and decide to talk to her. Your intuitive systems is working. You are thinking about bying a car and you first look for the information about different cars and then make a decision to buy one of them. Now your rational system is working.

Intuitive system

This system is based on emotion and impulse. It represents your wants, impulses and gut instincts. It is always on, but your rational system sometimes overrides it. Intuitive system makes the decisions when you are tired and unable to think rationally. It works fast and most of the time you don´t even notice it. Fast response was thousands of years ago a requirement for survival. This system also saves lots of energy. Without it, we couldn´t get many things done. Most of the decisions are made by this system. It influences how you see the world around us: recognizing objects, deciding where you keep your attention, helping you avoid losses, and decides how to react in dangerous situations.

It also has some learned associations and biases. It sees some clues from the environment and makes predictable errors because of them. For example, when choosing a restaurant to eat, you tend to follow the crowd without noticing and choose the place to eat with the longest queues. When this system cannot decide, it asks rational system to take control. When the rational system is busy or exhausted, it has more power in our behaviour.

Rational system

Rational system is normally in the background while intuitive system is working. This system thinks it is the decision maker, but most often time, it is just monitoring your actions. You need this system to make decisions in complex situations or making complex calculations like deciding whether you should change a job or not or think about how much you should pay for an apartment. This system is always monitoring you. And it is working only when needed. It normally has the last word, but it gets exhausted. It normally controls your willpower, but when it is exhausted, your intuitive system takes control and you cannot think and make decisions rationally. This normally happens when you have made many decisions during the day or haven´t slept enough. Sleeping enough and keeping your blood glucose level stable helps you to make rational decisions.

Systems working together

These systems work together. Most often, your intuitive system makes the decisions. It also creates impressions and feelings for the rational system. They are the main sources for the explicit beliefs and deliberate choices of the rational system. Only the rational system can change how your intuitive system works. You need to rewire your brain to make changes by programming the automatic and intuitive functions of attention and memory. This cannot be achieved without the rational system. You need to have a lot of conscious effort to change yourself. Changing your habits, improving your skills, and many other things cannot be done without lots of repetition. Your conscious system is in power until you have repeated the action hundreds or thousands of times. You need your rational system to teach your intuitive system work better. You have your paths of least resistance. Which is normally the intuitive system. You get better results and better skills, when your intuitive systems works better. This is the result of your rational system working better.

You need to use both of our systems to achieve a skill level of an expert. Without enough repetitive conscious thoughts or actions you cannot achieve a level where you can use your intuitive system to react whatever the impulses it receives from the environment. For example, a chess master has thought about some positions on the board in advance or played similar games to find a best possible next move. Then he can intuitively make a decision without using any time to think. Thus, it saves a limited time to complete the game. In most of the physical actions, the speed is one thing that separates an expert from a novice. The other is the quality of the actions. You cannot have better quality of actions without having better mental models learned through rational thinking. When you combine the fast speed and the quality high quality of physical actions you get real expertise.

Sources:

Thinking Fast and Slow, Daniel Kahneman
Peak, Anders Ericsson
Predictably Irrational, Dan Ariely

Until next week,

-TT

Systems

Definitions

System is defined as: ”A set of things working together as parts of a mechanism or an interconnecting network; a complex whole or ”A set of principles or procedures according to which something is done; an organized scheme or method.

Examples

Universe is a system. Our bodies, habits and skills are systems. Most of the things we do are systems. Some systems are consisted on smaller subsystems like our bodies have skin, organs, etc. Latticework of mental models is an example of a thinking system.

Self-reinforcing and self-stabilizing systems and delays

Universe is always expanding. The interest on interest compounds the debt. In self-reinforcing systems, the previous outputs of the systems change the inputs coming into the systems and amplify the outputs coming out of the system. What happens is that eventually self-reinforcing system gets to the point where the amplifying destroys the whole system. The other possibility is that the limit of growth comes to the point where the growth stops, slows, diverts or reverses. When this happens, the system becomes self-stabilizing.

