Make decisions from first principles

A lot of life is based on decision making.

Each decision deserves “just enough” thought and planning to go into it.

I’ve learned from a couple of places the benefits of applying pre-existing mental models to decision making.

Mental models

Josh Kaufman, in his book The Personal MBA says that mastering the fundamentals of business can get you surprisingly far.

Together, mental models “create a solid framework you can rely on to make good decisions.”

Elon Musk: Boil down problems to first principles

Elon Musk, founder of Tesla Motors, gave advice in several interviews that people would benefit from making decisions from first principles:

I’m not sure if he’s refering to first principles in physics, or using it as a more general term.

Financial decisions

Financial coach Dave Ramsey has a talk-radio show.

Listening to him got a bit repetitive after a while (but it’s still encouraging). I realised he was applying the same frameworks for most of the calls coming in.

Some frameworks Dave applies:

  • If you’re deciding to keep something you own instead of selling it, apply a “reverse buying question”. If you own a spare laptop which could be sold for €200, ask yourself “If I didn’t own this laptop, would I go out and spend €200 on it?”

  • Don’t get fooled by the sunk cost fallacy. Move on.

  • Be concious of loss aversion.

  • Make sacrifices in the short-term if it leads you to longer-term gain.

  • If you’re feeling stressed, decide on what’s your core objective, and make everything else in life revolve around that.

Learn from the masters

It pays off to learn from people who have developed their own constructs for making decisions.

If you’re interested in more, I suggest reading How Einstein thought.

Have you developed a set of first principles that help you make decisions with different parts of life? I’d love to hear from you in the comments below.