Decision Making Guide: How to Make Smart Decisions and Avoid Worst Decision that Will Affect Our Life

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What is Decision Making?

Let’s define decision making. A decision can be defined as a course of action purposely chosen from a set of alternatives to achieve organizational or managerial objectives or goals. Decision making process is continuous and indispensable component of managing any organization or business activities. Decision making is just what it sounds like: the action or process of making decisions. Sometimes we make logical decisions, but there are many times when we make emotional, irrational, and confusing choices. This page covers why we make poor decisions and discusses useful frameworks to expand your decision-making toolbox.

Why We Make Poor Decisions

Tim Ferriss shares a line by one of his mentors in which I feel sets the tone for why this topic is an incredibly important one. His mentor said, “Easy decisions make for a hard life. Hard decisions make for an easy life.” It had me reflecting on some of the decisions and choices I’ve had to make in recent times.

Decision making is one of the most laborious processes I know. For somethings, I can make decisions with relative ease, and for others, it can be a daunting task. I’ve made some excellent choices in life, some inferior ones, and at times when there are tough decisions to make I avoid them like the plague. Why?

I’m always inspired to research motivation and reasons behind why as it relates to how the journey of my life rolls out. How is it possible that by making hard decisions in life we can lead to an easier one? Why do we make poor decisions? In awareness and understanding perhaps I will be able to make wiser decisions moving forward.

In Dan Gilbert’s Ted Talk, titled “Why We Make Poor Decisions,” he shares an insightful formula as to how we calculate the expected value of something. This formula may help us better understand the reasons, errors and the why behind some of the decisions we make.

It was Daniel Bernoulli who apparently came up with this formula. He was an 18th-century Swiss mathematician known for his work on probability and statistics. The recipe looks like this, Expected value = Odds of gain + Value of gain. This relates to the actions or decisions we will likely make.

Here is how it works. If we can calculate the odds and value of any gain, we will be able to know might better how we will behave. For example, if in taking action the odds of something occurring is high and the value we attach to its occurrence is also high, we are likely to make a decision in favor of the action. If these elements are low, we will likely to make poor choices or none at all. At least this is my understanding of the formula.

According to Gilbert, there are a few reasons why people make bad decisions, and usually, it results from an error of judgement. What influences our ability to reason is our upbringing, conditioning, experiences and everything else we’ve been exposed to in life. That is the hard wiring of our brain, and it will affect how we calculate odds of gain and value. Emotions have an important role to play.

Gilbert also said that when we compare we may even make errors in judgment. Comparing is contextual to a particular experience. In one instance the odds may look favorable based on other positive elements occurring at the same time however in different contextual circumstances it may not be so.

There is the social comparison that effects our decisions and comparison to our experience. For example, many of our purchasing decisions are driven by social comparison. How will this make me look? Also, if we did or had something in the past that we remember as being good we might decide to purchase or do it again but this time be disappointed because the conditions were not the same.

These factors will contribute to either an overestimation or underestimation of odds and misrepresented perception of value.

Having experienced something more frequently in life, we will be in a better position to calculate the odds of it happening. For those things we are unfamiliar with it is more challenging to do this. For example, I can safely predict the odds of how good I will feel after going for a run in the morning, something I do a few times a week. On the other hand, waking up to go for a surf, something I’ve never done, will be more difficult to determine the expected value.

However, I can form assumptions based on my interactions with other surfers and their shared experiences and my knowledge that exercise and swimming in the ocean positively influence how I feel. In practice, I will be better able to calculate the odds. It reinforces to me why it is important to experiment and try things in life before ruling out possibilities that may lead to regret.

If we can easily see that the gain of something happening is more likely to occur because it has been something we’ve been more heavily exposed to or experienced, that will increase the overall expected value and the motivation to act. However, the odds of gain are based less on calculated fact and more so driven by emotions. In my experience, even with hard evidence, emotion usually overrules.

