Stop Using Pros and Cons : 3 Superior Decision-Making Techniques

Learn to use Weighted pros & cons, Risk vs reward, and second-order effects techniques for making Better Decisions

Making decisions is important because they shape who you are. Your life is a result of the choices you make and the things you do.

Every action that you take is a vote for the person that you wish to become - James Clear, Author of Book Atomic Habits

Understanding your choices and making good decisions is crucial for achieving your goals.

We've all been taught to make decisions by listing out the pros and cons. But this method has some major flaws that can lead you to make poor choices, especially for important life decisions.

Let me explain why, and share three better techniques you should use instead.

The Problems with Pros and Cons

The traditional pros and cons approach assumes that every factor carries equal importance. However, in reality, some pros and cons hold more significance than others. This approach oversimplifies the evaluation of complex decisions.

Moreover, it encourages individuals to make choices based solely on the number of bullet points on each side, without considering the weight and significance of each factor. Consequently, one may end up selecting an option with six minor pros over another alternative with four significantly major pros.

Finally, the pros and cons method fails to consider the likelihood of each factor occurring or the potential risks associated with them. It treats every pro and con as guaranteed outcomes rather than assigning probabilities.

While listing pros and cons can serve as a helpful starting point, more advanced decision-making frameworks are necessary for major life choices.

Here are three superior techniques to use:

1) Weighted Pros and Cons

Instead of giving equal importance to every factor, you assign weighted percentages based on how important they are to you.

How to Do Weighted Pros and Cons:

1. List All the Pros and Cons: Start by writing down all the pros and cons as you normally would.

2. Assign Weights: Give a weight to each category based on its importance to you. Make sure the weights add up to 100%.

3. Calculate Weighted Scores: Multiply the weight of each pros and cons by its likelihood score. Then, calculate the weighted score using this formula:

   Weighted Score = (Weight1 x Score1) + (Weight2 x Score2) + ... + (Weight6 x Score6)

Real-World Example: Picking Between Two Job Offers

Imagine you are trying to decide between two job offers. One is from a well-known company, while the other is from a fun and relaxed workplace. To help you make a decision, you can consider the following criteria and assign weights to them:

1. Career Growth Potential: 30%

2. Learning Opportunities: 20%

3. Salary: 15%

4. Commute: 10%

5. Work Environment: 15%

6. Perks and Benefits: 10%

Assigning Scores:

To make a decision, you should give a score (from 0 to 10) for each category of each job offer. This score should be based on your research or personal opinion. Here is an example

Scores for the Prestigious Company:

1. Career Growth Potential: 9

2. Learning Opportunities: 8

3. Salary: 9

4. Commute: 6

5. Work Environment: 5

6. Perks and Benefits: 4

Scores for the Fun Workplace:

1. Career Growth Potential: 6

2. Learning Opportunities: 7

3. Salary: 6

4. Commute: 8

5. Work Environment: 9

6. Perks and Benefits: 9

Calculating weighted scores:

Prestigious Company Weighted Score = (0.30 × 9) + (0.20 × 8) + (0.15 × 9) + (0.10 × 6) + (0.15 × 5) + (0.10 × 4) = 7.4

Fun Workplace Weighted Score = (0.30×6)+(0.20×7)+(0.15×6)+(0.10×8)+(0.15×9)+(0.10×9) = 7.15

Making the decision

According to your weighted criteria and scores, the prestigious company (with a score of 7.4) seems to be a slightly better choice compared to the fun workplace (with a score of 7.15).

Instead of using a simple pros and cons list, you can gain better clarity by assigning weights to the factors that matter most to you.

2) Risk vs Reward Analysis

Another powerful technique is evaluating each option's potential rewards versus risks. It helps you choose the one with the most favorable balance. It encourages you to think carefully about the chances of success and the potential consequences.

How to Do Risk Reward Analysis:

1. Identify Risks and Benefits: Make a list of the possible risks and benefits for each option.

2. Evaluate Impact and Likelihood: Rate how much impact (how much it would affect) and how likely each risk and reward is.

