How to Decide: Simple Tools for Making Better Choices

Summary

A guide to making better decisions.

Review

Annie Duke of poker fame wrote a book about decision making.

Takeaways

• quality of decision is different from quality of outcome, good decisions do not always lead to good outcomes and vice versa (judging a decision based on outcome is known as Resulting)
• keep a decision journal to assess accuracy of decision and avoid Hindisght Bias and Memory Creep
• three p's of judging a decision: preference, payoff and probability
• take an outside view/opinion to get beyond own filters
• to overcome analysis paralyss, figure out if you are in a Free Roll or Sheep in Wolf Clothing Decision situation
• anticipate what might go wrong, do post a pre-mortem as well as a Backpath
• avoid telling people your opininon to collect untainted opinions

Concepts

Notes

preamble

• the things that determine your life
  • your decisions and your luck
  • you can only control one of them
• exercise: think of best and worst decisions, how do you judge them?
  • if your like most people, you judge quality of decision based on the outcome #star

1 - resulting outcome

• called outcome bias or Resulting
  • use outcome to shortcut evaluating whether decision was good
• four types of outcomes #ent.model #star
  • just desert: bad outcome, deserved it
  • worthy decision: good outcome, deserved it
  • bad luck: bad outcome, did not deserve it
  • dumb luck: good outcome, did not deserve it
• watch out for bad luck and dumb luck, makes good decision seem bad and vice versa #star
  • even good decisions are not necessarly the best decision, always study decisions to learn from them
• anecdote: hollywood pass on star wars, was it a bad decision or a good one with bad luck?

2 - hindsight is not 20/20

• Hindisght Bias: believe event was predictable after it happened #star
• Memory Creep: when items after outcome makes you feel you knew things all along
  • our brains aren’t timestamped (but #dendron (Private) is)
• use knowledge tracker
  • hindsight bias causes us to lack compassion for others and ourselves,leads to we should have known it syndrome
• keep a decision journal to counter this #star

3 - the decision multiverse

• the paradox of experience

  • lots of experience is useful, one event is not helpful #star
  • eg. quit and try something, it fails, will weight on you

• put individual experience in context of all other experiences

• Decision Forestry #star

  • forest massacre, before making decision, tree of possibility, afterwards, you take a cognitive chainsaw and wipe everything out, making the one thing seem inevitable
  • glue branches back on to tree to make outcome more like the twig it is then the bow it became (create decision tree)
  • explore counterfactuals

• many futures but one past, why it feels inevitable #star

  • we can counteract this by making a decision tree and exploring what could have been
  • important to also apply this to good outcomes

4 - the three ps, preference, payoff, probability

• Step 1: Identify the reasonable set of possible outcomes

  • These outcomes can be general scenarios or be focused on particular aspects of the outcomes that you especially care about.

• Step 2: Identify your preference for each outcometo what degree do you like or dislike each outcome, given your values?

  • These preferences will be driven by the payoffs associated with each outcome.
  • Gains comprise the upside and losses comprise the downside.
  • Include this information in your decision trees.

• Step 3: Estimate the likelihood of each outcome unfolding.

  • As a start, use common terms that express probabilities. Don’t be afraid to guess.

• Step 4: Assess the relative likelihood of outcomes you like and dislike for the option under consideration.

• Step 5: Repeat Steps 1–4 for other options under consideration.

• Step 6: Compare the options to one another.

• The above is from the PDF accompaniment of How to Decide

• preference

  • two people can have same outcomes but different preferences
    • eg. maximize career vs family

• payoff

  • size matters
  • Asymmetric Risk
  • is upside worth downside?

• probability

  • you never go in with no information, don’t overlook territory between right and wrong
  • guess like archer, you might not hit the bulls eye but your aiming for it #word.anecdote
    • contrast this with pin the tail on the donkey where the kid has a blindfold, its just luck
  • take aim: what do you know, what can you learn to move forward #star

• pro/con list not useful because no payoff, preference or probability

5 - taking aim at future: power of precision

• people have different percentages in mind with words (eg. real possibility is can mean between 20 to 80 percent) #star
  • get better with precision
  • aiming at target vs bulls eye
• give a range of uncertainty for estimate #star
  • make sure range isn’t too wide or narrow
  • the shock test: would i be shocked if it’s outside of range test
  • do the shock test exercise in the book #todo (Private)
  • if i were wrong, why?

6 - turning decisions outside in

• it’s easier to solve other peoples problems #star

  • we are over confident in our own beliefs
  • our own circumstances filter everything

• some filters

  • confirmation bias
  • disconfirmation bias
  • recency bias
  • illusion of control
  • availability bias

• everything strengthens your own believes

  • you aim to protect your own beliefs

• inside view vs outside view, outsider helpful, diff conclusion with same set of facts #star

  • eg
    • friend that always dates jerks, maybes it’s them
    • 90% professors think they’re above average, most people think they are good drivers
    • 50% end in divorce, 5% have prenuptial agreement #ent.eg

• harder to see outside view when you are smart

• what is true in general, outside of anyone's views? this is base rate

  • see to actively find out what other people know
  • people avoid disagreeing because they don't want to hurt your feelings but this actively harms you
    • eg. spinach in your teeth, people are unkind to not tell you

• start with outside view and then inside view

  • marry the two narratives

7 - analysis paralysis

• base decision on payoff
• if decision repeats, easier to go fast #star
• Free Roll: low downside
• watch out for Free Donut: lottery ticket
• Sheep in Wolf Clothing Decision: all options are close
  • test: if this were the only option, would you go with it? if so, then do it
• some other factors
  • consider cost of quitting
    • sometimes its worth it to quit
  • exercise options in parallel
    • more expensive but you get to sample multiple outcomes
  • if you want to do research, do you have information that you can get that would change your mind? #star

8 - power of negative thinking

• Behavior Gap: what we believe and what we do

• techniques

  • mental contrasting: figure out what might go wrong and what to do
  • Pre Mortem
  • Backpath: how to succeed
  • pre-commitment, Ulysses Contrac: heighten or lower barriers to do something
  • dr evil: death by a thousand cuts, give a rational sounding reason to not get closer to your goal
  • categorical decision: make a decision that rules out other decisions (eg. i will avoid meat vs i'm vegan) #star
  • tilting: making bad worse, plan for this
  • hedging: control bad luck

9 - decision hygiene

• if you tell people your opinion, they tend to agree #star
  • avoid doing this
• study with visual test of card with three lines, two of which which are clearly not the same length
  • in one room, planted confederates who said all lines were equal
  • over 30% of test participants went with confederates #ent.eg

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Children

1. Concepts

Tags

1. area.decision-making

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