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Decisions
Risk, judgment, and the biases that get in the way of both.
- Adam SmithScottish moral philosopher and political economist (1723–1790), professor at Glasgow and confidant of David Hume, whose Theory of Moral Sentiments grounded ethics in sympathy and whose Wealth of Nations founded the modern discipline of political economy, providing the framework within which commercial society has been understood for two centuries.FiguresPhilosophyEnlightenment
- Amara's lawWe tend to overestimate the effect of a technology in the short run and underestimate it in the long run.ConceptsBusiness
- AntifragileSome systems gain from volatility, and the practical task is arranging exposures so that surprises help more than they hurt.BooksBusiness2012
- AntifragilityThe property of gaining from disorder rather than merely surviving it.ConceptsBusiness
- Base rate neglectJudging how likely something is from how well the case matches a picture, while ignoring how common the thing is to begin with.ConceptsBusiness
- Black swansA rare event that was not in anyone's model, has very large consequences, and is explained confidently afterwards as though it had been foreseeable.ConceptsBusiness
- Brandolini's lawThe energy needed to refute nonsense is an order of magnitude greater than the energy needed to produce it.ConceptsMind
- Capital allocationDeciding where a business's available money goes: back into growth, into paying down debt, into reserves, or out to the owners.ConceptsBusiness
- Chesterton's fenceThe rule that you should not remove something until you know why it was put there.ConceptsBusiness
- Cognitive dissonanceThe discomfort of holding two things that do not fit, and the work done to remove it.ConceptsBusiness
- Confirmation biasThe tendency to look for, notice and weight evidence that fits what you already think.ConceptsBusiness
- Decision FatigueThe decline in decision quality after a long sequence of choices.ConceptsBusiness
- Decision Under UncertaintyChoosing when the probabilities of the outcomes are not known.ConceptsPhilosophy
- Diminishing marginal utilityEach additional unit of something is worth less than the one before it.ConceptsMoney
- Edmund BurkeAnglo-Irish statesman, orator, and political thinker (1729–1797) whose Reflections on the Revolution in France founded modern conservative political thought, whose decades in Parliament addressed American, Indian, and Irish questions with sustained moral seriousness, and whose theory of the political tradition shaped Anglo-American conservatism from the nineteenth century to the present.FiguresPhilosophyEnlightenment
- ErgodicityWhether the average outcome across many people equals the average outcome for one person over time.ConceptsBusiness
- Expected valueThe average outcome of a decision if it were repeated many times: each possible result multiplied by its probability, all of them added together.ConceptsBusiness
- First PrinciplesFirst-principles reasoning derives a conclusion from premises held true independently of that conclusion, rather than from precedent or analogy.ConceptsBusiness
- Game theoryThe study of decisions where the outcome depends on what other people choose, and everyone knows the others are reasoning the same way.ConceptsPhilosophy
- Hanlon's razorNever attribute to malice what is adequately explained by carelessness, confusion or overload.ConceptsBusiness
- How to choose between two job offersAsk which one pays well and which one teaches you something, and take the one that still teaches.GuidesTransitions
- Intrinsic and instrumental valueSomething has instrumental value if it is worth having for what it gets you, and intrinsic value if it is worth having for itself.ConceptsMeaning
- InversionSolving a problem by asking what would guarantee failure, then avoiding that.ConceptsBusiness
- Loss AversionLosing something feels roughly twice as bad as gaining the equivalent feels good.ConceptsBusiness
- Margin of safetyThe gap deliberately left between what a plan requires and what it can actually withstand, so that being wrong is survivable.ConceptsBusiness
- Memento moriRemember that you will die — a practice, not a mood.ConceptsMeaning
- Murphy's lawAnything that can go wrong will go wrong.ConceptsBusiness
- Opportunity costThe cost of a choice is the most valuable alternative given up to make it.ConceptsBusiness
- OptionalityThe value held in an asymmetry: a right to act without an obligation to, so that good outcomes can be taken and bad ones declined.ConceptsBusiness
- Origen of AlexandriaAlexandrian Christian scholar (c. 185–254) whose Hexapla, On First Principles, biblical commentaries, and Contra Celsum constituted the first systematic Christian intellectual project, integrating Platonist metaphysics with biblical theology and producing a controversial speculative system later condemned in part but never displaced as a foundational reference.FiguresPhilosophyLate Antiquity
- Poor Charlie's AlmanackGood judgement requires the major ideas from several disciplines, and problems are often best approached by asking what would guarantee failure.BooksBusiness2005
- Present BiasOverweighting what is close in time.ConceptsBusiness
- Prisoner's dilemmaThe situation where each person is better off defecting whatever the other does, so both defect and both end up worse than if they had cooperated.ConceptsPhilosophy
- Regression to the meanExtreme results tend to be followed by less extreme ones, because part of any extreme outcome was luck and luck does not repeat.ConceptsMind
- Regret minimizationChoosing by asking which option you would regret more at eighty, rather than by comparing expected outcomes now.ConceptsCareer
- Reversible decisionsThe distinction between decisions that can be undone cheaply and those that cannot.ConceptsBusiness
- SatisficingChoosing the first option that meets a standard you set in advance, rather than searching for the best available one.ConceptsMind
- Second Order EffectsThe consequences of the consequences.ConceptsBusiness
- Sturgeon's lawNinety percent of everything is crud.ConceptsMind
- Sunk costMoney, time or effort already spent and not recoverable.ConceptsTransitions
- Survivorship biasDrawing conclusions from the cases that made it into view while the ones that did not are invisible.ConceptsBusiness
- The 25-vs-45 AsymmetryFailing at twenty-five costs two years and buys a skill set.FrameworksBusinessWhether to take the risk now or later
- The availability heuristicJudging how likely or common something is by how easily an example comes to mind.ConceptsBusiness
- The deferred life planOrganizing life in two stages — do the unwanted thing now, live afterward — where the second stage is indefinitely postponed because its trigger condition keeps moving.ConceptsTransitions
- The five whysA method for getting past a symptom by asking why repeatedly, each answer becoming the next question.ConceptsBusiness
- The hedonic treadmillThe tendency to return to a stable level of contentment after a change in circumstances, good or bad.ConceptsMeaning
- The Lindy effectFor things that do not age biologically, life expectancy rises with age — a book in print for fifty years is likelier to last another fifty than one published this year.ConceptsBusiness
- The OODA loopJohn Boyd's model of competitive decision-making: observe, orient, decide, act, repeatedly.ConceptsBusiness
- The Ownership LedgerEvery hour you spend produces something and somebody ends up owning it.FrameworksBusinessWhether the thing in front of you builds something you hold, or something somebody else does.
- The Wealth of NationsNational wealth comes from the division of labour operating in competitive markets — and the standing threat to it is monopoly secured through political privilege.BooksBusiness1776