3. Compare: Consider the total potential benefits in comparison to the total potential risks

Real-World Example: Deciding Whether to Start a Business

For example, let's imagine you are trying to decide whether to keep your current job or start your own business. You could analyze it along these lines:

Calculate Risk and Reward

Starting a Business

• Rewards:

  • High Earnings Potential (Impact: 10, Likelihood: 6) = 60

  • Independence (Impact: 8, Likelihood: 7) = 56

• Risks:

  • Financial Instability (Impact: 9, Likelihood: 8) = 72

  • Long Hours (Impact: 7, Likelihood: 9) = 63

Stay at Current Job

• Rewards:

  • Stable Income (Impact: 8, Likelihood: 9) = 72

  • Predictable Schedule (Impact: 7, Likelihood: 8) = 56

• Risks:

  • Limited Growth (Impact: 6, Likelihood: 7) = 42

  • Job Dissatisfaction (Impact: 7, Likelihood: 5) = 35

Totals

• Start a Business: Rewards: 116, Risks: 135

• Stay at Current Job: Rewards: 128, Risks: 77

Making the decision

Here, starting a business has higher rewards but also higher risks. If you’re risk-averse, staying at your current job might be the better choice.

When you look at it through a risk/reward lens, it helps you in facing the harsh truths and determining if the potential benefits outweigh the risks you would have to endure.

3) Second-Order Effects

Finally, you need to consider the indirect consequences and 'second-order effects' of your decision, not just the immediate impacts. These can sometimes be even more important than the first-order factors.

How to use second-order effects:

1. Identify Immediate Consequences: Determine the direct outcomes of each option.

2. Predict Second-Order Effects: Consider what those immediate consequences will lead to in the future.

3. Evaluate: Assess which option has more favorable long-term effects.

Real-World Example: Deciding whether to go back to school

Let's say you're deciding between keeping your job or going back to school. You could map out second-order effects like:

Keep Job

First-Order Effects:

• Immediate income stability

• No tuition fees or student loans

• Continued work experience

Second-Order Effects:

• Stunted Long-Term Earnings:

  • Professional Stagnation: Not having advanced qualifications may limit opportunities for promotions.

  • Skill Obsolescence: As industries change quickly, current skills may become outdated.

• Regret Later in Life:

  • Missed Opportunities: There may be regret over not pursuing further education.

  • Career Ceiling: Without advanced credentials, reaching a career plateau may be more likely.

• Work-Life Balance:

  • Less Time for Personal Growth: With a full-time job, there may be less time for activities that help with personal improvement.

  • Family Stability: Having a consistent income can better support the needs of a family.

Go Back to School

First-Order Effects:

• You may temporarily lose income.

• There are tuition fees and the possibility of student debt.

• You can gain new skills and qualifications.

Second-Order Effects:

• Expanded Career Options:

  • Higher Earning Potential: Getting advanced degrees often leads to higher salaries.

  • Career Mobility: You have more flexibility to switch fields or roles.

• Personal Growth:

  • Increased Knowledge: You can gain a better understanding of subjects that interest you.

  • Self-Confidence: Achieving an advanced degree can boost your self-esteem and personal fulfillment.

• Debt and Financial Pressure:

  • Loan Repayment: The burden of paying off student loans after you graduate.

  • Financial Planning: The need for careful money management during and after your studies.

• Opportunity Cost:

  • Missed Work Experience: The time spent in school could have been used to gain more work experience.

  • Delayed Career Progression: A temporary pause in advancing your career.

Making the decision

Deciding whether to stick with your job or return to school is a tough choice that can have big consequences. It's important to think about how this decision will affect your career, money, and personal life in the short and long term. By taking a step back and thinking about the ripple effects your choice could have down the road, you're less likely to make a short-sighted decision that you'll regret later.

Conclusion

It's time to stop using the old pros and cons method for making decisions and start using more advanced techniques.

By using weighted pros and cons, analyzing the risks versus the rewards, and considering second-order effects, you can make better choices that consider the importance, likelihood, and long-term impact of each factor.

So start using these superior decision-making techniques to make better choices in your life. Don't settle for mediocrity when you have the power to make decisions that will truly benefit you in the long run.