According to Lisa Feldman-Barrett, the theory that emotions are hard-wired is flawed. She proposes the constructionist theory which states that emotions are learned and built over a lifetime of experiences. Neuroscience research has found that emotions result from numerous brain networks working in tandem and influenced by “effect” – the mind and body relationships to stimuli.

As mammals, in life, we are influenced by the need to survive. To do this, we seek to fulfil our fundamental needs that are purposeful to our survival. Reward and punishment drive our actions. The brain functions as an efficiency tool. To help us remember what is good or bad and hence improve our ability to survive. The issue is that it is not necessarily always right.

The brain, now filled with pre-conditioned tendencies, will interact with the external environment and how the body feels to produce emotions, either positive or negative. Emotion will powerfully motivate our decisions, and how well we determine the odds of gain and value of gain despite evidence or fact, that may suggest otherwise.

How many times do we do, say, eat, or think things that even against our best judgment we still proceed? When angry I may lash out violently, and yet I know it’s not the best solution. When tired or sad I eat unhealthy foods or drink despite my knowledge that such things are not suitable for me long-term. I buy something that I want in anticipation of how happy it will make me feel and yet a couple of days or hours later I’ve forgotten all about it. I realize that most of what I think I want is driven by perceived needs and that without it I wouldn’t be any worse off.

In summary, and this may sound obvious to many of you, emotions affect the quality of decisions we make in life. Emotions affect the quality of life. I believe that with increased awareness and growth in our knowledge we will be able to understand better how our emotions work and therefore how they direct our decisions. From there, may we all make better decisions and live a life with greater freedom, fulfillment and happiness.

I like to think of myself as a rational person and reasonable person, but I’m not one and I am not perfect. The good news is it’s not just me — or you. We are all irrational. For a long time, researchers and economists believed that humans made logical, well-considered decisions. In recent decades, however, researchers have uncovered a wide range of mental errors that derail our thinking. The articles below outline where we often go wrong and what to do about it.

  • 5 Common Mental Errors That Sway You From Making Good Decisions: Let’s talk about the mental errors that show up most frequently in our lives and break them down in easy-to-understand language. This article outlines how survivorship bias, loss aversion, the availability heuristic, anchoring, and confirmation bias sway you from making good decisions.
  • How to Spot a Common Mental Error That Leads to Misguided Thinking: Hundreds of psychology studies have proven that we tend to overestimate the importance of events we can easily recall and underestimate the importance of events we have trouble recalling. Psychologists refer to this little brain mistake as an “illusory correlation.” In this article, we talk about a simple strategy you can use to spot your hidden assumptions and prevent yourself from making an illusory correlation.
  • Two Harvard Professors Reveal One Reason Our Brains Love to Procrastinate: We have a tendency to care too much about our present selves and not enough about our future selves. If you want to beat procrastination and make better long-term choices, then you have to find a way to make your present self act in the best interest of your future self. This article breaks down three simple ways to do just that.

How to Use Mental Models for Smart Decision Making

The smartest way to improve your decision making skills is to learn mental models. A mental model is a framework or theory that helps to explain why the world works the way it does. Each mental model is a concept that helps us make sense of the world and offers a way of looking at the problems of life.

You can learn more about mental models, read how Nobel Prize-winning physicist Richard Feynman uses mental models, or browse a few of the most important mental models below.

Top Mental Models to Improve Your Decision Making

  • Margin of Safety: Always Leave Room for the Unexpected
  • How to Solve Difficult Problems by Using the Inversion Technique
  • Elon Musk and Bill Thurston on the Power of Thinking for Yourself

Best Decision Making Books

  • Thinking, Fast and Slow by Daniel Kahneman
  • Poor Charlie’s Almanack by Charles T. Munger
  • Seeking Wisdom by Peter Bevelin
  • Decisive by Chip Heath and Dan Heath

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Stock Trading Guide

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The stock market is basically just one giant auction, similar to any other auction, except it is incredibly efficient and involves millions of buyers and sellers and instead of toys, video games, furniture, etc. you are trading small ownership in a company (equities, stocks) and debt owed by those companies. Furthermore, you can buy currencies, options to buy/sell a company at an agreed upon price (options), trade exchange rates, etc.

