“Razors” are rules that help you make better decisions. Here are 15 of the most powerful razors you should know:

TheFinanceNewsletter.com
3 min readMar 18, 2024
Photo by Lucrezia Carnelos on Unsplash

“Razors” are rules that help you make better decisions.

15 of the most powerful razors you should know:

1. The Sunken Cost Fallacy:

This fallacy makes us stick with a bad decision because we’ve already invested in it.

Don’t keep investing time, money, or effort into something just because you’ve already invested a lot.

If it’s not worth it anymore, it’s okay to cut your losses and move on.

2. Regret Minimization Framework:

Make decisions based on what you’ll regret the least in the future.

Think long-term.

3. Law of Diminishing Returns:

Know when to stop.

There comes a point where putting in more effort doesn’t yield better results.

4. Alder’s Razor:

If something feels wrong, it probably is.

Trust your intuition and gut feelings when something doesn’t seem right.

5. Pareto’s Razor:

In many situations, 80% of your results come from 20% of your efforts.

Focus your efforts on the 20% that will produce the most significant results.

6. The Dunning-Kruger Effect:

Beware of overconfidence.

People who know the least about a topic often overestimate their knowledge, while experts tend to underestimate their knowledge.

Keep this in mind when evaluating your own abilities and those of others.

7. Patton’s Razor:

A good plan today is better than a perfect plan tomorrow.

Don’t get paralyzed by overthinking and take action.

8. Hofstadter’s Law:

This law says that things always take longer than you expect.

So, give yourself extra time.

9. Law of Unintended Consequences:

Think before you act.

Every action has ripple effects, so consider the potential consequences before making a decision.

10. Availability Heuristic:

This heuristic makes us think that if something can be recalled, it must be important.

But remember, just because it’s top of mind doesn’t mean it’s important.

11. Anchoring Bias:

This bias makes us rely too much on the first piece of information we hear.

So, always seek out multiple sources.

12. Dunbar’s Number:

There’s a limit to how many relationships we can maintain effectively.

Quality friendships matter more than quantity.

13. Feynman’s Razor:

Don’t assume you’ve nailed super complex topics.

If you think you understand quantum mechanics, you don’t understand quantum mechanics.

14. Parkinson’s Law:

This law says that work expands to fill the time available.

So, if you give yourself a week to do a day’s work, it’ll take a week.

Set tight deadlines to stay focused and avoid procrastination.

15. Confirmation Bias:

Seek out opposing viewpoints.

Don’t just look for evidence that confirms what you already believe — challenge yourself to consider alternative perspectives.

15. The Razor of the Internet:

The internet is full of angry people with too much time on their hands.

Consider the source of information and don’t let negativity consume you.

Razors help you “cut” through all the confusion, evaluate situations and make better decisions, faster.

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TheFinanceNewsletter.com

I write TheFinanceNewsletter.com for 50,000 subscribers. My expertise comes from real-world knowledge, sharpened by 15 years working on Wall Street and Banking.