Among numerous lessons learned over the past three decades, one valuable lesson is related to decisions. This post discusses decisions and lessons learned from them. It argues that we need to optimise our decisions to maximise our satisfaction in both the current and future periods, giving at least as much value to the future as to the current moment.
The topic of decision-making is imperative to discuss, but relatively underrated. The average adult makes 33,000 to 35,000 total decisions each day, many of which happen automatically and simultaneously. All decisions, from the little to the big ones (in terms of the possible implications and risks), put us on the road, i.e., they lead to consequences, and there is no shortcut or way to avoid. Assuming a rational economic agent, we would want to optimise each decision made in a given time period to maximise our satisfaction. Nonetheless, individuals are sometimes irrational, time-inconsistent, and shortsighted in their time horizon, preventing them from decision optimisation.
The lessons the author learned with respect to decisions:
- A regret might be another form of self-blaming, which could be due to (seemingly) wrong decisions in the past state that lead to suboptimal rewards (benefits) and current state. Accordingly, we might need to forgive ourselves (in the past) and let go of the past, taking only lessons from the experience into consideration and valuation for the current and future states and the rewards.
- Subject to our resource constraints and conditions, we might want to optimise our decisions at the moment and in the future. Nevertheless, it depends on how patient we are and to what extent we value our future. The more valuable the future, the less discount or compromises are put in the decision-making. Recalling that there are always trade-offs and consequences, the more we value the current moment, the less value we give to the future.
- The future is about uncertainty and complexity. Instead of calculating every possible future consequence, we can look one step ahead and estimate the rest to find the best possible “optimal” decision to maximise benefits.
- Hence, the objective could be optimising decisions in the current and future periods, given possible choices of action and constraints. In other words, it calculates the value of a state based on the rewards from taking actions and the expected value of future states. The questions that could guide oneself to optimise the rewards in each phase of the time horizon are as follows:
- Current State Value: How good is it to be where I am right now?
- Immediate Reward: What do I get right now by taking an action?
- Future Value: How good will the next situation be?
It is worth noting the caveats of this notion. Firstly, the rewards/benefits could sometimes be unknown. Secondly, the valuation of the current state, rewards, and the future state could be subjective. Thirdly, one should be rational – be time-consistent, long-sighted, and should only aim to optimise their decision and rewards. Lastly, there are still rooms for uncertainty and possibility of external forces like a momentum that are completely exogenous (out of one’s control) and could influence the valuation of the states, decisions taken, and the rewards.
To conclude, decision-making could sometimes be difficult. If we are to be true to ourselves, it is wise and better to make decisions that give an equal value of rewards between the present and the future, even when the future is uncertain. Given different circumstances and starting points individuals have, the basic idea and the leading questions still hold. It could lead to optimal decisions and prevent lamentation and remorse.
hope. 