Thinking Bounded Rationality

Bounded Rationality and Satisficing

Overview

Herbert Simon's Bounded Rationality recognizes that human decision-making is limited by three fundamental constraints: available information, cognitive capacity, and time. Rather than pursuing optimal solutions (which is often impossible), Simon proposed "satisficing"—a portmanteau of satisfy + suffice—choosing solutions that are good enough to meet requirements.

Core Principle: "Decision makers can satisfice either by finding optimum solutions for a simplified world, or by finding satisfactory solutions for a more realistic world." — Herbert Simon

When to Use

• Making design decisions under time pressure
• Facing complex problems with incomplete information
• Analysis paralysis is blocking progress
• Optimization costs exceed potential benefits
• Need to set stopping criteria for searches/research
• Evaluating when "good enough" beats "perfect"
• Resource allocation under constraints

Decision flow:

Decision needed? → yes → Do you have perfect information? → rarely
                                                         ↘
                    Is optimization cost justified? → no → SATISFICE
                                                    ↘ yes → Optimize (but verify cost)

The Three Constraints

1. Information Bounds

What you can know is limited

• Complete information rarely exists
• Gathering more information has costs
• Information has diminishing returns
• Future states are inherently uncertain

Example: Choosing a technology stack
Reality: You can't test every option in production
         You can't predict 5-year industry shifts
         You can't know your future team composition
Satisfice: Pick a well-supported option that meets current needs

2. Cognitive Bounds

What you can process is limited

• Working memory holds ~4-7 items
• Complex comparisons overwhelm analysis
• Decision fatigue degrades quality
• Expertise helps but doesn't eliminate limits

Example: Reviewing architecture options
Reality: You can't hold 20 tradeoffs in mind simultaneously
         You can't model all interaction effects
         You can't foresee all edge cases
Satisfice: Focus on the 3-5 most critical criteria

3. Time Bounds

When you must decide is constrained

• Deadlines are real
• Markets move
• Opportunities expire
• Perfect is the enemy of shipped

Example: Technical design for Q1 deadline
Reality: You have 2 weeks, not 2 months
         The business needs an answer now
         Delaying has its own costs
Satisfice: Make the best decision possible with available time

Satisficing vs. Optimizing

When to Satisfice

When to Optimize

The Satisficing Process

Step 1: Define Aspiration Level

Set the minimum acceptable threshold for each criterion:

Example: Hiring a senior engineer
Optimizing: Find the absolute best candidate
Satisficing: Find a candidate who:
- Has 5+ years relevant experience ✓
- Can pass technical interview ✓
- Salary expectations fit budget ✓
- Available to start within 4 weeks ✓
- Culture fit (team confirms) ✓

First candidate who meets all criteria → Hire

Step 2: Search Sequentially

Evaluate options one at a time against aspiration level:

Option A: Meets 4/5 criteria → Continue search
Option B: Meets 3/5 criteria → Continue search  
Option C: Meets 5/5 criteria → STOP, choose this one

Key insight: You don't compare options against each other, you compare each option against your threshold.

Step 3: Adjust Aspiration If Needed

If search is too long or too short, recalibrate:

Too many options qualify → Raise aspiration level
Nothing qualifies after reasonable search → Lower aspiration level

Step 4: Commit and Move On

Once threshold is met:

• Stop searching
• Accept the decision
• Resist second-guessing
• Redirect energy to execution

Application Patterns

For Technical Design

Scenario: Choose a message queue for new service

Satisficing approach:
1. Define requirements (aspiration level):
   - At-least-once delivery ✓
   - Handles 10k msg/sec ✓
   - Team familiarity or fast learning curve ✓
   - Managed option available ✓
   - Within cost budget ✓

2. Evaluate sequentially:
   - RabbitMQ: Meets all → STOP, use RabbitMQ

3. Don't continue researching Kafka, SQS, etc.
   unless RabbitMQ fails threshold

For Code Review

Scenario: Reviewing a PR under time pressure

Satisficing approach:
1. Define "good enough" criteria:
   - No security vulnerabilities ✓
   - Tests pass ✓
   - No obvious performance issues ✓
   - Code is readable ✓
   - Follows project conventions ✓

2. Stop when criteria met
   Don't perfect every line if shipping matters

For Research/Investigation

Scenario: Debugging production issue

Satisficing approach:
1. Define stopping criteria:
   - Root cause identified ✓
   - Fix verified in staging ✓
   - Rollback plan exists ✓

