Simple rules are shortcut strategies that save time and effort by focusing our attention and simplifying the way we process information. The rules aren't universal--they're tailored to the particular situation and the person using them. Simple rules work, it turns out, because they do three things very well. First, they confer the flexibility to pursue new opportunities while maintaining some consistency. Second, they can produce better decisions. When information is limited and time is short, simple rules make it fast and easy for people, organizations, and governments to make sound choices. They can even outperform complicated decision-making approaches in some situations. Finally, simple rules allow the members of a community to synchronize their activities with one another on the fly. As a result, communities can do things that would be impossible for their individual members to achieve on their own.
Effective simple rules share four common traits. First, they are limited to a handful. Capping the number of rules makes them easy to remember and maintains a focus on what matters most. Second, simple rules are tailored to the person or organization using them. College athletes and middle-aged dieters may both rely on simple rules to decide what to eat, but their rules will be very different. Third, simple rules apply to a well-defined activity or decision, such as prioritizing injured soldiers for medical care. Rules that cover multiple activities or choices end up as vague platitudes, such as "Do your best" and "Focus on customers." Finally, simple rules provide clear guidance while conferring the latitude to exercise discretion. Central bankers, for example, use simple rules not as a mechanistic tool to dictate interest rates, but as guidelines within which they exercise judgment.
MAKING BETTER DECISIONS
Boundary rules guide the choice of what to do (and not do) without requiring a lot of time, analysis, or information. Boundary rules work well for categorical choices, like a judge's yes-or-no decision on a defendant's bail, and decisions requiring many potential opportunities to be screened quickly. These rules also come in handy when time, convenience, and cost matter. Boundary rules cover the basics of what to do.
DOING THINGS BETTER (PROCESS RULES)
WHERE SIMPLE RULES COME FROM
Codifying Personal Experience
Drawing on the Experience of Others
Distilling Scientific Evidence
Negotiating an Agreement
STRATEGY AS SIMPLE RULES
Figure out what will move the needles. Economic-value creation is a powerful lens for focusing managers on what matters most, but the concept can be a bit abstract. A practical way to visualize value creation is to picture two horizontal needles running parallel to one another. The upper needle marks how much a company's customers are willing to pay for its goods--so it will be much higher for Audi than it will be for Hyundai. The bottom needle indicates the costs of producing a product (including the risk-adjusted cost of capital). Ikea, by selling its furniture unassembled out of cavernous warehouses, keeps its cost needle lower than most of its competitors. The gap between the needles represents economic value created.
Identify a bottleneck.
Craft the simple rules. Developing rules from the top down is a big mistake. When leaders rely on their gut instincts, they overemphasize recent events, build in their personal biases, and ignore data that doesn't fit with their preconceived notions. It is much better to involve a team, typically ranging in size from four to eight members, and use a structured process to harness members' diverse insights and points of view. When drafting the dream team to develop simple rules, it is critical to include some of the people who will be using them on a day-to-day basis. It is critical to test your first-cut rules in a rigorous fashion, and refine them in light of your findings.
SIMPLE RULES IN PERSONAL LIFE
Determine what will move the needles for you. "Strategic" improvements can come from two sources. You can raise the top needle by doing more of what makes life worth living, such as spending time with your children, for example, or contributing to your community. Increasing these activities will enhance your sense of well-being, happiness, and self-esteem. You can also create personal value by lowering the bottom needle, which represents problematic areas, such as money worries or poor health, that prevent you from getting the most out of life. Mitigating these negative aspects of life can reduce stress, anxiety, or fear. Personal value consists of the gap between those activities that bring you the most happiness and those that keep you from enjoying life to the fullest.
What aspect of your life do you most want to improve? What are the first three things that come to mind?
What activities bring you the greatest happiness and sense of well-being? How could you spend more time on these?
Which aspects of your life cause you the most fear, stress, or anxiety? How could you decrease these?
If you look back in five years, what will you regret not changing? What will you regret if you look back from your deathbed?
How might a trusted friend, spouse, or loved one answer these questions for you? (It would be useful to ask them.)
It is helpful to list more than one area for improvement, as some will be more suitable for simple rules than others. Three to five is typically enough to get started. In this stage it is helpful to be as specific as you can on what you want to achieve. For instance, "eat better" might be refined into "lose twenty pounds," "increase energy," or "eat to manage blood sugar." These are very different objectives that will require, in all likelihood, different simple rules.
Find the right bottleneck. To help you identify promising candidates, ask yourself the following questions: Which activities or decisions keep you from achieving your objective? Where will rules have the greatest impact? A productive bottleneck should not only create personal value; it should also lend itself to simple rules. Some key questions to consider when selecting a bottleneck include:
Do you frequently make this decision or participate in this activity?
Does the number of options exceed your available time, money, energy, or attention?
Does this activity or decision require willpower?
Does this activity or decision require some flexibility?
Can you measure results to test and refine your rules?
After weighing the importance of potential activities and how suitable they are to simple rules, you should identify a single, specific bottleneck to tackle. When selecting a bottleneck, it is helpful to be as precise as possible.
Craft simple rules that work for you. By drawing on multiple sources, you increase the odds of finding rules that will work for you. When developing your own rules, it is best to spend sufficient time--a few days to a week typically works--pulling inspiration and insights from multiple sources, which provide the raw material that you can draw on and reshape to formulate your own simple rules.
When it comes to gathering and reviewing data to craft simple rules, you typically want to take a few days to a week. If you skip the data collection altogether, you are likely to make false assumptions that will result in ineffective simple rules. If you go to the other extreme and stretch the data collection out for weeks, you will probably lose momentum.
The simple rules process is, at its heart, informed trial and error. By drawing on research, advice from friends, past data, and your own experience, you can make better choices of the bottleneck and first-cut rules. You want to make the rules as simple as possible to increase the odds that you will follow them. You can also limit your rules to two or three, as we have seen elsewhere in the book, to increase the odds that you will remember and follow them.
After crafting your preliminary rules, it is helpful to measure how well they are working. Measuring impact allows you to pinpoint what is and isn't working, and evidence of success also provides more motivation to stick with the rules. The best performance metrics are tightly linked to what will move the needles for you--pounds lost for a dieter, or dollars invested if you are trying to save for retirement. Don't agonize about crafting the perfect rules right off the bat. Once you have gathered enough data to assess progress, you can step back and refine your rules.
EXAMPLE: RULES TO WIN FRIENDS AND INFLUENCE PEOPLE
(The Charisma Myth: How Anyone Can Master the Art and Science of Personal Magnetism, by Olivia Fox Cabane)
Daniel settled on three rules to develop the charisma that comes from focusing intensely on other people. First, "Imagine the person you are talking to is the sympathetic star in a film you are watching." Second, "Carry yourself like a king"--calm, comfortable, and without excessive nodding, "uh-huh"-ing, and fidgeting. Regal posture reduces the physical restlessness that can keep people from fully engaging in conversation. Finally, "Make and maintain soft eye contact," which means relaxing your eyes and face when you look at someone.
Daniel's story illustrates an effective solution to a common problem: how to translate a self-help book into action. The simple rules process provides a framework for sifting through hundreds of pages and honing in on the nuggets of advice that are most likely to work for you.