In self-stabilizing systems the previous outputs of the systems changes the inputs by stopping, slowing, diverting or reversing the growth of the outputs. This self-correction keeps the system working without exploding. Every natural system has an optimal growth rate. We should use them into our advantage. Our skin keeps the temperature of our body from overheating by sweating if we are in an environment in which the temperature is too high or we are exercising. It can be hard to notice these balancing processes, even though they are mostly necessary. We should keep the self-reinforcing and self-stabilizing systems and their interaction in balance. We should always limit the effect of self-stabilizing processes on self-reinforcing processes in balance.

All the systems have delays. People have a natural tendency in concentrating on the consequences we see right after we have done something. The second and third order consequences may come after a long delay. In complex systems, consequences can come after years. We may concentrate on the symptoms, rather than the solutions because of delays. Some system structures have unrecognized delays and they can lead wrong solutions. We should have better awareness about the delays. And we should also remember that causes and effects are not always close in time. When we notice a delay, we should try to shorten it as much as possible.

Small changes in systems can create big results

This happens in individual circumstances as well as in systems. Well-focused small actions aimed for changing the system can create surprisingly big results. Solving a difficult problem can be a matter of finding the system structure in which the small change deliver the big and lasting results. Most of the times, finding these structures is hard. We need to understand the system and how its parts interact with each other. Otherwise we will never find the right structures for these high leverage improvements. We cannot do this without understanding the system as a whole.

Reacting to the change in the system is a lot easier than truly understanding its cause-effect relationships and ways to improve it with small changes. Reacting to the change can be a bad thing. It may cause small changes to the system structure creating bigger problems through self-reinforcing processes. Changing a system structure can have different consequences in the short run and in the long run. Different parts of the systems can also have different consequences caused by the small changes. We also have to think about interactions of the parts before changing anything in one part of the system.

Most of the results in your life depend on the quality of your systems

We are mostly focusing on the different parts of our systems in a particular moment without thinking about the system as a whole or any long-term consequences. Our systems can deliver results that exceed the sums of their parts by a large margin. They can also deliver results that are not even close to the sums of their parts. People using the same systems tend to produce similar results. When we do not change our systems we cannot expect different results. Most of the time, the results we get are not caused by other people, some particular conditions, bad luck or some other explanations. The reason for bad results are the systems or their implementation or our understanding of them. We should think a lot more about the quality of our systems or their subsystems. Then we can get better results. We cannot really improve ourselves without improving our systems.

Have a nice week!

Sources:

The Fifth Discipline, Peter M. Senge
Work the System, Sam Carpenter

-TT

Compound effect

Definitions

Compounding effects mean little things that repeatedly multiply themselves. They will give big results after lots of repetitions. After a small amount of repetitions, the compounding effect do not have much influence. In the long run, it means everything. When you talk about compounding we talk about exponential growth or decline.

Examples

Universe´s expansion is accelerating all the time due to the compound effect. Repeating an action again and again will create a reverse compound effect by saving energy out brain needs for executing it. If you have a debt, its amount is compounding as fast as its interest on interest. Inflation has a reverse compound effect on the value of cash. After twenty years of 3% inflation, cash has lost about 45 per cent of its value.

Repetition, repetition, repetition

You have a preference to look for immediate and most obvious reactions in whatever you are doing or seeing. This is a problem in achieving something great. You cannot achieve any big wins quickly. You need to make hundreds or thousands of repetitions to achieve greatness. These repetitions creates the compound effect. You quit too early and you miss the compounding effect. This is a sure way to fail. There are no short-cuts even though some companies or people are willing to offer them. In a highly competitive field of expertise, you need to practice thousands of hours. These means that the amount of repetitions is huge.

You have to be patient and need to trust the process. Consistency is the key. For example, in order to lose 10 kilograms, you can make big changes to your diet for a short period of time like couple months and hope you have enough willpower to survive it or you can make a small change of eating hundred calories less every day for two to three years. The second way will probably be more sustainable and its results will be better. The results will take time, but fast fixes normally lead to fast setbacks. Bigger payoffs are achieved by smaller changes, more time and more repetitions. The best way to get the magic of the compound effect is repeating things long enough. Depending on things, the best results are achieved through years or even decades of compound effect.

