Decision Debt
The hidden costs of past decisions
So take control and make your own choices
Yeah, you have the power
Some call it power, some call it poison
- Annisokay, Face the Facts
Only when our progress slows do, we become aware of the weight of our past decisions.
England and America built their first modern railways within a year of each other: the Liverpool and Manchester Railway (1830) and the Mohawk & Hudson Railway (1831). Each set the space between the rails (i.e., the rail gauge) at 4 feet 8 1⁄2 inches.
As railroads proliferated throughout the 1830s and 1840s, so too did the variety of gauge sizes. Few based their selection solely on engineering criteria. In some cases, it was a matter of familiarity, aligning the gauge with the width of the transportation lanes the railway was replacing. In others, it was a strategic decision, fending off competitors or neighboring nations from connecting to their rails.
This made things complicated. By the 1870s, America utilized over twenty different gauges varying anywhere from five to seven feet. Left to their own devices, the railways had created a transportation network that would force passengers and cargo to switch trains at each junction. Something had to be done.
The Americans experimented with solutions that modified the existing framework:
Train cars were developed with wider wheels to travel on various tracks and wheels that could be manually adjusted to match the tracks' width. Both proved unstable and prone to derailment.
Tracks were modified to include a third laid within existing rails to accommodate two different gauges. This proved to be a limited and expensive solution.
Steam-powered cranes were employed to lift cars from one gauge rail to another manually. This was effective but expensive and slow.
So many innovations, so little progress. After years of working around the problem, the writing was on the wall. As long as the railways were allowed to set their own gauges, long-distance train travel was neither safe nor efficient. Gauge standardization was the only solution.
During the Transcontinental Railroad development in 1869, railways were torn up and replaced with the standard 4 feet 8 1⁄2 inches gauge first installed over 30 years ago. The change was expensive but not nearly as disruptive as expected. Standardization enabled an unparalleled focus on a singular solution. Focus brought efficiencies, as exemplified by Louisville and Nashville’s replacement of a combined ~2,000 miles of track within one day.
As impressive as this was, it wasn’t revolutionary. The British came to the same conclusion more than 20 years earlier. As the Americans toiled with solutions to a problem they created, the British solved the problem at its source by enacting the Railway Regulation Act, which defined the same 4 feet 8 1⁄2 inches gauge as standard, banning all others.
The American approach is a stark reminder of how our past decisions can shape our trajectories. Each decision creates a commitment that reduces our option pool. Each commitment acts as a form of leverage: it can amplify our outcomes either up or down.
Much like debt.
Debt gets a bad rap. In today’s climate, it’s often conflated with a looming crisis: the national deficit, the student loan bubble, etc. These are possible outcomes of borrowing, but they are not inevitable.
Starting a company. Going to graduate school. Buying a home. These potentially life-changing events would be largely unattainable if they were only available to those who had the cash in hand. It is when the cost outweighs the benefits of our outstanding commitments that we get into trouble.
In finance, this is known as debt overhang. Think of it as a borrowing black hole, where the debt burden looms so large that it consumes all available resources. Even if a golden opportunity presents itself, there’s no way to pursue it, as every incremental resource generated is needed to fund the obligation. The commitment becomes a condemnation. Debt becomes a four-letter word.
Our decisions work in much the same way. Commitments, by definition, create constraints. When we go on a diet, we forego delicious deserts because we believe a healthy lifestyle will make us feel better. When we take that promotion, we abandon the safety of our last job in hopes the newer role gives us a better life. When we get married, we (hopefully) delete the dating app on our phone because we believe the one we’re with is the one.
These constraints are force multipliers in that they focus our resourcing. Just like debt consumes a percentage of future earnings, decisions consume future opportunities that otherwise would’ve been available to us. If we make the right choices, the payoff is massive. If not, we fall behind to the point where we may never catch up.
Thinking about our decisions as a form of debt gives us a framework to avoid the trap of decision overhang. When we find ourselves in a hole, we have a choice: keep going to emerge on the other side or stop digging.
Decision overhang is dangerous because it’s a gradual process. Think of each decision as a swipe of a credit card - a series of individually small purchases can put us into the same bind as a singular, massive one. Keeping our decision debt manageable requires that (1) reflect on how past decisions affect us today and (2) remember what decisions were made.
To do this effectively, it’s helpful to subdivide our decisions into four quadrants (borrowed from Martin Fowler):
Deliberate / Reckless - these are the decisions we make when we’re in a rush. We know there are best practices, but those are nice-to-haves, not necessities. This is the paradox of speed vs. velocity, and it will ultimately catch up to us.
Deliberate / Prudent - we acknowledge we’re making a sub-optimal decision with the intent of addressing it down the road. Yes, this report should be automated, but the CEO needed it yesterday, so let’s hack it together this one time.
Accidental / Reckless - this is the most dangerous decision because we don’t even realize we had a choice. We’re trapped in a cycle of shooting ourselves in the foot and then bandaging it, all along wondering why the bleeding won’t stop. Think of the Americans’ attempt to deal with loss aversion, doing everything they can to enable railway connections while simultaneously building more that won’t connect.
Accidental / Prudent - similar to the above, we’re heavily indebted to commitments of the past, but we’ve now seen the error of our ways. Think of the British passing a law to standardize rail gauges after seeing what happens with railways are left to their own devices.
When we think about our decisions in this way, we can figure out which decisions continue to serve us and which hold us back. Decision debt is inevitable, but decision overhang is not.
This framework allows us to do a few things to maintain a palatable amount of decision debt:
Maintain a record of deliberate debts. It’s easy to forget that the shortcuts we take today are not intended to be long-term solutions. The more specific we can be on when and how we’ll address the shortcomings of today’s actions, the easier it will be to avoid carrying the debt too far into the future.
Step outside of yourself. Identifying reckless decisions is hard, either because we don’t realize it was reckless or we don’t realize we decided at all. So, separate yourself from the decisions you’ve made. Ask yourself: If someone took over for you, with no attachment to prior decisions, what would they do?
Look for unintended consequences. The key is to identify the decisions we didn’t know we made. Friction points make our day-to-day harder than it needs to be and, typically, result from a past decision that’s boxed us in. The intent isn’t to unwind the decisions we believe in but to adjust the parameters to allow for the opportunities we’re missing.