4 Reasons Why a "Good Enough" Decision May Be Best

This article is a reprint of Wise Bread's contribution to OPEN Forum from American Express -- where small business owners can get advice from experts and share tips with each other.

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Successful businesses are based on results, not promises; action, not plans; decisions, not procrastination.

Yet, in spite of the abundance of information — or more to the point, because or it — business decisions are increasingly hard to make. We sift through tons of irrelevant information on Google, Bing, and Yahoo in hopes of making an optimal choice.

The solution, as odd as it may sound, may be to stop trying to find the best solution and be happy with good enough. Here's why:

1. It's Hard to Know What You Want

"Look, we need to make a decision here and take some action. We need results, and we need them now." Sound familiar? Anyone who's ever run a business has said those words, or similar, many times. But making a decision requires that you know what alternatives are available, and more importantly, which one is the best.

Generally we make decisions based on prior experience. The problem is we're not very good at remembering experiences. Princeton Psychologist Daniel Kahneman has done some fascinating research that shows we only remember the best of what we experience, and how the experience felt at the end. He calls this the "peak-end" rule, which suggests people remember the average of an experience, not the sum.

For example, one group of people in an experiment were subjected to loud noise, while a second group was exposed to the same noise plus more, but less painful, noises at the end of the session. The second group, surprisingly, said the the experience was less unpleasant than the first group, even though they actually had to listen to more noise.

How does this play out in a business? Years ago you made a decision. The results were a disaster, but all the angst and chaos tapered off as you got things back under control. You remember the decision as a reasonably good one because on average things weren't so bad, especially at the end.

2. We Can’t Trust Ourselves

In some deep way, many of us know we really shouldn't trust our experiences. So we talk about, and read about, other people’s experiences and opinions in hopes of making better decisions. You're doing that right now.

The problem is we're wired to depend on what's most available, or what we're familiar with. You see lots of ads that offer discounts, so you assume discounting must be a good idea. In fact, it often isn't.

College students selecting classes are influenced more by a single review from someone they know than an extensive evaluation survey collected from several hundred students. Advertisers learned long ago that branding works because people will chose what's familiar, a brand name they recognize. Mass media features dramatic causes of death such as tornados, accidents, floods, fires, and homicides. So we overestimate how often those occur while, at the same time, we underestimate diabetes, asthma, stroke and tuberculosis — more common causes of death.

Worse, because we often have to rely on secondhand sources, we find ourselves relying on the same secondhand sources, such as CNN or Fox News or Huffington Post. What that means is that we're less likely to get unbiased advice from someone else's experience. We also tend to associate with people of like mind, so we limit the advice we receive to people who think like we do. Soon we’re believing in something that has no basis in fact — something that may even be based on fraud, such as the anti-vaccination baloney that’s actually killing kids.

3. We Don't Know How to Make Good Decisions

If discounts are a bad idea, why do department stores seem to have everything on sale all the time? Because we're bad at decision making. They give us the manufacturer’s suggested retail price as an anchor, and then lead us to believe we're getting a great deal by offering what seems to be a bargain. One mail-order catalog offered a $279 bread maker with mediocre results. When they offered a super-deluxe version for $429, sales of the cheaper model almost doubled.

Even the way information is framed affects our decision-making. Two stores sell a particular brand of paint. One store has a big sign that says, "Discount for Cash!" and offers the paint at $11.50 a gallon, or $10.50 if you pay cash. A nearby store offers the same paint for $10.50 a gallon, but imposes a $1 surcharge per gallon if you charge it. Research shows that we'll go for the discount every time, even though the cost is exactly the same. We'll also pick a small-but-sure gain (do you want $100 now?) over a large but uncertain one (or $200 based on the flip of a coin?). And we prefer yogurt that’s 95% fat-free over yogurt with 5% fat content.

We're also psychologically challenged when it comes to making decisions about gains and losses. Losses are "more bad" than gains are good. That's why money-back guarantees work — people think something they possess is worth more then its cash value, so if they return it they feel as if they've lost something. 

4. We Strive for the Optimum Choice at Our Peril

Seeking the best is impossible when you have many alternatives. The only way to know if you’re picking the best alternative is to know what they all are. In today’s world that can drive you nuts. An "if only I had..." mentality can lead to regret, and that steals from the satisfaction of even a good, if not optimum, decision.

In fact, when economists theorize about how we make decisions they assume we try to maximize our preferences, our satisfaction. What they’ve learned is that satisfaction and preferences are subjective, not objective. And that’s where the idea that good enough — not necessarily the best — decisions, actions, and results may make the most sense.

Daily decisions overwhelm us to the point that we want to avoid making them. But if we understand that any decision is usually better than no decision, that there never will be a perfect choice, and that we are going to make mistakes, we’re on the path to satisfaction and sanity.

We can limit our choices, decide which ones are important and invest our time in those. The entrepreneurial predisposition for a "ready, fire, aim" approach is based on that premise. Does the color of your logo really matter when you don’t have any customers?

Choose an alternative; don’t just pick one. Once you’ve narrowed the list of choices, you’ll have the time and attention to be thoughtful, even creative, about what to do.

Every advertiser tries to convince you to accept only the best, but if you can embrace the idea that good enough can be satisfactory, you can stop trying to make the perfect choice and get on about your business.

Think carefully about what you want, where you’re going, and what’s important. Once you do, make a decision and take action and you’ll find the result much more satisfying.