How To Find More Options
DIvergent Thinking
When I applied to college, I only got into one school. I had two option—go to college or don’t go to college. Very simple. But then I did something odd. I started looking for more options to choose from and then still chose to go to college. Why did I look for other options?
I didn’t like the idea of a binary decision (this or that) so I looked at joining the army, taking a year off, or joining a volunteer program. After going through that process, when I chose to attend college, I was more confident than when I had been choosing between only two options. After reading this chapter of Clear Thinking, I think I know why - binaries suck.
Divergent Thinking
We have a habit of simplifying decisions into binaries. We like this-OR-that solutions, because…
“it creates the false sense that [we’ve] gotten to the problem’s essence. In reality, [we’ve] just stopped thinking” (145)
We mistake breaking the problem down quickly into two options as being decisive and effective. In reality, it’s often an oversimplification. It’s a lack of critical thinking. We jump the gun.
The 3+ principle is a safeguard that forces us to find at least three options before making a decision. Two easy tricks to find third options when you only see two:
The “Both-And” trick. Instead of saying option A or option B, think of ways you could do option A AND option B. What would need to be true? What would that look like?
Ask “what would I do if that were not possible?”. If you couldn’t do Option A, what could you do with Option B to improve the outcome. Repeat that for both options.
Opportunity Costs
Legendary investor Charlie Munger is a great example of a man who understands and lives by opportunity costs. He once said,
“Intelligent people make their decisions based on opportunity costs… It's your alternatives that matter. That’s how we make all of our decisions.”
Berkshire Hathaway, Charlie’s holding company, has gone periods of years without making any major transactions. That’s odd for professional investors. But the way Charlie sees it, buying a fair deal today means he won’t have the cash or attention to buy a great deal tomorrow.
He doesn’t just think about the potential return on an investment, he thinks of the potential return of another investment. This is part of the legacy that created the most successful holding company in history.
The cost of the option we don’t choose is easy to miss, but just as expensive. Think about adding time to your commute for a new job that pays more. What’s the opportunity cost of the hour you just lost? Is it time you can’t spend with your family? Time you can’t spend exercising? How much is the time worth to you? Beware trading hidden metrics for obvious metrics.
Three Lenses
Three question to ask to bring hidden costs to light
Compared with what? This is easy. What options are you comparing?
And then what? What are the extra costs of each option? If I pick option A today, what costs will I have tomorrow, the next day, and a year from now.
At the expense of what? What are we giving up beyond the money and the obvious? If I’m picking cars and one is an extra 5k, what could I have done with that 5k if I bought the cheaper car?
Keep in mind that these tools are for exploring possible solutions. Yesterday, we looked at defining the problem and tomorrow, we’ll look at how to evaluate your options - how to pick.
TOO LONG DIDN’T READ…
When you’re picking between two options, look for more by saying A and B instead of A or B.
Every decision has hidden costs. If you think there aren’t you’ve got a tough surprise waiting ahead.
To find hidden costs, ask: What are my options? What happens next? What could I have done instead?
Big Nerd Question of The Day
What big decisions do you have to make? Do you feel at a loss for options?
Merry Christmas Eve Big Nerds! I hope those observing enjoy time with family and the Big Jewish Nerds enjoy Chinese food.
Happy Holidays,
Noah “BigNerd” Sochaczevski