Compound effect is always working

Compound effects are everywhere. You go through them every day. Most often, their effects are so small that you are not noticing. You need to focus on them and choose which kind of effect on you they have. You should always aim for more positive than negative effects. For example, your diet is responsible for many compound effects. Their effects are not only on our weights. Good diet will let you make better decisions, feeling more refreshed, more focused, etc. Bad diets will lead you to bad decisions, tiredness, or maybe become even depressed.

Your habits are the most important thing about compounding effect. Your good and bad habits and the sum of their effects make all the difference in your life. The older habits you have, the more difficult it is to change them. Repetitions make them stronger and easier all the time. You also need less effort to maintain them after every repetition. A daily routine built on good habits makes a difference in your success. You have good and bad habits and the the sum of their effects is the sum of most of what you are accomplishing.

Your environment and the people you are with are important in getting the right compound effects. You are constantly bombarded with desirable and undesirable impulses through your environment and your friends. You need to think the inputs our brains get every day. You get most of the impulses without noticing. The sum of these impulses compound over time. Therefore, you need to control our environment and avoid all the unnecessary negative impulses like advertising, other people complaining, negative feedback without critical thinking, etc. You also should get as much positive impulses as possible, like constructive criticism, hanging around with more positive people, etc. You are the sum of the people you most often are with. You do not notice these things, because these things happen so slowly. And people also think they are not influenced by these things, because you think you are always rational. You should increase your awareness and start thinking about your environment, your friends, and their effects on us. Then you can increase the positive effects of compounding.

Most of the readers have probably noticed that I haven´t mentioned much about money and compounding. It is true that compounding money is one of the most important things about this mental model. The reason I have left it out of this text, is that it needs more space than I can offer in this text. 

Sources:

Compound-Effect, Darren Hardy
Tipping Point, Malcolm Gladwell
Poor Charlie´s Almanack, Peter Kaufman, Charles T. Munger
Peak, Anders Ericsson

-TT

Combinations and permutations

Combinations and permutations are very important in calculating probabilities. In this text, they are not covered. The idea is to focus on the combinations and permutations of the mental models. Lets start with definitions.

Definitions

Combinations can be defined in many ways. Here is one: ”A joining or merging of different parts or qualities in which the component elements are individually distinct.”

Permutations can be defined in many ways. Here is one: ”Each of a several ways in which a set of number of things can be ordered or arranged.” In mathematics, the notion of permutation relates to the act of arranging all the members of the set into some sequence or order.

Combinations of the mental models

You need to forget mathematical meanings when you are talking about combinations of the mental models. You could also talk about multiplications when all the mental models are working towards the same direction. For example, when you talk about brands, we talk about many psychological tendencies moving to the same direction. Many tendencies like social proof, availability bias, authority misinfluence tendency, etc. together are creating a connection between the product and customer´s mind. A strong need to buy a particular brand is the product of the biases. The strength of each bias is different in the minds of different customers. In reality, mental models never have effects only on one direction. For example, social proof from a person a customer hates moves his/her decision to a negative direction and from a person he/she likes moves to a positive direction. Sometimes different models will lead people into separate directions.

Permutations and mental models

The biggest difference between combinations and permutations of the mental models is that in permutations the order of the mental models matter. This means less choices. Without a right order, it is not possible to get the wanted results. For example, you cannot introduce new habits without the right order. Habits have three components. First is trigger, which offers you a clue to execute an action. Then, there is the action. The reaction for the action is a reward. Reward is really a source of motivation. When you want to establish a new habit, you need to have all the components in the right order. There is no action without the reward or clue. The most important thing in establishing a new habit is that the source of motivation is very rewarding. The action should be as achievable or easy as possible at first. A trigger should be as available as possible.

Lollapalooza-effect is one kind of combinations of mental models

When the most mental models such as, psychological biases, Inertia, the path of least resistance, and so on, and their strongest effects leads us to the same direction, you can talk about Lollapalooza-effect. This mental model is introduced by Charlie Munger. He only talks about everything moving to the same direction, but it is basically the same thing as having big effects compared to small effects. Munger uses a simplified model. That is maybe a better approach than mine. All the billion dollar brands, the most successful companies and people are the results of the Lollapalooza-effects.

