Annie Duke on How to Decide, Part 4

In her book, How to Decide: Simple Tools for Making Better Choices, Annie Duke discusses how to train our brains to combat our own bias and help ourselves make more confident and better decisions.

These are some of my favorite concepts and takeaways from reading the book.

Chapter 4 “The Three Ps: Preferences, Payoffs, and Probabilities”

In this chapter, Annie Duke goes into the necessary details of building an effective decision process. She suggests the following six steps:

Step 1 – Identify the reasonable set of possible outcomes.

Step 2 – Identify your preference using the payoff for each outcome – to what degree do you like or dislike each outcome, given your values?

Preferences matter. Annie suggests we identify them upfront. It is not sufficient to merely identify the possible outcomes, and we should be explicit about which outcome we would prefer to see.

Payoff also matters. While we certainly have preferences on the outcomes, we also need to put forth the effort upfront in identifying the size of the payoff. Without diligently considering the payoff’s size, it would be difficult to assess how much we should risk achieving the preferred outcome.

Step 3 – Estimate the likelihood of each outcome unfolding.

To assess whether a decision is optimal or sub-optimal, we need to know the payoff and the likelihood for any given outcome. This also implies that to become a better decision-maker, we need to be willing to make educated guesses on each outcome’s possibility.

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

Often, we do not prefer all outcomes equally. Combining probabilities with preferences and payoff can help us to evaluate our decision better and minimize the paradox of experience bias. By clearly defining our preference beforehand, it can help us get out from under the shadow of the particular result that we experience.

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

Step 6 – Compare the options to one another.

Annie Duke on How to Decide, Part 3

In her book, How to Decide: Simple Tools for Making Better Choices, Annie Duke discusses how to train our brains to combat our own bias and help ourselves make more confident and better decisions.

These are some of my favorite concepts and takeaways from reading the book.

Chapter 3 “The Decision Multiverse”

Experience is valuable for learning, but leveraging experience incorrectly can create traps that interfere with our learning. One example of such pitfalls is the paradox of experience bias.

We experience the paradox of experience when our past carries an extraordinary amount of influence on our future decision-making process.

The immense weight of our past is not unusual. After all, while we can easily imagine many possible futures for a given decision, there is only one past.

If our past is the only instance of experience we can learn about something, we don’t have too many other options to work with because our past is all we got.

To minimize the negative effect of the paradox of experience bias, we can use techniques to counter-act the trap. Viewing the outcome that occurred in the context of other potential consequences at the time of the decision can resolve the paradox.

By recreating a simplified decision tree that reflects the potential, plausible outcomes that could have happened, the decision tree can put the actual result in its proper context.

Exploring the other possible outcomes is a form of counterfactual thinking. Practicing counterfactual thinking can help us in our future decision-making and decision-evaluation exercises by putting the results in their proper context.

Our willingness to examine outcomes also must go both directions. While we are more eager to put bad outcomes in context, we must also be willing to do the same for the good outcomes.

It can be challenging to put the excellent outcomes in perspective, but becoming a better decision-maker requires us to do it regularly.

Annie Duke on How to Decide, Part 2

In her book, How to Decide: Simple Tools for Making Better Choices, Annie Duke discusses how to train our brains to combat our own bias and help ourselves make more confident and better decisions.

These are some of my favorite concepts and takeaways from reading the book.

Chapter 2 “Hindsight Is Not 20/20”

Hindsight bias is the tendency to believe that an outcome, after it occurs, was predictable or inevitable. The typical cues for hindsight bias are reactions such as:

            “I should have known it.”

            “I told you so.”

            “I knew it all along.”

When we come under the influence of hindsight bias, we place an unreasonably large influence on our decisions’ outcome. We give ourselves more credit than we deserve for the right results while punishing ourselves more harshly for the unfavorable consequences.

Hindsight bias also distorts the way we process outcomes. We tend to associate a piece of prior knowledge with the outcome and amplify that piece of information. That particular bit of information may or may not be the direct cause of the result.

