opondo300/born-builders-agent-library/decision-making

Decision-Making Frameworks

Sources: Ray Dalio (Principles), Warren Buffett (Shareholder Letters + Munger), Peter Thiel (Zero to One), Charlie Munger (Poor Charlie's Almanack)

Ray Dalio — The 5-Step Process

Use this whenever a goal is not being reached or a problem keeps recurring:

1. Set clear goals — Distinguish what you truly want from what you think you want. Prioritise ruthlessly. "You can have anything you want, but not everything you want."
2. Identify and do not tolerate problems — Treat problems as "improvements screaming at you." Confront them directly. Ignoring a problem is a choice to let it compound.
3. Diagnose root causes — Separate symptoms from causes. A root cause is a reason, not an action. Ask "who should do what differently?" not "what happened?"
4. Design a plan — Specific tasks, clear ownership, defined timelines. Visualise as a narrative: what needs to happen, in what order, by whom?
5. Execute and push through — Great plans fail without follow-through. Build metrics. Assign accountability. Review.

Pain + Reflection = Progress Mistakes are data. Every setback must be followed immediately by objective analysis. What went wrong? Why? What would a different person have done? Extract the lesson before moving on.

The Designer vs Worker Rule: It is more important to be a good designer of your life than a good worker in it. Ask: "Am I strategically structuring this, or just working harder within broken constraints?"

Dalio — Idea Meritocracy

Idea Meritocracy = Radical Truth + Radical Transparency + Believability-Weighted Decisions

• Radical Truth: Everyone speaks their mind. Challenges are expected. Silence is not agreement.
• Radical Transparency: Default to sharing information. Hoarding information is a failure mode.
• Believability-Weighted Decisions: Not all opinions are equal. Weight input from people with proven track records in the relevant domain. A junior person who has been right repeatedly outweighs a senior person without that evidence.

Warren Buffett — 6 Mental Models

1. Economic Moat — What prevents a competitor from replicating this in 5, 10, 20 years? Types: brand, switching costs, network effects, cost advantage, regulatory barrier. No moat = no investment.
2. Circle of Competence — Know exactly what you understand and what you don't. "I don't know, and I think most people don't either" is a valid answer. Operate inside your circle. Expand it slowly.
3. Mr. Market — The market is your servant, not your guide. Prices are information, not commands. Emotional detachment is a competitive advantage.
4. Compounding Snowball — Wet snow, long hill. Find assets and environments where results compound. Avoid anything that interrupts compounding (high churn, resets, starting over).
5. Institutional Imperative — Organisations make smart people do dumb things. Watch for pressure to behave like peers even when logic contradicts it. The crowd is often wrong at inflection points.
6. Owner Mindset — Evaluate every business decision as if you own the whole company. Would the owner approve of this allocation of time and money?

Warren Buffett — 8 Decision Heuristics

Peter Thiel — 7 Questions Every Business Must Answer

A business that cannot answer these is not ready:

1. Engineering — Is this a 10× improvement, or just incrementally better? Marginal improvements do not create defensible businesses.
2. Timing — Why is now the right moment? What changed recently that makes this possible or urgent?
3. Monopoly — Are you starting with a large share of a small, specific market? Trying to capture 1% of a huge market is not a strategy.
4. People — Does your team have the specific knowledge and experience to execute this particular thing?
5. Distribution — How does the first customer find you? The hundredth? Distribution is not an afterthought.
6. Durability — Will your market position be defensible in 10–20 years, or will it be competed away?
7. Secret — What do you know that others don't? Every great business is built on a secret the market hasn't priced in yet.

Vertical vs Horizontal Progress:

• Horizontal: Copying things that work. 1 to n.
• Vertical: Creating something new. 0 to 1.

Great businesses go from 0 to 1. Competition is for losers.

Charlie Munger — Inversion

"Invert, always invert." — Jacobi

To solve any problem: instead of asking "how do I succeed?" ask "what would guarantee failure?" List every way the plan could fail. Work backwards from failure to identify what must be protected against.

Application:

• Before launching a product: "What are all the reasons this product fails?"
• Before hiring: "What would make this hire a disaster in 12 months?"
• Before a pricing decision: "What assumptions, if wrong, destroy the unit economics?"

The most dangerous assumption is the one nobody is questioning because it feels obvious.

Charlie Munger — 10 Most Business-Critical Psychological Misjudgments

From "The Psychology of Human Misjudgment" (1995). Full list has 25; these 10 cause the most business failures:

1. Reward & Punishment Superresponse — Incentives drive behaviour more than values or logic. Always ask: "What are the incentives here, and what behaviour do they actually reward?"
2. Liking/Loving Bias — You distort facts to please those you like. Avoid hiring or partnering based on likeability alone.
3. Disliking/Hating Bias — You distort facts to damage those you dislike. Competitors and critics are often right. Hear them.
4. Doubt-Avoidance — The mind resolves uncertainty by reaching a decision quickly and defensively. Premature certainty kills analysis. Sit with the uncertainty longer.
5. Inconsistency-Avoidance — People resist changing their minds even when evidence demands it. Sunk cost, identity, and status all reinforce bad positions. Ask: "What would I think if I had no prior position on this?"
6. Curiosity (absent) — Lack of curiosity about why things work closes off entire categories of insight. Force "why does this work?" before "what should we do?"
7. Kantian Fairness — People act based on what they believe is "fair," not what is logical. Compensation, recognition, and deals that feel unfair destroy motivation regardless of the number.
8. Envy/Jealousy — More destructive than most other biases because it produces zero benefit to the envier. Watch for this in team dynamics and competitor obsession.
9. Social Proof — Doing what others are doing feels safe but is often wrong at inflection points. "Everyone is doing it" is a warning sign, not reassurance.
10. Authority Misinfluence — Deferring to credentials rather than evidence. Titles and status do not determine correctness. Always ask: "What is the actual evidence?"

Kahneman — System 1 vs System 2 (Bias Detection)

System 1: Fast, automatic, emotional, pattern-matching. Produces intuitions. System 2: Slow, deliberate, effortful, logical. Produces analysis.

Most business mistakes happen when System 1 is running on a System 2 problem.

Signs you are in System 1 when you need System 2:

• The decision feels obvious
• You feel confident without being able to articulate why
• You are under time pressure
• Emotions are elevated (excited, threatened, afraid)
• The decision confirms what you already believe

Loss Aversion: Losses hurt roughly 2× more than equivalent gains feel good. This means people take too little risk (refusing good bets to avoid possible losses) and too much risk (doubling down on losing positions to avoid confirming a loss).

Anchoring: The first number seen heavily influences all subsequent estimates. Always generate your own estimate before seeing any external number.