Clear Thinking: Turning Ordinary Moments into Extraordinary Results

by Shane Parrish

There are two principles concerning opportunity costs. The first is this: the opportunity-cost principle: Consider what opportunities you’re forgoing when you choose one option over another. The second principle is closely related: the 3-lens principle: View opportunity costs through these three lenses: (1) Compared with what? (2) And then what? (3) At the expense of what?[*]

To speed things up, I came up with a system for them to sort decisions into three boxes: 1. decisions they could make without any input from me, 2. decisions they could make after sharing their reasoning with me so I could double-check their judgment, and 3. decisions I wanted to make myself.

There is only one most important thing in every project, goal, and company. If you have two or more most important things, you’re not thinking clearly.

Most Information Is Irrelevant When it comes to getting information that’s relevant to the decision, remember this: the targeting principle: Know what you’re looking for before you start sorting through the data.

When it comes to getting information that’s accurate, there are two principles you should know: the HiFi Principle and the HiEx Principle. The first will help you find the best intel possible from within any given situation, and the second will help you find the best intel possible from outside of it. the hifi principle: Get high-fidelity (HiFi) information—information that’s close to the source and unfiltered by other people’s biases and interests.

A lot of the information we consume is in the form of highlights, summaries, or distillations. It’s the illusion of knowledge.

The amount of information that bombards us daily can feel overwhelming. But the further the information is from the original source, the more filters it’s been through before getting to you. Living on a diet of abstractions is like living on a diet of junk food: it has less nutritional value—less information content, which means you’re not learning as much. Real knowledge is earned, while abstractions are merely borrowed.

Everyone has a limited perspective into the problem. Everyone has a blind spot. It’s your job as the decision-maker to weave their perspective together with others to get closer to reality.

the hiex principle: Get high-expertise (HiEx) information, which comes both from people with a lot of knowledge and/or experience in a specific area, and from people with knowledge and experience in many areas.

Remember: the goal isn’t to have someone tell you what to do; rather, it’s to learn how an expert thinks about the problem, which variables they consider relevant, and how those variables interact over time.

Another big reason we find action hard is that we’re afraid of being wrong. In this case inertia holds us in place as we gather more and more information in the false hope that we can ultimately eliminate uncertainty.

Consequentiality and Reversibility Consequential decisions affect the things that matter most: whom you marry, where you live, which business you launch. The more a decision affects what matters to you—either in the short term or the long term—the more consequential it is.

Reversible decisions can be undone by a later course of action. The harder or more costly it is to undo a decision’s effects, the less reversible it is.

the asap principle: If the cost to undo the decision is low, make it as soon as possible.

the alap principle: If the cost to undo a decision is high, make it as late as possible.

When the stakes are high, and there are no take-backs, you want to decide at the last moment possible, and keep as many options on the table as you can while continuing to gather information.

Defaults can transform caution into an excuse not to act if you don’t resist them. Anyone who has held on to a failing job, relationship, or investment too long knows that information gathering reaches a point of diminishing returns—at some point the cost of getting more information is exceeded by the cost of losing time or opportunity.

the stop, flop, know principle: Stop gathering more information and execute your decision when either you Stop gathering useful information, you First Lose an OPportunity (FLOP), or you come to Know something that makes it evident what option you should choose.

Confidence increases faster than accuracy. “The trouble with too much information,” Robinson told me, “is you can’t reason with it.” It only feeds confirmation bias.

In my life and in the lives of people I’ve worked with, these are some signs you’ve hit the limit of useful information you can gather: You are able to argue credibly for and against the options you’re considering from all angles. You’re stretching for insight by asking people for advice who are more than one step removed from the problem or who don’t have experience solving problems of this sort. You feel like you need to learn more, but you’ve stopped learning new things, and are instead in a constant loop reviewing the same information (or same arguments) over and over.

Building a margin of safety means giving yourself as much cushioning and coverage in the future as possible. It’s a way of preparing yourself for the widest range of possible future outcomes—and protecting yourself against the worst ones.

tip: The margin of safety is often sufficient when it can absorb double the worst-case scenario. So the baseline for a margin of safety is one that could withstand twice the amount of problems that would cause a crisis, or maintain twice the amount of resources needed to rebuild after a crisis.

