Making Decisions In Crazy Markets

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_{[Read time: 3.5 minutes]}

Hey, it’s Peter.

I’m about to make a bold claim (that I genuinely believe):

Today’s letter will save you millions of dollars, thousands of headaches, and hundreds of regrets over the course of your business.

Though I reference “crazy markets” in the title, the framework applies to any important decision just as much (business, life, personal).

Especially for me right now — as I’ve been on house-hunting since May.

Let’s get into it.

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Whenever I mention my house-hunting adventure to friends or colleagues, the unanimous reaction is:

“This market is crazy!” 

Initially, I echoed their sentiments. But I’ve realized I was wrong to react that way.

A market is a market. It’s the combination of economics and customer psychology.

I can’t control the market. I can only choose how to play within it.

Most people think about markets like they do the weather.

Good weather. Bad weather.

But there is no such thing as good or bad weather.

Weather is the weather. It’s uncontrollable. It may require adapting your activities, but that doesn’t make it good or bad.

And if you’re emotional about it, you are either misinformed or unprepared.

There are 1,000+ ways to lose in so-called-crazy markets:

• Dwelling on missed opportunities

• Thinking markets don’t change

• Attempting to time it perfectly

• Betting on luck

• And 996+ other ways

I’ve decided there is only one way to win in any type of market:

Make informed decisions grounded in certainty.

Certainty in decision-making is built on three pillars:

• logic

• intuition

• experience

It’s not a surprise I have a framework for this.

I call it the degree-of-certainty decision framework.

And I’m using it to help me buy a house (among other business decisions).

How I leverage certainty to make decisions:

There are 3 levels of certainty:

• Low → I think it’s the right decision

• Mid → I feel it’s the right decision

• High → I know it’s the right decision

Each requires a different input.

• Thinking relies solely on logic

• Feeling relies solely on intuition

• Knowing relies on logic and intuition to align

It may be surprising to see that intuition has a higher degree of certainty than logic, but only when you have experience. Without experience, intuition is just guessing…and guessing has 0% certainty.

Why this framework improves decisions:

Ideally, you want to ‘know’ it’s the right decision, but it’s not always possible.

Sometimes, logic and intuition are at odds.

• Some people tend to lean on logic

• Some people tend to lean on intuition

But it’s a certainty that tells me which one to trust.

And as I mentioned last week in letter #75, certainty leads to confidence. 

To boost certainty, I follow this three-step process:

1. Independently decide using logic and intuition

I consider these questions:

• How would I decide if I only relied on logic?

• How would I decide if I only relied on intuition?

I’ll write it down.

2. Validate intuition against experience

Experience acts as a reality check for intuition. So I ask:

• How experienced am I with this decision?

Little experience = guessing

A lot of experience = intuiting

Big difference.

After answering these questions, the framework provides guidance:

3. Assess the risk of being wrong

For this framework to work, I must also evaluate the following:

• What’s the risk of this decision?

• Is the decision reversible (if needed)?

• How easy is it to change (to reverse)?

Here’s how to choose:

• It's low-risk, reversible, or changeable → I’ll make the decision even if it’s “I think” or “I feel.”

• It’s high-risk, irreversible, or unchangeable → I’ll conduct further research to improve my logic or talk to an expert to improve my intuition.

Most decisions do not require in-depth analysis, but some do.

For me, this framework is now automatic. I don’t have to go through every step methodically.

Candid side note:

The truth is that before this framework, I had trained myself to remove emotions entirely from decisions. But removing emotion entirely was the wrong approach. I’m not a robot. Life happens, so there is always some emotion at play — just hopefully not letting it drive me too much. Now, I know if I just focus on certainty, I’ll make a great decision.

I can’t control the market. I can’t control the weather.

But I can control my decision.

Thank you for reading.

See you next week.

— Peter

P.S. If you’re interested, I’m offering “power sessions” exclusive for Impact Thinking readers (from now until Aug 18, 2024).

It’s a 60-minute think-out-loud session designed to help you deconstruct a business decision or problem you're wrestling with (and formulate a plan to act on it).

Normally, $250. For Impact Thinkers, $99.

Possibly $0 if you’re willing to help me with a special project I‘m working on.

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