2. Stop investigating once you can fix
   Don't exhaustively trace every code path
   if you have a working solution

For Feature Scope

Scenario: MVP feature set decisions

Satisficing approach:
1. Define "enough to learn":
   - Core user job addressed ✓
   - Measurable success metric exists ✓
   - Usable enough for feedback ✓
   - Can ship within sprint ✓

2. First scope that meets criteria → Ship it
   Don't polish what you might throw away

Setting Appropriate Aspiration Levels

Too High → Analysis Paralysis

Symptoms:

• Nothing ever meets the bar
• Endless research and comparison
• Decisions perpetually delayed
• Perfect becomes enemy of good

Fix: Ask "What's the minimum that would be acceptable?"

Too Low → Poor Outcomes

Symptoms:

• Frequent rework required
• Quality issues in production
• Technical debt accumulation
• Stakeholder dissatisfaction

Fix: Ask "What past decisions do I regret? What threshold would have prevented them?"

Calibration Heuristics

Reversibility Check:
- Easily reversible → Lower aspiration OK
- Hard to reverse → Raise aspiration

Consequence Check:
- Minor consequences → Lower aspiration OK
- Major consequences → Raise aspiration

Time Check:
- Tight deadline → Accept lower aspiration
- Ample time → Can afford higher aspiration

Common Traps

Trap 1: Satisficing Feels Like Settling

Reality: Satisficing is rational under constraints, not lazy.

Optimizing with infinite time = mathematically correct
Optimizing with real constraints = often irrational
Satisficing = adapted to actual world

Trap 2: Post-Decision Regret

Reality: Finding a better option later doesn't mean the decision was wrong.

You chose Option B (met threshold)
Later discovered Option D was "better"
This is expected—you stopped searching at B
Regret is only valid if B didn't meet your threshold

Trap 3: Creeping Aspiration

Reality: Moving goalposts prevent closure.

Original: "Need 100ms response time"
After meeting it: "Actually, 50ms would be better"
After that: "Hmm, 25ms would be ideal..."

Fix: Lock aspiration level before search begins

Trap 4: Satisficing the Wrong Things

Reality: Some decisions warrant optimization.

Wrong to satisfice:
- Security critical systems
- Legal compliance
- Safety-critical code
- Irreversible architectural choices

Right to satisfice:
- Internal tooling
- Reversible experiments
- Style preferences
- Low-stakes choices

Integration with Other Thinking Models

With First Principles

Use First Principles to determine:
- What constraints are real vs assumed?
- What is the fundamental requirement?
Then satisfice against those fundamentals

With Inversion

Use Inversion to set aspiration level:
- "What would make this solution unacceptable?"
- Avoid those failure modes
- Any option avoiding them satisfices

With Circle of Competence

Outside your circle:
- You can't evaluate "optimal" anyway
- Satisficing is your only realistic option
- Set thresholds based on expert input

Inside your circle:
- You can choose when to optimize vs satisfice
- Trust your calibrated aspiration levels

With Pre-Mortem

Run pre-mortem to validate aspiration level:
- "If this satisficed solution fails, why?"
- Adjust thresholds to prevent likely failures
- Don't over-engineer against unlikely failures

Verification Checklist

• Identified whether this decision warrants optimizing or satisficing
• Set clear aspiration level before searching
• Defined explicit stopping criteria
• Evaluated options against threshold, not against each other
• Stopped when threshold was met (or adjusted threshold rationally)
• Committed to decision without continued comparison shopping
• Documented reasoning for future reference

Key Questions

• "What's the minimum acceptable solution here?"
• "What would 'good enough' look like for this decision?"
• "Is more research likely to change my decision?"
• "What's the cost of continued analysis vs acting now?"
• "Can I reverse this decision if I learn more later?"
• "Am I searching for best, or searching to avoid deciding?"
• "What threshold would I set for someone else in my position?"

Simon's Insight

"A wealth of information creates a poverty of attention."

In a world of infinite information and finite attention, satisficing isn't settling—it's adapting to reality. The goal isn't to make perfect decisions, but to make good decisions efficiently, preserving cognitive resources for the problems that truly require optimization.

The satisficer who ships beats the optimizer who's still researching.