Also, the bias can introduce the “memory creep” effect. We experience the “memory creep” effect when we take a piece of information revealed after the fact and associate it with our memory of what we knew or was knowable before the decision.

To combat the hindsight bias, we must strive to be honest and accurate about what we knew at the time of our decision.

Just like the resulting bias, hindsight bias can lead us to diminished compassion for ourselves and others.

Annie Duke on How to Decide, Part 1

In her book, How to Decide: Simple Tools for Making Better Choices, Annie Duke discusses how to train our brains to combat our own bias and help ourselves make more confident and better decisions.

These are some of my favorite concepts and takeaways from reading the book.

Chapter 1 “Resulting”

Resulting is the tendency to judge the quality of a decision based purely on the outcome’s quality. We succumb to resulting when we attribute good results to the right decisions while relating the poor outcomes of ours to just bad luck.

Outcomes cast a significant shadow over the decision process because we naturally assess our decisions based on the outcomes. Resulting can be a trap if we are not careful or become unaware of it.

Luck is the significant force that intervenes between our decision and the actual outcome. The bias of resulting can cloud our view of the role of luck. Resulting can also reduce our compassion for others when we attribute other people’s poor outcomes due to their bad decision-making.

For many things in life, it is not always possible to establish a strong causal relationship between the quality of the decision and the quality and the quality of the outcome in the short-term. The two may be correlated, but the relationship can take a long time to play out.

Making better decisions starts with learning from experience. The bias of resulting can interfere with that learning process by preventing us from examining good-quality/good-outcome decisions (and poor-quality/poor-outcome decisions), which can offer valuable lessons for future decisions.

Worse yet, resulting might even put us in a trap by causing us to repeat some low-quality decisions that did not blow up before. Resulting can also stop us from re-examining some potentially good-quality decisions.

When we make decisions, especially the complicated ones, we can rarely guarantee an inevitable outcome. Instead, our goal should be to try to choose the option that will lead to the most favorable range of results.

Annie Duke on Thinking in Bets, Part 9

In her book, Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts, Annie Duke draws on examples from business, sports, politics, and poker to share tools anyone can use to embrace uncertainty and make better decisions.

In the chapter, “Adventures in Mental Time Travel,” Annie Duke discusses the technique of recruiting out past-self and future-self to help our present-self in the decision-making process. These are some of my favorite concepts and takeaways from reading the book.

“Reconnaissance: mapping the future”

For us to make better decisions, we need to perform reconnaissance on the future. If a decision is a bet on a particular future based on our beliefs, we should consider what those possible futures might look like before we place a bet.

Scenario planning is a prominent example of scouting out the future. We should always be asking ourselves the questions, “What are the possible futures? What are the probabilities of those possible futures?”

By doing the hard work of reconnaissance, we can position ourselves better with the following benefits. First, we remind ourselves that the future is uncertain and to have a realistic view of the world. Second, we will be better prepared for how we are going to respond to different outcomes. Reconnaissance can make us more agile.

Third, anticipating the range of outcomes can keep us from unproductive acts of regret when a particular future happens. Finally, we are less likely to fall prey to resulting or hindsight bias by mapping out the potential futures and possibilities.

“Backcasting: working backward from a positive future”

There are two ways of advance thinking: standing at the beginning and looking forward or standing at the end and looking backward. The second approach is much more effective.

Forecasting the future from where we stand can be daunting. From the vantage point of the present, it is hard to see past the next step. We get a sense that the present the immediate future loom large, with anything beyond that fuzzy and losing focus.

When we identify the goal and work backward from the journey’s end to “remember” how we got there, research has shown that we do better. Imaging a successful future and backcasting is a useful approach for identifying necessary steps for reaching our goals.

“Premortems: working backward from a negative future”

Like backcasting, working backward from the end can also help us to imagine an unfavorable future. Backcasting and premortem complement each other as we must always account for both positive and negative outcomes.

