LinkedIn Co-Founder Reid Hoffman on how to make better decisions
Making decisions is one of the core competencies of entrepreneurship. When you’re in the thick of things, you may be making multiple decisions per hour. And even when they don’t seem like big decisions, the impact of each decision – however small – compounds rapidly. Let’s say that improving your decision making allows you to increase the utility function of each decision by 0.5%. But after 1,000 such good decisions, that same function will have increased 147X.
Despite this large impact, the techniques of decision-making are often overlooked.
I sat down with my Blitzscaling co-author Chris Yeh to discuss this in depth on the most recent Greymatter podcast, which you can listen to here:
What is Good Decision-Making?
Entrepreneurs and executives will do all sorts of things to improve themselves, from taking a class on a particular technology, to reading a book about venture deals, to practicing intermittent fasting. Yet very few of them stop to ask the simple yet powerful question, “How can I make my decision-making better?”
And by the way, “better” doesn’t just mean “more accurate.” It also means “faster.” Many of the decisions facing entrepreneurs seem to have high stakes; they can literally mean the difference between the life or death of the company. When faced with such weighty decisions, the normal human instinct is to slow down, collect all the available information, and get emotionally comfortable with the possibilities before making a decision. That instinct is almost 100% wrong for entrepreneurial decision-making.
I describe entrepreneurial-decision making as confronting a rocky minefield (at night, inside a dense fog bank…) and deciding to sprint across. The central skill is learning how to be quick and decisive, and to adjust your course to avoid the worst of the mines.
When I evaluate entrepreneurs, one of the key factors I analyze is their decision-making calculus. This is especially true for repeat entrepreneurs. If they’re the kind of infinite learner who uses their past experiences to make their decision-making better, they have a huge advantage when it comes to everything from hiring to strategy to sales, making them an even better bet the second time around. But if they don’t have the drive and self-awareness to improve their decision-making, it’s probably not worth paying the experience premium to invest in them.
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