So let’s start out with how this auction works.

You are a buyer of a stock. You want to buy one share of Apple. If you buy that one share at $173.90 (current day’s price), then you own 1/861.74million of that company.

So, to do this, you would first need to open a brokerage account. If you live in the US, Robinhood is a very popular trading platform. Others include Questrade, Qtrade, TD Ameritrade, etc. etc. there are many options and they differ based on how much quality information they provide you on your trades, the commissions on the trades, the customer service provided, etc.

So let’s get rolling. You open your brokerage account and you buy 1 share of APPL. The bid price is the price that is currently dictated that people are buying it at. The ask price is what the sellers want to get for it. A very liquid stock (lots of trades) would have a very low bid-ask spread.

So let’s discuss some of the mechanics of how the stock market works. The stock market follows a random walk (that is, it randomly walks forward and backwards and changes every day based on new information that comes available about a stock) and this generally follows a trend. A good point to start at to understand how this all works is to read “Random Walk Through Wall Street”.

To get into more details of this, you should start to understand how the market works. The market will go through stages: prosperity, peak, recession, possibly depression, and eventually back to prosperity. GDP growth, unemployment numbers, consumer confidence, etc. all help to tell us where we are in the business cycle but no one can be entirely sure how close we are to the next recession (we are currently in the longest bull market since The Great Depression). Another more in-depth book to consider reading is “The Intelligent Investor”.

Once you start to understand how this all works, you should figure out how to trade on it. Say unemployment numbers go down, how do you react? If the government deficit increases, how do you react? If the Fed announces that they will slowly raise interest rates, how do you react? You can read about this in “When it rains in Brazil, Buy Starbucks” and you can find an economic calendar:

So that is a great starting point for learning about trading stocks. As mentioned in other comments, you can also learn a lot from simulators and from reading investopedia articles and definitions etc.

Some common ones: Beta is the correlation of a stock to the overall stock market Price/Earnings ratio: This is the ratio of how much the price of a stock is reflective to their net earnings available to shareholders. A growth stock has a high P/E ratio.

There are two different prices, yes.

Just imagine you are negotiating to buy a bike with a guy off Craigslist. You offer $80. That’s your bid price. He says, no, that’s a ripoff. I want $120. So you’re both too far apart and can’t come to an agreement.

Then there’s a second seller of the same identical bike and he wants $110. Then there are 10 more identical bikes all selling for $110. The other guy just realize he can’t get $120 so he drops his asking price to $110. In fact, he goes down to $105 to sell immediately.

Now there’s a bunch more buyers. They’re willing to pay $100. So you can’t offer $80 any more because everyone else is offering $100. So you decide to raise your bid price to $100. In fact, you really want it, so you raise your bid price to $105. Bam. Now the bid-ask spread is zero and it sells at $105.

For thinly traded stocks though (few buyers and sellers), the seller may be asking too much money and the buyer is offering too little. In that case, there are two prices, and you may not come into agreement (we call this illiquid). Eventually with a stock that has thousands or millions of buyers and sellers, these two prices eventually converge into one – just like in the example I provided.

You can click link to register and start trading to earn.

http://partners.etoro.com/A76268_TClick.aspx

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Why Personal Blogging Is Still an Option Today

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In this digital age, it has never been easier to share one’s favorite entertainment with the rest of the world. Personal blogs can be used to discuss a blogger’s favorite music, movies, books, and performing arts. Posts can be archived according to specific topics such as the date of release of specific films or songs. Similarly, such blog posts can be classified by actor, singer or performer. Bloggers can have plenty of fun in creating their own personal archives featuring short statements or entire articles about anything related to entertainment. This could very well be one of the reasons why personal blogs rock.

