Even though we do our best to make smart decisions, we all end up regretting at least a few choices. One reason is that we are all, to borrow the title from one of Dan Ariely's books, predictably irrational. We're human. So we aren't always rational.
But still: Some people tend to make better decisions than others.
Jeff Bezos doesn't spend a lot of time weighing the pros and cons of easily reversible decisions. Oprah Winfrey swears by deciding which bridges to cross and which to burn. Steve Jobs said deciding when to trust yourself will make all the difference in your life.
Here are some signs, backed by science, that you make better decisions than most people:
1. You focus more on potential gains than losses.
Generally speaking, most people prefer to avoid a loss than acquire a gain. (Put more simply, you're more likely to seek to avoid losing $100 than to try to make $100.)
How much more do we want to avoid a loss than acquire a gain? Research by Daniel Kahneman, author of the great book Thinking, Fast and Slow, indicates that losses are two times as psychologically powerful as gains. (Maybe a bird in the hand really is worth two in the bush?)
That bias is understandable. A loss means giving up something you actually have; not acquiring a gain means giving up something theoretical rather than actual.
If I have a chance to make $100 but don't, that sucks... but if I have $100 in my pocket and lose it, that really sucks.
Which makes sense, but is also a problem. Say you decide not to attend a networking event because you don't want to waste an hour of your time. Fine -- but what if you might have met the perfect partner for a joint venture had you gone? Or say you decide you don't want to invest $20,000 more in your business because you hate the thought of losing it. Fine -- but what if you might have created a product line that would open up a great new revenue stream?
The key is to properly value the potential loss, because what you might lose often isn't as valuable as you may assume.
You can recover from almost any loss. But you will never recover from not failing to do everything possible to achieve your dreams.
2. You don't let other people set anchors.
Anchors are often used in negotiations because the value of an offer is highly influenced by the first relevant number -- an anchor -- that starts the negotiation.
Research shows that when a seller makes the first offer, the final price is typically higher than if the buyer makes the first offer since the buyer's first offer will usually be low, and set a lower anchor.
That's why anchors matter so much in negotiations.
Anchors matter everywhere else, too. If six-packs of Diet Mtn. Dew (the beverage of champions) are on sale but the limit is four six-packs per customer, research shows you're more likely to buy two or three six-packs even if you only planned to buy one.
Or take pricing schemes: Many businesses offer a high-priced "premium" service simply to make a less expensive level of service seem like more of a bargain. "I won't spend $250 a month for that," you think, "but $175 looks like a deal for this."
Anchors are widely used because they're extremely influential. The key is to know what you're willing to pay, to know what you're willing to do, to know what you really want, and then stick to that. Forget any other cues intended to influence your decision. After all, a Lexus IS at $40,000 isn't a better bargain just because an LFA costs $400,000.
Every item, every service, every thing has an intrinsic value -- especially to you.
Know that value before you start.
3. You don't assume one tale tells the whole story.
Ryan Gosling dropped out of high school when he was 17 and moved to L.A. to pursue acting. It worked spectacularly well for him... but what about the thousands of kids who drop out and move to L.A. in hopes of making it? Did they all become movie stars?
Nope. But you never hear about those folks.
The phenomenon is called survivor bias: Focusing people or things that "survived" while overlooking those that did not, simply because they aren't visible.
Steve Jobs is another example. He dropped out of Reed College so he could "drop in" on classes that interested him. It worked for Steve, but what about the thousands who don't finish college? Did they all become billionaires? Nope -- but you never hear about them.
Michael Sheerer talks about how advice about commercial success distorts perceptions by ignoring all the businesses and college dropouts who failed. University of Waterloo professor Larry Smith says, referring to Jobs, "And what about 'John Henry' and the 420,000 other people who tried ventures and failed? It's a classic case of survivor bias. We make judgments about what we should do based on the people who survived, totally ignoring all the guidance from the people who failed."
The problem with survivor bias is that it doesn't really indicate whether a strategy, or a technique, or a plan will work -- and especially whether or not it will work for you.
Never base your plans solely on a blueprint that worked for an outlier. Work hard to know yourself: Your strengths, your weaknesses, and what will make you happy.
That's the best way to determine the best path for you.
4. You don't care where an idea comes from.
We've all worked with people who hated every new idea... unless you find a way to make them think it's their idea.
And sometimes we're guilty of that, too.
Never be distracted by the source of an idea. Employees at every level have good ideas. Assuming an entry-level employee's input is worthless is just as foolish as assuming your VP of sales always has great ideas.
The same is true for friends, family, and people you've just met.
The value always lies in the idea and the implementation of that idea. Not where the idea comes from.
Especially if it's your idea. Being in charge doesn't make you smarter, savvier, or more creative. Being in charge just means you're in charge. Leaders don't have a monopoly on great ideas.
Smart people adopt outstanding strategies and practices... no matter where they come from.
5. You have strong opinions, but you hold them weakly.
As Inc. colleague Jessica Stillman quotes Stanford professor Bob Sutton, highly intelligent folks people have "strong opinions, which are weakly held." Weakly held opinions are important because they mean you aren't "too attached to what you believe," which "undermines your ability to 'see' and 'hear' evidence that clashes with your opinions."
Which is why Jeff Bezos says smart people change their minds -- a lot.
Which is really hard to do when you fall prey to confirmation bias, the tendency to look for and favor data that confirms what you already believe... and to avoid data that goes against what you already believe.
Think customers love your new product and you''ll pay close attention to feedback from customers who enjoy their experience -- and ignore any data that shows customers are less than satisfied.
The best way to avoid confirmation bias is to constantly seek new data, new information, new perspectives, etc. and then be willing to reconsider your earlier conclusions.
Then you'll know whether you're right -- at least for the moment -- and can make the best decision possible.
And what if you later learn something new?
You'll be able to make an even smarter decision.