Why do you need decision rules?

There are a number of benefits to a decision rule:

  1. They remove a lot of the emotional angst associated with making a decision — you just do it and move on — you don’t over-analyse the outcome in each case; and
  2. You know what you did, and can therefore make considered adjustments over time, and when the pressure has subsided.

What are the key decisions?

The first step in designing decision rules is to think about the key decisions you are likely to face on a consistent basis throughout your life, or that will need to be made under pressure.

Letting your decision rules mature

You need to give a decision rule time to mature, rather than changing them all the time. Applying a decision rule is all about letting the ‘law of averages’ work their magic.

Updating your decision rule

There is no point doing the same thing over and over again and expecting a different outcome. This is both the blessing and the curse of a decision rule.

What decisions are amenable to a decision rule?

In my view, there are two sorts of decisions that benefit from decision rules:

  • Decisions you make rarely, but in circumstances of great pressure and consequence.

Why I am thinking about decision rules now?

When I was 12 my father closed his business during one of Australia’s most notorious credit crunches. We lost everything. Our house, car, holiday home. For many years I thought those traumatic events had scared me, held me back. But in the midst of this crisis I can now see how in fact those childhood events prepared me.

  • Stay ahead of the curve. Cut costs immediately and deeply. Preserve a cash buffer. Do not take on debt.
  • As soon as we see genuine and confirmed green shoots in the economy (but not a moment before), put our foot down and invest like crazy on the upswing.
  • Keep everyone informed as to what we are doing, and why.
  • If you run out of cash, close the doors before you have lost everything.

Why doesn’t Government use decision rules?

What has really shocked me is the apparent lack of decision rules within Government — and most importantly, the bureaucracy that supports it. A key role of our expensive bureaucracy should be to maintain and develop decision rules of both categories.