Methods of Decision Making

Mental Models are time proven methods to sort out problems.

Discovering the right mental model to apply to the right circumstance can help reduce decision fatigue in small business. We have enough decisions to make each day and implementing strategies to avoid wasting time on those decisions is essential.

One of my favorite resources for explaining mental models is from Farnam Street.

Shane outlines a comprehensive list of mental models and how to effectively employ them.

The mental model I turn to the most is Occam’s Razor. The basic premise of Occam’s Razor can loosely be interpreted as “Keep it Simple”. However, a more accurate summary includes two primary principles:

  • The Principle of Plurality which says we should not apply more assumptions to a situation than are absolutely necessary.

  • The Principle of Parsimony which states that we should not do something with more resources than are necessary.

Taking these two principles together, we can look at decisions and ask, “What is the simplest way to achieve the goal with the least amount of guesses as to the outcome"?

Here is an example:

Let’s say a business offers a service for $500.00 (what the service is doesn’t matter).

The complicated version looks like this:

  • Several assumptions are made about all the groups of different buyers. Some might want installment plans (monthly, quarterly, annually), some might want to pay by check, some might want to pay in cash, some might not be willing to pay that much, etc, etc. This violates Principle of Plurality and makes too many assumptions. Because of this….

  • Multiple resources are used to create several systems in which payments can be received in all of the assumed avenues. The use of multiple resources costs more in time and money and now becomes more complicated to manage.

The version in which Occam’s Razor is applied looks like this:

  • One or two simple methods will be developed to receive payment and…

  • Those that want the service will find a way to use one of the methods.

When business decisions are made with the idea of the simple solutions generally being, valuable resources will be preserved.

Business owners often fear that reducing the options may reduce the number of clients. Generally speaking, this is not true. However, a few clients may drop off. In the big picture, the resources saved by keeping the systems simple will more than make up for the minimal client loss.