In this two-minute video Jeff Bezos explains what helped him understand whether the decision of leaving his stable and high paying job and starting a company selling books online was a good one:
I am trying to incorporate this mental model into my decision-making processes and what I really like about it, is that it forces me to think long-term and focus on things that matter – you won’t regret most of the small decisions when you are 80 years old.
Another benefit of Regret Minimization Framework is that it is focused on avoiding mistakes of omission.
- In short, mistakes of omission are mistakes where we failed to act when we should have.
- Compare it to mistakes of commission – those where we decided to act, and we were wrong.
I first heard about this principle from Marc Andreessen’s talk at Stanford Graduate School of Business (54 min):
“In venture capital, there is two kind of mistakes you can make. There is a mistake of commission, which is a mistake most people make: “I make a decision, I invest in a company, I lose all my money.”
And then there is a mistake of omission, which is: “Mark Zuckerberg walks in the door in venture capital firm XYZ in 2004 and, you know, “What is this little kid doing?” and “This idea is crazy!”, etc.
Every highly successful VC has made mistakes of omission, really big ones, of companies that they had the chance to invest in, they should have invested in, but they didn’t invest in. It turns out that the mistakes of commission, they matter, but they don’t scar you for life, compared to mistakes of omission.”
I think Regret Minimization Framework is a great mental model which helps to take outside view and avoid costly mistakes of omission. What’s your opinion?