Why Warren Buffett’s 10/10/10 Rule Will Help You Make Smarter Decisions
Decision-making is a non-negotiable experience people from all walks of life must confront. No matter how crucial and stressful it can get, a decision usually has to be made in order to arrive at the next station in life.
Ultra-successful people are the easiest target for the harshest decision-making situations. However, successful people like legendary investor Warren Buffett set themselves apart through a systematic way of handling their choices.
Mega moguls like Warren Buffett possess a skill that enables them to look into the bigger picture, avoid cognitive biases, and foresee long term results because they know that making smart decisions are necessary to thrive, achieve, and sustain success in life.
A brief on why we make bad decisions
According to recent studies, there are several factors that can negatively affect our decision making process. These might include our past experiences, cognitive biases, and a lot more factors that intensifies the situation further. Pile all of that on to a stressful situation, and you have a recipe for subconscious decision-making disaster.
So, how can you avoid your brain’s tendency to make bad decisions?
Ultra-successful people like Warren Buffett have to make choices that can affect millions of dollars (and people) every day. Rather than letting this affect their choices, they utilize a method that could easily be applied to anyone’s life. It is known as the 10/10/10 Rule.
This rule is really simple. You just need to remember three questions, and be able to answer them with a forward-looking perspective:
The questions are:
1. How will I feel about my decision in 10 minutes?
2. How will I feel about my decision in 10 months?
3. How will I feel about my decision in 10 years?
How this applies to you
How this applies to you
Your brain is hardwired to look towards short term pleasure. However, looking long-term gratifications and their ramifications allows you to make smarter decisions. As Dr. Stephen Covey put it, “Happiness can be defined as the fruit of the desire and ability to sacrifice what we want now for what we want eventually.”
This method forces you to think further, think smart, and assess the situation by how you would personally respond given the timeline. It saves you from a typical immediate reaction that could impact how you will be in the long run.
How to practice it
Sounds like a tall order? Trust us, this self-questioning will improve over time as you go along and test it out more frequently. And you don’t have to start with a massive decision: it can be as simple as considering whether you should buy a handbag or invest that money.
Practice is the key to success, and the same goes with this method: as you do it more often, you brain adapts quicker as well, and is able to naturally apply it to more scenarios. So, the next time you have to decide on something, give this long-term lens a try, and you’ll start to see the difference.
Do you have any other tips on smarter decision making? Share them with The LTH Tribe!
Want to learn more about making smart financial decisions? Visit CEO Elle Kaplan’s LexION Capital to read more.