How to make better decisions

Howdy, friends. Sorry for the long lapse between posts. After returning from a brief summer vacation, the GRS database had imploded. Again. We patched things up this morning and can now resume publishing. Over the next couple of weeks, I plan to share excerpts from three recent money books.

The following is from Buy This, Not That by Sam Dogen with permission from Portfolio, an imprint of the Penguin Publishing Group, a division of Penguin Random House LLC. Copyright © 2022 by Kansei Incorporated.

Please note that I’ve edited this passage slightly to (a) be more readable on the web and (b) fit within the publisher’s word-count limitations. Ready? Let’s dive in!

Life is rarely black-and-white, yet we need to make definitive choices all the time.

  • Rent this house or buy that apartment?
  • Invest in a growth stock or an index fund?
  • Live in San Francisco or Raleigh?
  • Join a start-up or work at an established firm?

These choices all involve an expense of time and capital. Each choice brings risk and reward. The problem is that most of the time we don’t have enough information to confidently choose this or that. My approach helps you overcome this information gap.

You do this by thinking in probabilities instead of in binary termswhere it’s an all-or-nothing proposition. If you start thinking in probabilities instead of absolutes, you’ll develop a stronger analytical mindset to make more winning decisions over time. You’ll also be able to make more winning decisions on risks that others never dare to take.

Positive-Expected-Value Decisions

One of the biggest decision-making fallacies people fall victim to is thinking they must take action only when there’s 100% certainty of success. Here are two examples.

  1. Only if you are certain someone likes you — because they told their friend, who told you — do you feel confident asking them out. But you might find out years in the future that they liked you as well and were just waiting on you to make the first move.
  2. Most…

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