When you are tackling important decisions, here are some points to keep in mind:

Decisions based on financial projections beyond say three years are tenuous at best. The farther ahead one forecasts, the greater the likelihood of a major unanticipated change in the critical variables and something unknown of significance occurring. That is just how the real world operates. Resist investing any time in preparing projections beyond three years, including those used in so-called “Business Plans”.

A key part of making decisions is a careful assessment of the risks associated with any course of action if things go wrong. Most people have a strong bias towards being overly optimistic. Remember Murphy’s Law — what can go wrong usually does. Be reticent about assuming any guarantees relating to the performance of other parties beyond your control. Obviously, you need to watch out for those decisions where the outcome may be seriously damaging or even fatal for your organization if they turn out to be wrong.

Jim Collins, in his book How the Mighty Fall, recommends that: “When making risky bets and decisions in the face of ambiguous or conflicting data, ask three questions:

Do not let yourself be rushed into making decisions prematurely before you and your group have completed the necessary analysis. If you are being overly pressured into making a yes or no decision, say “No”. It is easier to change a “No” to a “Yes” afterwards than vice versa. Keep notes on the key factors taken into account and the alternatives considered so that you have them available to refer to if the decision later proves to be incorrect.

Accept that you will make mistakes. Like baseball players, nobody comes remotely close to batting 100% in making decisions unless they are not in the game. Apart from avoiding fatal mistakes, what is important is that you learn from your mistakes and do not keep making the same mistake over and over again. Mistakes are rarely a sin. Trying to cover mistakes up by sweeping them under the carpet definitely is a sin.

Once the decision is made, implement it with a sense of urgency. At the same time, impose closure on any further consideration or discussion of the alternatives.

Charlie Munger, Warren Buffett’s partner, talks about the need to have three baskets on your desk: In, Out and Too Tough. He said, “We have such baskets — mental baskets — in our offices. An awful lot of stuff goes in the ‘Too Tough’ basket. And then we work on the rest.” Try to restrict yourself to dealing with decisions within your area of competency and realize when something is either outside of it or too tough to solve.

For a greater understanding of how to treat uncertainty in making decisions, I strongly recommend you read Nassim Nicholas Taleb’s book, The Black Swan — The Impact of the Highly Improbable. Prior to writing this book, the author made a considerable fortune as an options trader and in the hedge fund business.

On the subject of utilizing theories in making decisions, Taleb said, “I care about the premises more than the theories, and I want to minimize my reliance on theories, stay light on my feet, and reduce my surprises. I want to be broadly right rather than precisely wrong… A theory is like medicine (or government): often useless, sometimes necessary, always self-serving, and on occasion lethal. So it needs to be used with care, moderation and close adult supervision.”