Most decisions require thinking in probabilities rather than certainties. Base rates—statistical information about how things generally work—provide crucial context, yet we systematically ignore them in favor of vivid stories or intuitions about our specific situation. This creates predictable errors in judgment that compound over time.

Expected value—probability multiplied by magnitude across all possible outcomes—provides the right framework for decisions under uncertainty. The best opportunities have asymmetric payoff structures: limited downside with unlimited or disproportionate upside. Understanding this distinction transforms how you allocate resources and take risks.

Results are determined by decision quality plus luck. Conflating the two—working backward from outcomes to judge decisions—creates a vicious cycle where you learn the wrong lessons. The solution is evaluating decisions by process and information available at decision time, not by results that include randomness.

Mental energy is a finite resource. Every decision—from what to eat for breakfast to whether to fire an employee—depletes the same cognitive reserves. Decision fatigue degrades judgment quality progressively throughout the day, causing us to avoid decisions entirely or make impulsive choices. Managing this constraint is as important as improving decision-making skill.