Rafael Hartke starts a series on the topic of "Decision Trees and the Value of Flexibility" in his most recent article in Oil & Gas Monitor.
Decision trees "provide a simple and straight-forward platform for representing long-term strategies, including the options available right now, the uncertainties that will be revealed along the way and options available in the future. The value of all options, present and future, is conditional to both the information available at that time and expectations of future uncertainties. As a result, decisions take into account all current and future options, all available information, and all uncertainties. Decision trees can be used to explicitly measure, compare and present this value."
Decision trees are quantitative diagrams with nodes and branches representing different possible decision paths and chance events, as pictured in the PrecisionTree model above. This helps you identify and calculate the value of all possible alternatives, so you can choose the best option with confidence. In the article, Rafael explains how valuable decision trees can be for long term investment decisions.