Decision Making for Entrepreneurs
When it comes down to it, most people can’t even decide where they want to go to lunch much less the next move in their business. But if you want to run your own business online or offline, you need to become a master of decision making.
So if you’re one of the people right now who are completely indecisive, you can’t decide what you want to wear, where you want to go on vacation. What you want to eat for lunch. Then today’s video is for you. We’re going to teach you not only how to make decisions more quickly, but how to evaluate the probabilities. So you make better decisions. Overall, let’s get into it.
Some people wonder why CEOs of multinational corporations get paid so much in what they don’t understand is these people often have the responsibility of making hundreds of decisions every single day, that result in millions and millions of dollars won or lost in hundreds of thousands of people’s jobs and livelihoods and their survival of the company.
And so nobody’s going to take on that responsibility and that much pressure to make the right decision without proper incentives. And so this is why CEOs get paid so much is because they can make those big decisions under pressure that are the best for the whole, right?
They optimize for the whole. They make sure that the company stays in business, that the employees keep their paychecks, that the company keeps growing and that every single stakeholder that touches the company benefits from the decisions they make, at least the good ones anyways.
So if you’re out there and you want to be the CEO, even of your own one man business, you have to learn to make decisions. So the number one reason, most people never make it in business is they get so paralyzed by indecision. They just don’t do anything. They just sit there and they don’t do anything. So if you want to grow a company, the bigger company gets the more decisions you’re gonna make on a daily basis.
How to Be More Decisive
So let’s talk about how to actually become a more decisive person. And I’ll just warn you right up front by being more decisive. It does not mean you’re going to make the right decision every single time. And that’s okay. So we’ll get into that. So number one, everything in life is a bet. Okay. We’re looking at probabilities like we would in a poker hand, let’s say we step up to the poker table and we have certain cards in our hand, let’s say we have an eighth and a seven.
We’re going to evaluate the probability that we’re going to win the hand and then determine how much we should bet. Now there’s always going to be a really good chance that we’re going to lose that hand. And so if we apply this to life, some people just want to sit out of the poker game all together to avoid losing a hand. But poker players know if we want to win some bets, we also have to lose some weight.
So we’re going to go out there and we’re just going to make the best possible decision for the cards that we were dealt. And then we’re going to let the outcome take care of itself, right? We’re going to win some, we’re going to lose some, but just because we lost the hand, that also doesn’t mean we weighed the right decision. We might’ve just had bad luck, right?
The last card in the flop might’ve come out and it beat our hand doesn’t mean we played the hand wrong. We just had a bad luck, the draw. And so keep that in mind when you’re making decisions, like you can make the right decision and get the wrong outcome, and you can also make the wrong decision and get a good outcome.
And you have to understand when that outcome was the result of luck and when it was a result of good or bad decision making. So the first thing to do to start to make better decisions and more decisions is practice making small decisions. This one is quite easy, but if somebody asks you, where do you want to go to lunch? Don’t say, I don’t know. Where do you want to go to lunch? Or they ask, what movie do you wanna see? Don’t say, I don’t know.
What are you in the mood for? Pick a movie and say, this is what I want to do. Now, if the other person in your party doesn’t want to go to that restaurant or that movie, they’ll probably tell you so you don’t have to worry too much. But the reason most people won’t make these small decisions is unconsciously or consciously.
They’re scared that if they make the wrong decision, the other person will be unhappy with them. It’s a codependent behavior. And so you have to get used to the possibility that you’re going to make a wrong decision. So don’t pick the best restaurant, uh, and just cross your fingers and just hope that that person is going to love this restaurant.
And it turns out perfectly pick it. And then even if it’s bad restaurant, don’t think that you made the wrong decision. Just be happy that you made it need a decision at all, because oftentimes any decision is better than no decision.
And that’s because in business, there are so many situations we have to evaluate that we have to move quickly so that we can get information back. So if we’re trying to launch ad campaigns and we just sit there and we just think about which ad campaign is going to be the best forever, and we’re just stuck in analysis paralysis, that’s a much worse scenario than us launching a campaign, figuring out it was the wrong one, and then relaunching a new campaign to get the right one.
Do you see that? So just by making the wrong decision, we can often get much more Intel and experience than making no decision. Also, don’t be afraid to make the wrong decision here. Next we have thought experiments, a thought experiment is just where you play out a hypothetical scenario in your mind to see what happens. So if you’re in between two decisions and you’re not sure which one to pick, try to play it out like a movie in your head and see what happens in each one.
Now, one way we can do this is premortems and postmortems. So we can actually look at a situation. We are launching a new project to my business recently, and I said, let’s look out three months, this project failed. Why did it fail? And then we write down all the, that that project failed. We might write like the Facebook ad copy wasn’t compliant, and our account got shut down. And what does that tell us?
We need to put on the planning sheet for this project, make sure that the Facebook ad copy is complaint. So we don’t get our ad campaign shut down. And so when we actually think through all the things that could go wrong ahead of time, then we can actually approach the project and take care of those problems preemptively, without having to worry about making a bad decision and then a postmortem, we’ll be actually looking at that project for three months and looking back and saying, did this succeed or did this fail and why?
