PACED decision making

0:00- [Instructor] In this video, we're gonna talk about something that sounds fancy and technical, but as we'll see, it's something that at least I find myself doing all of the time, even though in my head I don't call it PACED decision making. You're going to see what PACED stands for in a second.

0:13So let's say that we have some problem, we have some decision to make, and that's actually where the P comes from. It's P for problem. And the problem is, and this is a nice problem to have, I have several job offers, and I have to figure out which offer to pick.

0:28So which offer to pick. So the natural question is, well, what are those offers? What are the alternatives? And so let's take a look at that. I put this, I drew this table ahead of time. So here are the alternatives. That's what A stands for. Let me, let me...

0:53A is for alternatives. I could write it out, but I've just told you that twice. So I got an offer from Blundersoft, one from Dogware, and one from Booble. Now, there's several factors in thinking about my alternatives. And so the next letter here is, what are the criteria?

1:12If you're trying to make a decision, you have to know, "Okay, what am I deciding between?" And then, "What are the things that I care about," "or what matter to this decision?" And I know, and it for me, it matters where I work. It matters how much I'm going to make, and it also matters what my title, or maybe my responsibility, or what my career growth is.

1:31Now, there's probably other factors if you're really doing this for yourself, but I'm trying to do this reasonably simple in a video. So we've defined our criteria, and actually, let me put it, the criteria, you could list that there, or I could say that that's going to be the criteria.

1:46So C is for criteria, right over there. I care about location, I care about pay, and I care about career growth more than title, maybe title plays into career growth, but that is not everything. So what I wanna do then, is based on these criteria, I wanna rate, and I wanna use the same rating, because if you used different scales, if you said just absolute pay, these are very large numbers.

2:10And then if you were to rank these or rate these, in some ways, those would be smaller numbers. You wanna rate them all on the same scale. And so that's why we have this rating here. And I'm gonna rate them all on a scale of one to five of how good these are. And so for me, let's say my family lives in Washington DC.

2:28That location is perfect for me, maybe I already live there. So that is a location rating of five for me. New York, a little bit further away, not ideal, maybe make it a three. And then, San Francisco, it's across the country from my family, I'd have to pick up and move, but it has nice weather, so maybe I give that a three as well.

2:52Now, Pay rating, San Francisco has the best pay. Let me give that one a five. And Washington is a little bit less than that. Let me give, well actually, let me just go in order here. Maybe New York is a four. I'd probably actually wanna scale it and use decimals.

3:09But for the sake of math being easy, I'll call the Washington DC pay a three. Now, career growth rating, not only is it VP of Sales in Washington DC, but I guess I'm gonna manage a lot of people, which is something that I aspire to do, and I'll learn a lot, and maybe it sets me up to be a CEO.

3:26So I will put that as a five. Let's say New York is a three. And San Francisco is also three. They're pretty similar in terms of what they're offering me, in terms of career growth. Then what we want to do is evaluate. That's where that E is coming from. And we can evaluate by coming up with a total score.

3:49Now, there are many ways to do this. One way is say, well, these different criteria matter equally to me. If they matter equally to you, you could just add up these numbers. But in many cases, or in most cases, they don't matter all equally. So let's say, that of the criteria, location matters the most to you, and it matters twice as much as each of the pay and the career growth rating.

4:14And so what we could do, is we could create these weights, and this is how much you're going to weigh each of these. They could be a number, they could be a percentage, but I'm gonna give the location weighting a two, 'cause that matters a lot. And pay and career are both ones.

4:31So one way to interpret this is, location matters twice as much to you as pay, and pay and career growth are about the same. If I had a rating like this, 3, 2, 1, that means location means three times as much to you as career growth. And pay means two times as much to you as career growth.

4:52And I guess you could say, location means 50% more to you than pay rating, because three is 50% greater than two. But I'll go back to my original ratings. So let's say it is three, two, two. And so now, when I calculate my total score, I'm going to weight these numbers by the weighting.

5:12What does that mean? Well, I'm going to do three times each of these scores, two times each of these scores, and two times each of these scores. So when I do my actual evaluation, I'm gonna do five times three. So five times three, plus three times two, three times two, plus five times two, five times two. And this is going to be equal to, let's see, 15 plus six is 21, plus 10.

5:42I got a score of 31 for Blundersoft. Now I will do the same with Dogware, three times three, plus four times two, plus three times two. That's going to be nine plus eight, which is 17 plus six, which is 23. And then last but not least, I have Booble. And so that's three times three, plus five times two, plus three times two, which is equal to nine, plus 10 is 19, plus six is 25.

6:22So based on this, if I evaluated my needs appropriately, then I would give, then I would pick Blundersoft. I got the highest score right over here at 31. So that is my decision, which is the final letter here. We have the problem, we have the alternative, the criteria, the evaluation, and then the decision.

6:45So that right over there, let me do that in a new color. I've already picked that color, let me do it in purple. So that right over there is my decision. Now, anytime you decide to do something, invest your time or your money into anything, there's always going to be an opportunity cost.

7:01The opportunity cost is the cost of not doing your next best alternative. And so what's the opportunity cost here? Well, the opportunity cost, your next best alternative, based on this criteria and how you evaluated it, is Booble. So your next best alternative is going over to Booble.

7:18And so when you pick to stay close to your family, and have the career growth of Blundersoft, you are passing up the higher salary, and I guess the opportunity to live in San Francisco by working at Booble. So that is your opportunity cost. There's a cost of not doing that.

7:33You're not getting all of the things that Booble involves. You can't do both jobs. And you're picking that, because, for you, Blundersoft is better. And it's mainly because of the location and the career growth.