It is a brute of a question isn’t it; what do I know to be true?
Ray Dalio mentions the question in his book Principles. The question plays a key part in the steps he takes to make decisions. In the complex world of investing, having a rigorous process for making decisions is essential.
It separates the successful from the not so successful.
The question can – and should – play an equally critical role in our decision-making. Any decision, big or small needs a logical approach. Alas, we don’t tend to make decisions logically. Outcomes, no matter how outlandish blind us. Emotions do the same – and that’s all before we get to our walkway of biases looking to trip us up.
Of course, the outcome of your decision matters. But it shouldn’t blind you from using facts to make an informed choice. Often, choice brings a plethora of information. Most of it is incomplete information, which we use to form assumptions.
When we assume, we accept incomplete information as facts.
Therefore, asking what do I know to be true should be your first question. It allows you to challenge your assumptions, filtering out the truth from the hysteria, thus enabling you to see the facts. Emotions, biases, and assumptions have no place when seeking objectivity. And it is objectivity which facts provide, which in turn leads to a better decision.
It is why the first question you should ask yourself when faced with a decision is what do I know to be true?