And then we’re just gathering that Intel and the information. So next time we have to make a decision about a project. We actually have some historical data to base our decisions of. We can also flip this on his head and do the positive way. Let’s look out three months and see how we wildly succeeded. Let’s say we have a goal in our business to hit a hundred thousand dollars a month.
Let’s just look out three or six months and say, okay, six months, we hit a hundred thousand dollars a month. What decisions led us there? And then we’re going to write down all the things that would lead us to that outcome. Now, if one of those is getting a coach who knows how to scale to a hundred grand a month, we can write that down. And then the next time I’m on a sales call for a coach who can help us get there.
And our brain is going, Oh, I don’t want to make a decision. Or I want to say no, cause it seems risky. We can look back and we can remember, okay, in the postmortem I did after we had gotten there, I made the decision to work with a coach.
How to Make Hard Decisions
And then we’re going to know we should make that decision in the moment, even though it’s scary to make that decision because we have such a fear of being wrong, right? The next thing we can do is use an expected value. This is a way to evaluate projects. So let’s say that we have one project that could potentially make us a hundred thousand dollars and there’s a 50% chance that we’re going to accomplish it, right? So we have a great chance of accomplishing this one and two, and it could make us a hundred thousand dollars.
We would say the expected value of that project since it has a 50% chance of coming true. And the outcome is going to be a hundred thousand dollars. We’d say the expected value of that project is $50,000. So we might pay up to $50,000 to implement that project, knowing that we would hypothetically break.
Even now, let’s say we’re weighing that option with another project. And let’s say this other project has a chance to make us $1 million, but there’s only a 20% chance that this project will come through to fruition. What is the expected value of the million dollar project? There’s a much smaller chance that it’s going to happen right, 20%, but we would just multiply that million dollars by 20%. The expected value of this project is $200,000. So if we have the required resources, we might weigh these two and decide we’re going to go with the one with the higher expected value, as long as the risk is not going to be catastrophic to us.
So we also have to limit our downside and say, what’s the worst case scenario of this. And we never want to take on catastrophic losses that will take us out of the game forever. So if we can manage a $50,000 loss, but we can’t manage a $200,000 loss, we might not go with the higher expected value, even though it has a higher value to us as a business.
But if you look at projects, if you look at what Amazon does or venture capitalists, they’re always going to be looking at that expected value. And if a business has a chance of becoming a billion dollar company, but there’s only 1% chance, or it can become a $500,000 company, and there’s an 80% chance, you can guess which one, the venture capitalists are going to pick. They’re gonna pick the one that has the chance of becoming the billion dollar company, because it has a higher expected value in this case.
How Entrepreneurs Make Hard Decisions
So next we’re going through, we’re calculating expected values. We’re doing pre and postmortems. We’re practicing making decisions, small little decisions, and we’re practicing getting them wrong. So at this point, we just have to get really good at being okay with having made a wrong decision or having made the right decision and getting a bad outcome. So again, you have to look back on your decisions and look at your decisions as a portfolio of risk, right? There’s always going to be risk involved. There’s always luck involved.
There’s market forces. There’s all these factors that you cannot control. And so what we want to do is we want to have a pattern of making good decisions over time. And if we do that on average, we will come out on top. Now we’re not going to win every single decision that we make. So again, to bring it back to the venture capitalist firms, they might invest in 10 different companies with high expected values because those companies can grow to a really big size.
Now probably about nine of those companies are going to completely fail and one might make up the gains for the whole entire portfolio. And the venture capitalists are not going to look at that fund and say, Oh, we made the wrong decision. On nine of these companies, they just know that there is expected value involved.
And most of those companies are gonna fail no matter what, as long as that one hits and it gives them a thousand X return, it makes up for all the failed investments in the other nine. So when you’re looking at your decisions over time, again, avoid catastrophic losses, make the right decision in the moment, but don’t depend on every single outcome going favorably somehow comes. They’re going to turn out great. Some are gonna turn out bad and that’s not always tied to your good or bad decision making.
So let’s just try and make the right decisions in the moment. Just like we want to pit play that poker hand to have the highest probability of winning, knowing that even if we play it properly, we could still lose. That’s how your big decisions are going to go. So that’s it go out there.
Practice making small decisions, get comfortable, getting not a perfect outcome every single time. Just knowing that over time, if you’re in the habit of making decisions quickly, you’re going to get information back further, faster. You’re going to have more Intel and you’re going to be able to move faster than your competitors in the market and overall grow your business and make more money. Okay?
Being decisive is one of the number and traits you need as a CEO. So if you want to go out there and grow your business, learn to be decisive. You’re not going to win every time. But on average over time, if you follow these principles, you will win.
Go out there, practice making some small decisions and try to get comfortable, making the wrong decision, know that it’s not always your fault. And it’s just part of playing the game.
That’s all for the latest Christian he worked from anywhere at digital marketing guy.
I’ll see you on the next one.