If the cost of failure is low, and outcomes are less consequential, you can often reduce or skip the margin of safety.

Here’s the bottom line: Predicting the future is harder than it seems. Things are great until they’re not. If things are good, a margin of safety seems like a waste.

Performing small, low-risk experiments on multiple options—in other words, shooting bullets and calibrating—keeps your options open before you commit the bulk of your resources to shooting a cannonball.

Live with a Decision before Announcing It

I added another element to the rule: before going to bed, I would write a note to myself explaining why I’d made the decision. Doing so allowed me to make the invisible visible.

Living with a decision before announcing it allows you to look at it from a new perspective and verify your assumptions.

Three Kinds of Execution Fail-Safes There are three kinds of execution fail-safes you should know: setting trip wires, empowering others to make decisions, and tying your hands. fail-safe: Set up trip wires to determine in advance what you’ll do when you hit a specific quantifiable time, amount, or circumstance.

Trip wires are forms of precommitment—you commit yourself in advance to a course of action when certain conditions arise.

fail-safe: Use commander’s intent to empower others to act and make decisions without you.

Giving a team enough structure to carry out a mission but enough flexibility to respond to changing circumstances is called commander’s intent—a military term first applied to the Germans who were trying to defeat Napoleon.

Commander’s intent has four components: formulate, communicate, interpret, and implement.

fail-safe: Tie your hands to keep your execution on track.

Whatever decision you’re facing, ask yourself, “Is there a way to make sure I will stick to the path I’ve decided is best?” By thinking through your options, and precommitting to courses of action, you free up space to tackle other problems.

self-serving bias, the tendency to evaluate things in ways that enhance our self-image. When we succeed at something, we tend to attribute our success to our ability or effort. By contrast, when we fail at something, we tend to attribute our failure to external factors.

The first principle to keep in mind when evaluating your decisions is this: the process principle: When you evaluate a decision, focus on the process you used to make the decision and not the outcome.

Making a good decision is about the process, not the outcome.

the transparency principle: Make your decision-making process as visible and open to scrutiny as possible.

safeguard: Keep a record of your thoughts at the time you make the decision. Don’t rely on your memory after the fact. Trying to recall what you knew and thought at the time you made the decision is a fool’s game.

Your ego works to distort your memories and convinces you of narratives that make you feel smarter or more knowledgeable than you really are.

The only way to see clearly what you were thinking at the time you made the decision is to keep a record of your thoughts at the time you were making the decision. Writing down your thoughts offers several benefits. One benefit is that a written record provides information about your thought process at the time you made the decision. It makes the invisible visible. Later, when you reflect on yo...

GOOD DECISION-MAKING COMES down to two things: 1. Knowing how to get what you want 2. Knowing what’s worth wanting

In life, we experience regret over both things we’ve done and things we’ve failed to do. The worst regret is when we fail to live a life true to ourselves, when we fail to play by our own scoreboard.

Running on the hedonic treadmill only turns us into what I call “happy-when” people—those who think they’ll be happy when something happens.

while we’re busy running on the treadmill chasing after all the things that won’t make us happy, we’re not pursuing the things that really matter.

Time is the ultimate currency of life. The implications of managing the short time we have on earth are like those of managing any scarce resource: you have to use it wisely—in a way that prioritizes what’s most important.

Say things now to people you care about—whether it’s expressing gratitude, asking forgiveness, or getting information. Spend the maximum amount of time with your children. Savor daily pleasures instead of waiting for “big-ticket items” to make you happy. Work in a job you love. Choose your mate carefully; don’t just rush in.

The list of things they said weren’t important was equally revealing: None said that to be happy you should work as hard as you can to get money. None said it was important to be as wealthy as the people around you. None said you should choose your career based on its earning potential. None said they regretted not getting even with someone who slighted them.

And the biggest regret people had? Worrying about things that never happened: “Worrying wastes you...