Ray Dalio’s Technique to Instantly Becoming a Better Decision Maker Boils Down to 8 Words
Never has it been easier to succeed and to perceptually be disappointed. These eight words is all that stands between.
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Some will say information available to them. Others will pinpoint to their finances. While those things help, there's something underneath that maximizes all of those things. That thing I'm talking about is decision making.
Information is freely available to us. Money is easier to accumulate now. But decision making is still something that is just as difficult as it was in years past. Great decision making is ultimately one of the biggest separation points across all industries and spectrums of life.
As I was reading Principles: Life and Work by Ray Dalio, there was a principle that stood out to me about making better decisions.
These eight words that we should ask ourselves on a daily basis consist of "What are the second and third order consequences?"
What is second and third order consequences?
Here's how Dalio describes it:
By recognizing the higher-level consequences nature optimizes for, I've come to see that people who overweigh the first-order consequences of their decisions and ignore the effects of second- and subsequent-order consequences rarely reach their goals. This is because first-order consequences often have opposite desirabilities from second-order consequences, resulting in big mistakes in decision making. For example, the first-order consequences of exercise (pain and time spent) are commonly considered undesirable, while the second-order consequences (better health and more attractive appearance) are desirable. Similarly, food that tastes good is often bad for you and vice versa.
Quite often the first-order consequences are the temptations that cost us what we really want, and sometimes they are the barriers that stand in our way. It's almost as though nature sorts us by throwing us trick choices that have both types of consequences and penalizing those who make their decisions on the basis of the first-order consequences alone.
By contrast, people who choose what they really want, and avoid the temptations and get over the pains that drive them away from what they really want, are much more likely to have successful lives.
In today's society, the notion of delaying gratification is essentially quaint. While instant gratification may make life easier, it doesn't necessarily make life, business, or our well being better. Second and third order consequences always deserve a seat at the table due to this one big reason.
True measures of success require a long-term investor's mentality.
Improving your health, business, and life is ultimately a journey, not an event. It's with this very reason in mind that playing the long-term game is of critical importance. Cashing in for short-term pleasure leads to long-term agony.
For example, in business, electing to take a short-term victory in the nature of financial incentives could potentially hurt the long-term value of a brand. I often times receive messages from people wanting me to mention them or sell some of their material.
A first-order consequence is some money right now. But the second and third order consequences when I avoid the first-order is better brand perception, opportunities, and money down the line.
With your well being, for example, the real benefits of healthy habits kick in months later, years later, decades later. It's the things that don't happen to you versus stuff that does. If choose health-promoting behaviors in your thirties and forties, your fifties will be largely uneventful. If you don't, your 50's will be very eventful in a way that you don't want them to be.
As you approach your business and personal well being, always operate with the mentality of an investor who's in it for the long run.
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