Have a nice week!

Poor Charlie´s Almanack, Peter Kaufmann, Charles T. Munger
The Power of Habit, Charles Duhigg

-TT

Motivation

Definitions

Motivation can be defined as ”A reason or reasons for acting or behaving in a particular way.” Youcan also talk about getting a prize or having an incentive for doing something. Motivation can also be defined as ”being positively engaged to complete a task. Motivation can have two directions. Away from something and towards something. To be more exact, motivation is a combinations of a choice to achieve something, desire to have an effort towards it and drive to persist with that effort.

Examples of sources

The adrenalin burst after having a run, the need for compliments after doing something, bonuses after reaching a predetermined goal at work, the joy of doing something we like etc. Motivation to move away from bad outcomes like spending too much money.

Three primary sources of motivation, intrinsic, extrinsic and altruistic

Intrinsic motivation comes from loving the things you do. You do something because you really want to do something. Extrinsic motivation is a need for doing something, because you get something else, because of that. Altruistic or relational motivation comes from your social needs like connecting with others. People are not equal in responding sources of motivation. Some people are more driven towards intrinsic sources, and some people are more driven towards extrinsic sources of motivation. These sources of motivation may vary. When you are performing an action, you are enjoying more intrinsic motivators. When you are planning for performing the action, you are incluenced more by the extrinsic factors. In the long run, you may think more about common good. Rewards from doing a particular task should always be personalized depending on the primary sources of motivation people have.

Intrinsic motivations come from your egocentric biases, especially if you are an adult. The more effort you have, the more you feel motivated about achieving something. The more effort you put, the more likely you will love the end product. Deep engagement in the action itself can be a source of putting maximum effort with no other rewards. This can be satisfying and most people do something that is enjoyable, satisfying, or personally challenging without getting any rewards. Why does this happen? Because people´s bodies and brains have biochemical reactions like adrenalin or dopamine or some other feel-good hormones bursting in our bodies. They are the sources in this case.

Extrinsic motivations are a double-edged sword. You have an inner need to get some kind of recognition from others. Wrong kinds of extrinsic rewards decrease your motivation to do something. Getting compliments from doing your work is a good way to motivate you, but you need to feel they are genuine. You are willing to work for a smaller salary, if we feel you get some genuine acknowledgement from your work. You may become less driven when you get monetary rewards. Verbal ”well done” is more effective for some people. It will probably lose its effect if it is used too much.

The most powerful source of motivation may be your connectedness to others which can be called altruistic motivation. By getting a higher meaning for your actions, you feel even more motivated than any intrinsic rewards can give you. Favorable perceptions of colleagues are important for all the workers. Doing things for others can make your life meaningful. Altruistic sources of motivation like meaning and connection are harder to understand, because they can influence the world in a longer timescale. For example, motivation to create a better world is not for just you, but for the future generations.

Motivation is a complex matter and not very well researched or understood

People do not understand motivation well. It is a complicated thing with different reactions from combinations of sources. Same action can have many sources of motivation. Different people have different motivations of doing the same things. Some people respond more to extrinsic sources and others more to intrinsic and altruistic sources. Sources may also have a different long-term and short-term effects. Money bonuses may work well as short-term motivators, but in the long run they may cause problems. You cannot get single answer for motivation and how different sources have different effects on different people. Most people and most companies should use a method of trial and error to maximize motivation.  

Have a nice week!

Sources:

Drive, Daniel H. Pink
Better Than Before, Gretchen Rubin
Payoff, Dan Ariely

-TT

Deliberate practice

You live in a global, interconnected economy. Anyone can sell anything to anyone anywhere in the world. The average performance is not good enough. Unless you have world-class skills in highly competitive fields or some unique and needed expertise, you are in trouble. When you are truly masterclass, the rewards are magnificent. You need to acquire skills through practice and the general principles of the best way to do it are the same in almost every field. This is called the deliberate practice.

