Decision Frameworks

Mental models and structured approaches to decision-making.

First Principles Thinking

Break problems down to fundamental truths, then reason up.

Instead of: "Electric cars are expensive because batteries are expensive."

First principles: "What are batteries made of? What's the raw material cost? Why is manufacturing expensive? What would change this?"

How to Apply

1. Identify assumptions you're making
2. Break the problem into fundamental components
3. Question each component from scratch
4. Rebuild your understanding from the ground up

When to Use

• Entering unfamiliar territory
• Conventional wisdom isn't working
• You need creative solutions
• High-stakes, novel problems

Inversion

Instead of asking "How do I succeed?", ask "How would I guarantee failure?" Then avoid those things.

Example - Building a successful company:

• How would I guarantee failure?
  • Ignore customers
  • Hire toxic people
  • Spend more than I earn
  • Move slowly
  • Never admit mistakes

Now do the opposite.

When to Use

• You're stuck on how to achieve something
• Risk management decisions
• When positive framing isn't yielding insights

Second-Order Thinking

Consider the consequences of consequences.

First-order: "If I lower prices, I'll sell more." Second-order: "Competitors will match prices, margins will shrink, low prices become expected, we'll need to cut costs to survive."

Questions to Ask

• "And then what?"
• "Who else will respond to this, and how?"
• "What happens in 10 days, 10 months, 10 years?"
• "What are the unintended consequences?"

The Eisenhower Matrix

Categorize by urgency and importance.

                    URGENT          NOT URGENT
                ┌───────────────┬───────────────┐
    IMPORTANT   │    DO         │    SCHEDULE   │
                │    (Crisis,   │    (Planning, │
                │    deadlines) │    prevention)│
                ├───────────────┼───────────────┤
    NOT         │    DELEGATE   │    ELIMINATE  │
    IMPORTANT   │    (Some      │    (Time      │
                │    meetings)  │    wasters)   │
                └───────────────┴───────────────┘

Key insight: Quadrant 2 (important, not urgent) is where the payoff lives. Spending more time here prevents crises.

The 10/10/10 Rule

How will you feel about this decision in:

• 10 minutes?
• 10 months?
• 10 years?

Use for: Emotional decisions where short-term feelings conflict with long-term interests.

Example: Eating junk food

• 10 minutes: Great
• 10 months: Regret, weight gain
• 10 years: Health issues

Regret Minimization

Project yourself to age 80. Which choice minimizes lifetime regret?

Jeff Bezos used this to decide to start Amazon: "When I'm 80, will I regret trying this and failing? No. Will I regret never trying? Yes."

When to Use

• Career pivots
• Major life choices
• When fear is holding you back
• One-way door decisions

The Pre-Mortem

Before making a decision, imagine it failed spectacularly. Why did it fail?

Steps:

1. Assume the decision was made and failed
2. Write down all the reasons it could have failed
3. Determine which failures are preventable
4. Adjust the plan to prevent them

Example - Launching a product:

• "The product failed because..."
  • We didn't talk to enough customers
  • The price was wrong
  • Marketing was unclear
  • We ran out of cash before traction
  • A competitor beat us

Now address each before launching.

Opportunity Cost Thinking

Every "yes" is a "no" to something else. What are you giving up?

Questions:

• What could I do with this time instead?
• What could I do with this money instead?
• What opportunities am I closing by choosing this?

Common blind spot: Comparing Option A to "nothing" instead of to Option B.

The Two-List Strategy (Warren Buffett)

1. Write down your top 25 goals
2. Circle the top 5
3. The other 20 are your "avoid at all costs" list

Why: The other 20 aren't bad goals. They're dangerous because they're good enough to distract you from the great ones.

Reversible vs. Irreversible (One-Way vs. Two-Way Doors)

Two-way doors (reversible):

• Decide fast
• Bias toward action
• Learn by doing
• Examples: Most hires, product features, pricing changes

One-way doors (irreversible):

• Decide carefully
• Gather more information
• Consult others
• Examples: Selling a company, having children, major surgery

Most decisions are two-way doors that people treat as one-way doors.

The Confidence Calibration

Rate your confidence in the decision: 50%? 70%? 90%?

Then consider:

• What would make this 90%+ confidence?
• Is that information obtainable?
• Is the cost of obtaining it worth the reduced uncertainty?

Key insight: Often the information needed to increase confidence isn't available or isn't worth the cost.

WRAP Framework (Chip & Dan Heath)

W - Widen your options

• Generate more alternatives
• Ask "What else could I do?"
• Consider the opposite

R - Reality-test assumptions

• Seek disconfirming evidence
• Run small experiments
• Ask "What would have to be true?"

A - Attain distance before deciding

• Use 10/10/10
• Ask what you'd advise a friend
• Sleep on it

P - Prepare to be wrong

• Set tripwires for when to reconsider
• Plan for both success and failure
• Consider "What if I'm wrong?"

The Pros and Cons Matrix (Weighted)

List pros and cons, but assign weights.

Key: Weighting forces you to think about what actually matters.

The Newspaper Test

Two versions:

1. Would I be comfortable if this decision was on the front page?

• Ethics check
• Reputation check

2. Would this decision be newsworthy in 5 years?

• Significance check
• Often the answer is "no" and you're overthinking

Kill Criteria

Before starting, define what would make you stop.

Example - Startup:

• "If we haven't found product-market fit in 18 months, we shut down."
• "If we run out of money and can't raise, we shut down."
• "If I'm not enjoying this after a year, I walk away."

Why: Prevents sunk cost fallacy. You've committed to stopping under certain conditions.

Quick Reference: Which Framework When