Making Smarter Decisions When You Don’t Have All the Facts
— by Annie Duke
There are exactly two things that determine how our lives turn out: the quality of our decisions and luck.
Annie Duke shares her experience studying human behavior at high-stakes poker tables.
Notes and quotes
Framing decisions as “bets” forces a decision maker to think probabilistically. This framing is helpful in reducing the risk that dysfunctional heuristics will interfere with a sound decision making process.
A bet really is a decision about an uncertain future. The implications of treating decisions as bets made it possible for me to find learning opportunities in uncertain environments.
When we think probabilistically, we are less likely to use adverse results alone as proof that we made a decision error, because we recognise the possibility that the decision might have been good but luck and/or incomplete information (and a sample size of one) intervened.
Resulting - tendency to equate the quality of a decision with the quality of its outcome.
Resulting is a routine thinking pattern that bedevils all of us. Drawing an overly tight relationship between results and decision quality affects our decisions every day, potentially with far-reaching, catastrophic consequences.
Decisions are bets on the future, and they aren’t ‘right’ or ‘wrong’ based on whether they turn out well on any particular iteration. An unwanted result doesn’t make our decision wrong if we thought about the alternatives and probabilities in advance and allocated our resources accordingly.
What good poker players and good decision-makers have in common is their comfort with the world being an uncertain and unpredictable place…They embrace that uncertainty and, instead of focusing on being sure, they try to figure out how unsure they are, making their best guess at the chances that different outcomes will occur.
Real Games
Real life consists of bluffing, of little tactics of deception, of asking yourself what is the other person going to think I mean to do. The decisions you make in your life - in business, saving and spending, health and lifestyle choices, raising your children, and relationships - are “real games”.
You have to learn from the results of your decisions.
Saying “I don’t know” is a necessary step toward enlightenment. It is a prelude to every great decision.
A great decision is the result of a good process - not that it has a great outcome.
Motivated reasoning - irrational, circular information-processing pattern
Instead of altering our beliefs to fit new information, we do the opposite, altering our interpretation of that information to fit our beliefs.
The Internet is a playground for motivated reasoning. It provides the promise of access to a greater diversity of information sources and opinions than we’ve ever had available, yet we gravitate toward sources that confirm our beliefs, that agree with us.
It feels bad to be wrong. Information that disagrees with us is an assault on our self-narrative. We’ll work hard to swat that threat away. On the flip side, when additional information agrees with us, we effortlessly embrace it.
Outcomes are almost never 100% due to luck or skill. We take credit for the good stuff and blame the bad stuff on luck so it won’t be our fault. The result is that we don’t learn from experience well.
Instead of seeking opinions that confirm what you already believe, seek out those with which you disagree.
This is how you think you form beliefs:
- You hear something.
- You think about it and vet it, determining whether it is true or false.
- Only after that, you form your belief.
It turns out, though, that you actually form abstract beliefs this way:
- You hear something
- You believe it to be true
- Only sometimes, later, if you have the time or the inclination, you think about it and vet it, determining whether it is, in fact, true or false.
How you form beliefs was shaped by the evolutionary push toward efficiency rather than accuracy.
A simple “Wanna bet?” triggers you to engage in that third step that you only sometimes get to.
Circle of competence
The accuracy of the statement should be evaluated independent of its source.
When we have a negative opinion about the person delivering the message, we close our minds to what they are saying and miss a lot of learning opportunities because of it. Likewise, when we have a positive opinion of the messenger, we tend to accept the message without much vetting.
Groups can improve the thinking of individual decision-makers when the individuals are accountable to a group whose interest is in accuracy.
Truthseeking communication
- Express uncertainty. Uncertainty not only improves truthseeking within groups but also invites everyone around us to share helpful information and dissenting opinions.
- Lead with assent. Listen for the things you agree with, state those and be specific, and then follow with ‘and’ instead of ‘but.’
- When the new information is presented as supplementing rather than negating what has come before, our listeners will be much more open to what we have to say
Skepticism is about approaching the world by asking why things might not be true rather than why they are true.
You need to be particularly skeptical of information that agrees with you, because you know that you are biased to just accept confirming evidence.
10-10-10 Process
What are the consequences of each of my options in ten minutes? In ten months? In ten years? How would I feel today if I had made this decision ten minutes ago? Ten months ago? Ten years ago?
Think about your happiness as a long-term stock holding, not focused on day-by-day movements. Strive for a long, sustaining upward trend in your happiness stock.
Once something occurs, we no longer think of it as probabilistic or as ever having been probabilisitic. This is how we get into the frame of mind where we say, ‘I should have known’ or ‘I told you so.’ This is where unproductive regret comes from.
If you want to get better at something try to teach it.
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