Definition of deliberate practice

Deliberate practice is a highly structured act of rehearsing a behavior or engaging in an activity over and over consciously and intentionally, for the specific goal of improving or mastering it. Deliberate practice has four components:

1. The person practicing has a strong motivation and is focused on getting better in every action.
2. The task is designed to take person´s existing skills into account and be understood by her.
3. There should be immediate informative feedback.
4. There should be a possibility to repeatedly perform the same or similar tasks.

Examples

Figure skater is learning a new jump with the help of her coach. The jump should be a little bit harder than skater has ever succeeded in. Coach should give feedback after every jump about how the skater did and what she can improve when she repeats the jumping action. A professional chess player is studying a certain position that he played wrong in the last game with his coach. The study could be consisted of the games played before by the best chess players in history.

Some of the fields of expertise are better for applying deliberate practice

Many fields of expertise have already developed broadly accepted training principles and these can be called deliberate practice. Most of the professional sports, classical music, and mathematics use the principles of deliberate practice. These fields have some common characteristics. First, there are at least semiobjective ways of measuring performance such as evaluation of expert judges. It is impossible to improve performance, unless you are not aware of what constitutes improvement. Second, fields typically have to be competitive enough to have enough motivation to practice for the goal of improvement. Third, the relevant skills of these fields have been developed for a long time, normally for decades. Fourth, these fields have professional coaches who are improving training methods used by the experts. Otherwise it is not possible to increase the skill level of the top performers in the fields.

The four components

It is hard to have an intense focus and a superb motivation, while you practice things you have not yet managed to do well enough. You need to push outside of our comfort zone and stay focused, when you experience the pain of failure or disappointing result. You can do two things to have a better focus. First, you need general maintenance like enough sleep and good nutrition. The second, is to limit the length of the practice sessions for not more than an hour. Humans have a basic rest-activity cycle which lasts about 80-120 minutes. When you are awake, your brainwaves are faster during the first half of the BRAC cycle and you feel alert and focused. Then your brainwaves slow and we start feeling dreamy and little tired and your focus gets lost. You must also have a motivation to get better. Practicing years and thousands of hours and constantly failing is nearly impossible without high intrinsic motivation.

The practice needs to push the person outside of his/her comfort zone. The path of least resistance is not enough. Specific practicing activities, and exercises should be designed to exceed the person´s current skills, adapt to the person´s ways of doing things and get him/her to the next level. A figure skater needs to learn a jump that is harder than the previously learned jump. She should also understand what is the purpose of everything. What are the reasons to do something in a particular way. And what will the results be by doing things that way. For example, in which part of the feet should touch a certain part of the football while practicing a certain kick. And what kind of spin will the ball have after the kicking action is done right. All the practice should have concrete clear goals. What to do, how to do it and why it should be done that way.

You need feedback to improve. In many cases, it is not possible to know what you have done wrong. It is hard to improve in many activities without somebody watching you while practicing. You should get this feedback immediately. It should be delivered in a way it is understood by the person. Most people need some advice after failure. For example, skater needs to know why her new jump failed. Was it because of not enough speed, or was the position of a skate´s blade wrong. Why did it happen? What should she do differently? Practicing without feedback may lead to the strengthening the wrong chains of nerve fibers. Too many repetitions in a wrong way will lead to wrong ways of doing things and practice won´t be useful. The better you are the more you can understand what you did well and what you did wrong. Watching the performance from the videos may be enough for many experts.

All the practice should be repeatable. It is not possible to strengthen the right nerve fiber chains without repetition. These nerve chains won´t get strong without it. If this is not possible, deliberate practice cannot be done. There are many situations where conditions are not always the same. In these cases, the practice can be done through simulations. For example, practicing about flying an airplane in a storm needs to be practiced in a simulator, or practicing the emergency landing is not possible in natural conditions. Repeating things over and over again will achieve unconscious competence. Things become automatic and repetitions need less thinking. When the critical mass of repetition has been done, the unconscious action becomes the new norm.