When blogging about personal interests such as entertainment, it is important to keep in mind the type of readers that will be exposed to the posts. Often, friends and relatives will be the most loyal followers of such personal blogs. However, it is also a good idea to share some personal interests with fellow workers and other individuals from the workplace.

For example, some teachers are more than happy to share their thoughts about music and movies with students. Teachers might seem “cooler” if they have similar tastes in entertainment as the youth. Similarly, parents of students might also be interested in finding out about the personality of teachers.

Personal entertainment blogs can also act as “icebreakers” for professionals who start a new job. It’s a great way to bond with co-workers by using blogs to talk about specific interests in entertainment or sports. A young professional like Lindsey Stone and other ladies are examples of individuals who blog about their favorite kind of entertainment.

Blogging platforms and social networks actually allow individuals to encourage others to enjoy specific movies, video games, songs, books and more. For example, it’s quite easy to post a link that leads to a movie trailer or review on an external site. Similarly, links could be posted to official websites of video game publishers.

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While ordinary individuals blog about their favorite entertainment, companies are also taking advantage of online platforms. For example, recent movie releases or classic films can be downloaded online and then watched on any platform. Users can select to download file formats for an HDTV, desktop computer, laptop or tablet. Before making an online purchase, customers get the chance to preview the movie by watching an extended trailer version.

Before downloading songs or entire albums online, customers have the chance to listen to samples. There might be different versions of a single song such as those for radio play and original album releases. Up to 30 seconds of actual soundtrack can be heard for free before making a purchase of the full-length song. Similarly, video game demo versions could be downloaded for free before making an upgrade to the full-length editions.

Blogging about favorite books is enhanced thanks to external links to websites that might have full versions of specific titles. In fact, most classic literature is available for download for free because copyright laws didn’t exist centuries ago. Marketplaces for digital multimedia are loaded with electronic versions of books that can be downloaded without any charges. Of course, there are also plenty of new releases of books that can be purchased. Before buying electronic books, customers can preview several pages of actual content. Full-length descriptions of books are also available in traditional synopsis format. Sharing these snippets on blogs can attract readers and help bloggers discover new favorites.

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Finally, blogging is therapeutic. Where else in your life can you talk endlessly about any subject of your choosing? Likely, nowhere (If you do have somewhere you do this in real life, perhaps you should evaluate how others feel about this).

An entertainment blog can be tailor-made to suit your needs as a writer. Want just a few readers? Only tell your friends. Want your thoughts to be read by the masses? It’ll take a little more work, but there are abundant resources available online to help you learn to expand your readership.

Blogging is a great activity that accommodates all types of writers. Many people, though, have trouble writing that first post. My advice? Just write it, publish it, and then publish more. Expecting big after doing small things could become one of the biggest mistakes bloggers must avoid. Not many people will see the first post. By the time they catch up with you, you’ll have posted 20 times or more. You’ll be better at it from the practice, and your blog will start to have its own identity. The only way to get there is to start, so I encourage you, start your entertainment blog today.

COMPREHENSIVE GUIDE TO VIRTUAL ASSISTANT SALARIES IN THE PHILIPPINES

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How Much Does the Average Virtual Assistant Earn?

A Virtual Assistant’s salary ranges from $300 to $1000 a month depending on their skills. A programmer will obviously require a higher salary as compared to a data entry specialist, which is almost the same case with office-based jobs. Below is a gist of VA salaries. You can find a more complete list here.

