Decision journals are an easy way to improve your ability to make decisions over time.
In most organizations today, your product is decisions. By and large, your success will be the sum of the decisions you make over your career. The problem is it’s not easy to get better at making decisions.
Bosses would be the easy solution to helping you improve. After all, they have the best view of the problem and you. They should be able to point out strengths and weaknesses in your decision process as well as your judgment. All of this is known at the time you made the decision. This is hard and subjective and requires people doing a lot of thinking. So bosses tend to default to resulting, a process by which the outcome of the decision is attached to the process used to make that decision. Under resulting good outcomes are the product of good decisions and bad outcomes are the product of bad decisions. The problem isn’t that people don’t want to get better at decisions, it’s the system that’s preventing them from doing so.
Even if we can’t get our boss to help us make better decisions we can take things into our own hands. The way to test the quality of your decisions is to test the process by which you make them. Daniel Kahneman, Nobel Prize winner and dean of biases, argues that using a decision journal is the best solution. Kahneman said:
Go down to a local drugstore and buy a very cheap notebook and start keeping track of your decisions. And the specific idea is whenever you’re making a consequential decision, something going in or out of the portfolio, just take a moment to think, write down what you expect to happen, why you expect it to happen and then actually, and this is optional, but probably a great idea, is write down how you feel about the situation, both physically and even emotionally. Just, how do you feel? I feel tired. I feel good, or this stock is really draining me. Whatever you think.
The key to doing this is that it prevents something called hindsight bias, which is no matter what happens in the world, we tend to look back on our decision-making process, and we tilt it in a way that looks more favorable to us, right? So we have a bias to explain what has happened.
A decision journal helps you collect accurate and honest feedback on what you were thinking at the time you made the decision. This feedback helps you see when you were stupid and lucky as well as when you were smart an unlucky. Finally, you can get the feedback you need to make better decisions.
The key to understanding the limits to our knowledge (see circle of competence) is to check the results of our decisions against what we thought was going to happen and why we thought it was going to happen. That feedback loop is incredibly powerful because our minds won’t provide it by themselves.
I’ll give you the spoiler right now. We don’t know as much as we think we know. We’re fooled into thinking that we understand something when we don’t and we have no means to correct ourselves.
Our minds revise history to preserve our view of ourselves. The story that we tell ourselves conflates the cause and effect of a decision we made and the actual outcome. The best cure for this revising is the decision journal.
Decision Journals
You can think of a decision journal as quality control — something like what we’d find in a manufacturing plant or a restaurant. Conceptually, using the journal is pretty easy, but implementing and maintaining it requires some discipline and humility.
In an interview I did with Michael Mauboussin, he offered some great advice:
The idea is whenever you are making a consequential decision, write down what you decided, why you decided as you did, what you expect to happen, and if you’re so inclined, how you feel mentally and physically.
The act of writing in itself helps you. Carol Loomis once said:
Writing itself makes you realize where there are holes in things. I’m never sure what I think until I see what I write. And so I believe that, even though you’re an optimist, the analysis part of you kicks in when you sit down [to write] … You think, “Oh, that can’t be right.” And you have to go back, and you have to rethink it all.
A Decision Journal Template
The key question is what information to include in your decision journal. Here’s the template we use at FS.
You can find the template below, however, the Decision Journals are so popular, we’ve created the FS Decision Journal that you can order here.
Click for PDF
Whenever you’re making a consequential decision, either individually or as part of a group, you take a moment and write down:
The situation or context
The problem statement or frame
The variables that govern the situation
The complications or complexity as you see it
Alternatives that were seriously considered and why they were not chosen (think: the work required to have an opinion)
A paragraph explaining the range of outcomes
A paragraph explaining what you expect to happen and the reasoning and actual probabilities you assign to each projected outcome (The degree of confidence matters, a lot.)
The time of day you’re making the decision and how you feel physically and mentally (If you’re tired, for example, write it down.)
You have to make this part your own. I’ve seen others include:
What’s the primary thesis
What is the expected outcome(s)
What are the second and third order consequences
What is the worst-case scenario and why that’s ok
What is the potential upside beyond core thesis
What emotions am I experiencing
What is the opportunity cost (by doing this what am I not doing)
What unique advantages or insights do I have in this situation
Who is the best person to make this decision
What does this look like in 5 weeks, 5 months, 5 years?
An Example of a Real Decision
Perhaps an example will help illustrate. Here’s a real decision that I made using the FS decision journal template.
Tips on Using the Journal
Things are complicated; I get it. Here are some tips to keep in mind as you implement your decision journal.
Journals can be tailored to the situation and context. Specific decisions might include trade-offs, second-order effects, weighting criteria, or other relevant factors. These examples are only to get you started.
Don’t spend too much time on the brief and obvious insights. Often these first thoughts represent the thinking of someone else and not our own thinking.
Any decision you’re journaling is inherently complex and may involve non-linear systems. In such a world, small effects can cause disproportionate responses whereas bigger ones might have no impact. Remember that causality is complex, especially in complex domains.
There are two common ways people wiggle out of their own decisions: hindsight bias and jargon.
I know we live in an age of computers, but you simply must do this journaling by hand because that will help reduce the odds of hindsight bias. It’s easy to look at a printout and say, “I didn’t see it that way.” It’s a lot harder to look at your own writing and say the same thing.
Another thing to avoid is vague and ambiguous wording. If you’re talking in abstractions and fog, you’re not ready to make a decision, and you’ll find it easy to change the definitions to suit new information. This is where writing down the probabilities as you see them comes into play.
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Your decision journal should be reviewed on a regular basis—every six months or so. The review is an important part of the process. This is where you can get better. Realizing where you make mistakes, how you make them, what types of decisions you’re bad at, etc., will help you make better decisions if you’re rational enough. This is also where a coach can help. If you share your journal with someone, they can review it with you and help identify areas for improvement.
And keep in mind that it’s not all about outcomes. You might have made the right decision (which, in our sense, means used a good process) and still had a bad outcome. We call that a bad break.
Odds are you’re going to discover two things right away. First, you’re right a lot of the time. Second, it’s often for the wrong reasons. This discovery can be somewhat humbling. It’s also how we learn.
Also if you want to order an actual journal, go here.