Deliberate practice creates better mental models

Every skill has its own mental models. To achieve an expertise through deliberate practice happens by developing latticework of mental models in the field. Experts have more developed and accurate latticework than ordinary people. This is true in physical skills too. Most of the practice is done to form a clear mental model of what the action should feel and look like at every moment in terms of moving your body and it´s position. These models are held in a long-term memory and can be used to have a fast and effective response to certain types of situations. Better models make it possible to process larger amounts of information despite the limitations of short-term memory. Complicated activities require more information than your short-term memory is capable of processing, therefore, you are always building mental models. Everyone has their own models. What really makes the difference between experts and novices is the quality and quantity of the models.

Sources:

Peak, Anders Ericsson
Talent is Overrated, Geoff Colvin
The Talent Code, Daniel Coyle
The Art of Learning, Josh Waitzkin

-TT

The path of least resistance

Definitions

The path of least resistance tells you the easiest way to continue a forward motion from a set of alternative paths. A person taking the path of least resistance avoids personal confrontation or pain. You also make the choice that minimizes the energy consumption from many possibilities. You can see this in the second law of thermodynamics which says that heat always moves from hotter to colder bodies unless external work is performed on the system.

Examples

River always runs down hill. It always follows the easiest path. Without conscious effort, you always choose the action which consumes the least energy. You like novelty. This means when you are confronted by many impulses, you choose the new ones which are the easiest paths. When you get lost, you choose the easiest path when you are trying to find out the place you are not familiar with. If you are somewhere uphill, the most probable path for you is downhill, when you don´t know where to go.

Always try to create the path of least resistance for the most desirable things

When I introduced inertia which basically means continue moving into direction where you are already going or stay in the position where you are. I talked about habits. In this case, your habits are the path of least resistance after they have been automated into our brains. You need to make your triggers for good habits as available as possible. The more exciting the prizes of your habits are the less resistance you have. These are the basic principles of creating good habits by using the path of least resistance into your advantage. Changing the existing habits is a lot harder.

You should also create some decision making systems where the path of least resistance is taken into consideration. Most people have a default option of making choices that are based on their opinions and beliefs. You may disagree with some people without making any research, because you just believe something is true. The reason can be that you just believe in something because you wish it is true. For example, you can believe in some promises from politicians and give your votes for them, because they tell us what we want to hear. They use your paths of least resistance. Truth is politicians can never keep all of their promises.

Always try to create the path of most resistance for the least desirable things

While it is important to create the path of least resistance for the most desirable things, you need to use inversion and also make it as hard as possible to choice the path of least resistance for things that are bad for you. This is as important as creating the path of least resistance for the most desirable things. When you are choosing from the alternative paths, you may have to make the worst paths disappear. When you are on a diet, you should keep all the bad food unavailable. Otherwise you may come to a situation where it is too easy to make a choice for eating unhealthy foods. It is probable that this happens when we are in a recovering part of the daily cycle. Feeling tired and emotionally drained will lead you to the path of least resistance, which in this case is unhealthy food. You suffer from availability bias. All the triggers to the wrong paths should be eliminated.

Avoiding all the harder paths will get us nowhere in life

You cannot always choose the path of least resistance if you want to achieve something great. If you want to get better at something, the path of least resistance is not enough to move us further. It will probably lead you to become less skilled. You have to fail, experience some pain and reflect. You need to think what you did wrong. And try to improve yourself. You cannot create new habits or change the existing ones without making conscious choices first. These choices are not your default options and you need to rewire our brains. Rewiring happens through repetition and takes more energy than doing things the way you did before. Things get easier after you have had enough repetitions and ultimately lead you to new or better habit. You have created a new and better path of least resistance. You can create this path of least resistance more easily, when You start creating it during the upper part of the performance cycle. Which means you have less resistance than in the recovering phase of the cycle.

The path of least resistance is not so useful mental model by itself. Understanding inertia, cycles, skills and availability bias helps you to understand it better. As you can see, all these mental models interact. When you understand enough models and how they are related, you create the whole latticework of mental models and using it every day becomes eventually the path of least resistance.

Sources:

Mastery, George Leonard
Peak, Anders Ericsson
The Power of Habit, Charles Duhigg
Be Excellent at Anything, Tony Schwartz

-TT