Analyzing and tracking decisions long term- do you?

Question

I keep an excel spreadsheet detailing all of my investment decisions, RE and non-RE, as a tool for me to use long-term to update and analyze my decision making skills.  The way I have it outlined is very simple using 4 columns:

-Investment decision- outline what I did or did not do

-Why I think it is a good decision- Write down all the factors, variables, and assumptions I’m using to justify my decision and why I think it’s a good move.

-Why it may be a bad decision- Analyze what could go wrong or what assumptions could prove false, internally or externally, and how that may affect my investment.

-Result- periodically updated since things can change over a period of months/years/decades.

I am only 33 years old, and hopefully have many decades of investing left in me, so I want to form a good understanding of how I’m making decisions and track long-term how those assumptions play out.  My goal is to identify common areas where I either make mistakes, poor assumptions, show information bias, use data improperly, or when I followed/didn’t follow gut feelings and how that worked out.  By identifying these characteristics about my decision making process, I know it will help me in the future to be aware of these biases and blind spots which can allow me to account for it and ultimately lead to better decision making skills.  How do you guys track your decisions long-term?  I’m always open to improving upon this spreadsheet so I’m interested in learning what others are doing to keep track of these things and periodically return to analyze, evaluate, and learn from prior decisions.

Bill F. · Answer

@Scott Passman

First off great idea and thanks for sharing! I do something very similar to @Will Fraser with the Moleskin note book, but with an index in the back, So not nearly as high tech as you, but while still having the ability to find my notes.

When I have a large decision to make and I've arrived at the choice, I write out the entire process that lead me to that decision in narrative form. I find it helps me recap where I have been and will bring up details I forgot. The content ends up matching much what you do.

I agree 100% with everything you wrote and the only thing I have to add is that doing this also helps humble yourself to the probabilistic nature of our world.

Any decision can be good or bad and any outcome can be good or bad. That leaves four states for any decision: good choice/good outcome, good choice/ bad outcome, bad choice/ good outcome, bad choice/ bad outcome. The first and last end up being self evident, but it is the middle two that I think writing can help with.

It is a fact of life that sometimes we get unlucky, but the last thing we want to do is change a good decision making paradigm simply due to luck. The journal helps me see when I did everything right, but just got unlucky. The bad decision/good outcomes are far and away the most dangerous in my mind. All to often we do something dumb and our brains, wired to storytelling, will weave a tale about how we knew all along that this would turn out this way, when in reality we got lucky. The journal helps nip that in the bud and remind me when luck fell in my favor. That in turns stems the tide of over confidence in my abilities and then keeps me out of trouble in the future.

To me, process matters far more than outcome, so I try to have the best decision making process I can. Writing down the decisions helps me immensely.

Scott Passman · Answer

Great suggestions @Will Fraser.  Accountability and getting other people's perspectives are so crucial. I had a financial mastermind group going last year, but every single one of us had a child born at some point in the past 12 months so it has fizzled out for the time being.  Gaining a better understanding of my decision making process is important for me to develop so I'm working not only to self-analyze but to also gradually build a financially savvy group with different backgrounds that I can engage in higher level discussions with.

There are so many people on BP that I have learned so much from, and would love to hear how they have honed their decision making process over the years.  There are way too many to name, but a few of the contributors whom I really respect their thought processes are: @Bill F., @Joe Splitrock, @Alexander Felice, @Russell Brazil, @jay Hinrichs, @JD Martin, @shiloh lundahl and many, many more.

Will Fraser · Answer

Hey @Scott Passman, this is a really cool idea!  The data hoarder in me loves this and thinking of it 10 years later makes the formatting and search-ability of the data really crucial.  It'll be easier to format that now when the list is smaller than later when it is much larger.

I use an old school Moleskine journal - it's not bulletproof and certainly not searchable, but the one thing it does do is that it helps me process things and slow down while I'm doing that.

One thing I would be remiss not to mention here:  this is a fantastic role that accountability and camaraderie help with.  If you bring this data detailing tendency to a small group of other driven people and engage with each other on these points I would be shocked if you don't ultimately have more and better take-aways than you would from analyzing your self and your own data.  Those other people will be able to spot the lies you are telling yourself, the truths you are ignoring, and the trendlines you may be blind to.  Add to this that YOU will be doing the same this for THEM, and everyone wins togther.

Scott Passman · Answer

@Bill F. I agree that process is far more important than the outcome.  There are so many variables in any situation that cannot be fully controlled, but if you have the right framework for decision making than the probability that your outcomes will be favorable more often than they are unfavorable goes up.  There is a good book on this called "Thinking in Bets" written by Annie Duke that is worth the read if you aren't familiar.

I appreciate that you drew attention to deliberately writing out your thought process in narrative form to make yourself slow down and draw out your whole line of thinking.  Currently, I write down my rationale primarily in bullet points to help me list what assumptions/conclusions I'm making based off what data or indicators.  Perhaps I should add a little more long form writing to draw out my thought process a little more and see how that impacts my process.  Thanks for the suggestion.