What it is
You decide something today and will not know for months whether it was right. A decision journal is where you write it down now, with the date. Each entry records what you chose, what you turned down and why, and what you expect and how sure you are. It also lists the assumptions behind the choice and when you will reread it.
A diary records what has happened. A journal entry is written before the result. It states an expectation that events can prove wrong, and a date to check it. So later you can judge how well you reasoned, not whether you were lucky.
Where it comes from
No single person invented the term. In 1975 the psychologist Baruch Fischhoff described the problem the journal solves, in his paper "Hindsight ≠ Foresight". In his experiments, people who were told how an event ended thought the ending had been easier to predict. They did not notice their view change. Fischhoff wrote that not noticing "can seriously restrict one's ability to judge or learn from the past."
Advice to keep records reached business books in 1989. In Decision Traps, J. Edward Russo and Paul J. H. Schoemaker listed ten traps. The ninth was "Not Keeping Track". It means trusting experience to teach you, so you never write down what your past decisions led to.
The name "decision journal" spread later, mostly through Shane Parrish's blog Farnam Street. In his template you note how you see the problem, the alternatives and the expected outcome, with probabilities. You also note how you feel in body and mind.
A popular story has the psychologist Daniel Kahneman telling an investor to buy a cheap notebook and write down what he expected and why. But it comes second-hand, through the investment strategist Michael Mauboussin, and is not in Kahneman's published work. Treat it as a story, not a source.
What it corrects
Take a risky decision whose result comes months or years later. Along the way, events nobody controls shape it. When the result comes, you no longer remember how you reasoned. You remember a version edited to fit the outcome. After a success, the winning argument looks obvious and the doubts are gone. After a failure, the warning signs seem to have been in plain view.
Trying hard to be honest does not help. The people in Fischhoff's study, once told the outcome, still believed they were reporting what they had thought before. Nobody can feel their memory change, so even an honest, experienced, senior manager makes the same mistake. Only a note written before the outcome, and left alone afterwards, keeps your earlier belief.
How it works
- Write the decision in one sentence, with today's date: what you choose and what you give up.
- List the real alternatives and why you rejected each.
- Write your prediction. What will you see, by when, and how sure are you, as a number?
- Name the two or three assumptions the choice depends on. Mark the one you are least sure of.
- Set a date to reread the entry, or an event that would bring it forward.
- On that day, reread the entry before you look at what happened. Judge the reasoning and the result separately, and do not edit the entry.
Worked example
The psychologist Philip Tetlock kept such records for forecasts, on a huge scale. Over about twenty years he gathered forecasts from 284 people paid to comment or advise on politics and the economy. Each forecast was a probability with a date, on a question inside or outside the forecaster's field. By 2003 he had 82,361 of them. He also recorded how each forecaster explained a miss, so the excuse could be checked against the original number.
In 2005 he scored the forecasts against what happened and published the results in Expert Political Judgment. The experts barely beat well-informed non-experts, and neither group beat simple statistical rules. Anyone judging the experts by the hits they remembered would have missed this. Tetlock saw it because every forecast had a date and could not be changed once the outcome was known.
In a Business Case Weekly case
The Nike case stops in June 2020, when Nike's board is asked to approve Consumer Direct Acceleration. Nike would cut its wholesale accounts, the shops that resell its products, and sell directly to customers. Judged by profit margins, the move looks obvious.
A journal entry will not decide the vote. But it can hold three things. First, what the plan assumes shoppers want. Second, where you expect Nike to stand on other shops' shelves by 2024. Third, at what quarterly figure you would say that assumption had failed. Measure it outside Nike's own shops and website. Then, whatever happens by 2024, you can check your reasoning against it.
In your answer
- "Today I choose X over Y. I reject Y because …"
- "This rests on the assumption that … I am least sure about …"
- "By <date> I expect to see … I am about <n>% sure."
- "I will look at this decision again when … I will reverse it if …"
Common misuse
The first mistake is to write a diary. It tells what you decided and why it felt right, but has no prediction and no review date. You learn nothing from it, because it holds nothing the outcome could prove wrong.
The second mistake is to judge by the result. You reopen the entry, see a good outcome and mark the decision right. A lucky guess gets filed as a sound one. But a decision can be well reasoned and still unlucky. The point is to judge the reasoning apart from the result.
A quick check: find the sentence in your entry that the outcome could have proved false. Then find the date you meant to check it. If either is missing, you have written a diary.
References
- Baruch Fischhoff, "Hindsight ≠ Foresight: The Effect of Outcome Knowledge on Judgment Under Uncertainty", Journal of Experimental Psychology: Human Perception and Performance 1(3), 1975, 288–299. Twelve pages, and the whole case for writing decisions down.
- J. Edward Russo and Paul J. H. Schoemaker, Decision Traps: Ten Barriers to Brilliant Decision-Making and How to Overcome Them, Doubleday, 1989. Traps eight and nine are on feedback and keeping records.
- Philip E. Tetlock, Expert Political Judgment: How Good Is It? How Can We Know?, Princeton University Press, 2005. Twenty years of predictions, scored, and what they say about experts.
- Farnam Street, "How a Decision Journal Changed the Way I Make Decisions". The popular template.