Average Monthly Salary

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OFFICE WORKERS

VIRTUAL ASSISTANT

  • Accounting Clerk – $180
  • Nurses – $200
  • BPO Entry Level – $250
  • Customer Support Agents – $250
  • Autocad Operators – $302
  • Teacher – $420
  • Accountant – $530
  • Civil Engineer – $550
  • Management Accountant – $1,395
  • Project Manager – $1,400
  • Accountant – $470 ($300-$2000)
  • Transcriptionist – $360 ($300-$1600)
  • Link Builder – $420 ($300-$1500)
  • Customer Support – $460 ($400-$2000)
  • Graphic Designer- $450 ($400-$1800)
  • Artist – $400 ($330-$1800)
  • Virtual Assistant – $400 ($300-$1800)
  • SEO Specialist – $500 ($300-$1700)
  • Copywriter – $500 ($400-$2000)
  • Web Designer / Webmaster – $500 ($350-$2000)
  • Video Editor – $550 ($300-$2000)
  • Software/Web/App Programmer -$800 ($590-$1600)

Minimum Wage for
Major Cities

For office based jobs in the Philippines, there are other factors in play such as the tendency to base salary rates on the government mandated minimum salary and the progressiveness on the industry they are in. The sad part is, for office-based jobs, majority of the rates really are based on the minimum salary requirement.

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Average VA Salaries
Across the World

When you compare average salaries in the Philippines with other countries, you begin to see why the Philippines is the fastest growing outsourcing market. When you combine the talent level in the Philippines with the average salaries, the Philippines becomes downright compelling.

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How much does the average Filipino have to spend?

To make it easier for you to formulate a rating of your own for your future VA’s, or if a raise is long overdue, we also have a chart on the cost of living in the Philippines. This includes the utilities that they need to fully function in the virtual assistant world.

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OFFICE WORKERS

VIRTUAL ASSISTANT

RECURRING

  • Transportation: $36 – $150*minimum is 1 round trip jeepney ride. It usually takes a jeepney and MRT for most people
  • Rent: $150 – $300
  • Electricity: $54 – $150
  • Food: $250 – $460

Total Monthly Expenses

$490 – $1060

RECURRING

  • Transportation: $0
  • Internet Connection: $40 – $100
  • Rent: $150 – $300
  • Electricity: $54 – $150
  • Food: $100 – $180

ONE TIME COSTS

  • Computer: $360 – $1000*computers and laptops replaced every 3 years
  • Laptop: $500 – $1200*laptops more expensive in the Phils due to customs duties

Total Monthly Expenses

$344 – $568

Again, the chart only includes the basic utilities. Please keep in mind that there are other costs one requires in order to live, like clothes, mobile devices, and anything that allows them to go about their actual lives.

How old and experienced are these virtual assistants?

In the Philippines, a college degree is a prerequisite in order to get a job. That’s why majority of Virtual Assistants are college educated.

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What are the optional benefits that employers can pay for?

If you’re like me, you want to give a few extras for your loyal employees. There are some benefits such as health insurance (PhilHealth in the Philippines) or SSS (like Social Security in the USA). If you want to provide this benefit to your workers here’s how much it cost:

SALARY RANGE PHILHEALTH SSS
$200 – $249 $5.78 $27.54
$250 – $299 $7.22 $32.83
$300 – $349 $8.67 $33.89
$350 – $399 $9.63 $33.89
$400 – $449 $11.07 $33.89
$450 – $499 $12.03 $33.89
$500 – $549 $13.48 $33.89
$550 – $599 $14.92 $33.89
$600 – $649 $15.89 $33.89
$650 – $699 $16.85 $33.89
$700 – $749 $16.85 $33.89
$750 – $800 $16.85 $33.89

Source: http://www.philhealth.gov.ph/partners/employers/contri_tbl.html

As you can see, with Filipino workers, you don’t have to break the bank to give these highly skilled workers a living wage. If you just look at their salary in terms of numbers, yeah they do look insignificant compared to ours. But if you’re that Filipino VA, that $500 or $600 per month will get you more than most Filipino workers get. That amount gets them better meals for their families, better education for their kids, better lives overall. It’s a small amount to you but a big blessing for them.

So the next time someone accuses you of exploiting workers because you outsource, show them these numbers. Ask them what exploitation looks like and show them pictures of your VA being able to send their kids to private school and get iPhones for themselves. If this is exploitation, then giving them a “fair” wage would be winning the lottery.