Despite the popular wisdom that we achieve success through positive visualization, it turns out that incorporating negative visualization makes us more likely to achieve our goals. A premortem is a healthy form of organized skepticism. The approach gives us permission and freedom for dissent. Think of premortem as acting as our own red team.

Imagine both positive and negative futures allow us to plan and prepare for a wider variety of challenges. Both the likelihood of positive and negative futures must add up to 100% since the positive space of backcasting and the negative space of premortem must still fit into one finite continuum.

Once we decide and one of those possible futures happens, we cannot discard all that work, even if it included work on ends that did not occur. Forgetting about an unrealized future can be dangerous to good decision-making.

Annie Duke on Thinking in Bets, Part 8

In her book, Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts, Annie Duke draws on examples from business, sports, politics, and poker to share tools anyone can use to embrace uncertainty and make better decisions.

In the chapter, “Adventures in Mental Time Travel,” Annie Duke discusses the technique of recruiting out past-self and future-self to help our present-self in the decision-making process. These are some of my favorite concepts and takeaways from reading the book.

“Ulysses contracts: time traveling to precommit”

The Ulysses contract is an action we commit to as part of entering into a decision. By committing to a set of actions or constraints, Ulysses contracts, when used correctly, can help to raise a barrier against irrationality.

The pre-commitment can be an excellent interaction between our past-self, present-self, and future-self. A past version of us, who anticipated that we might decide irrationally about something we might do in the future, helps our present-self commit to an action that will prevent our future-self from getting into a certain kind of mistake.

“Decision swear jar”

A “decision swear jar” is another simple kind of pre-commitment contract that we can leverage to aid our decision-making. We can identify the language and thinking patterns that signal we are veering from our truth-seeking goal for the decision swear jar. Annie listed some examples of the decision swear jar:

  • Signs of the illusion of certainty or overconfidence
  • Irrational outcome fielding
  • Complaining about bad luck to off-load it
  • Generalized characterizations of people meant to dismiss their ideas
  • Signals we have zoomed in on a moment
  • Expressions that explicitly signal motivated reasoning
  • The over-use of the word “wrong”
  • Lack of self-compassion
  • Signals we are overly generous editors when sharing a story
  • Terms that discourage engagement of others and their opinions

Annie Duke on Thinking in Bets, Part 7

In her book, Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts, Annie Duke draws on examples from business, sports, politics, and poker to share tools anyone can use to embrace uncertainty and make better decisions.

In the chapter, “Adventures in Mental Time Travel,” Annie Duke discusses the technique of recruiting out past-self and future-self to help our present-self in the decision-making process. These are some of my favorite concepts and takeaways from reading the book.

“Let Marty McFly run into Marty McFly”

The best poker players develop practical ways to incorporate their long-term goals into their in-the-moment decisions. If we can harness the power of mental time traveling by including our past-self and future-self, we might be able to make more decisions that increase our chance of good outcomes.

Our decision-making process should encourage and perhaps even operationalize ways to cause a collision of past, present, and future as much as possible. Our present-self often finds itself alone in the decision-making process without help from our past-self and future-self. If we can get all three entities to deliberate together, we can improve our decisions’ quality.

“Night Jerry”

Temporal discounting is a bias where we tend to favor our present-self at the expense of our future-self. Staying up late and waking up with less energy for tomorrow’s work is an example of temporal discounting. Not saving enough for retirement is another example of such bias.

When we engage our past- and future-self during our decision-making process, we are more likely to make choices consistent with our long-term goals. It is not possible that we can guarantee better decision-making will always generate a favorable outcome, but our odds will undoubtedly improve.

“Moving regret in front of our decisions”

Regret is one of the most intense emotions we feel, but most people have not found productive use of guilt to enhance their decision-making. The problem is that regret occurs after the fact.

The emotion of regret can help us by moving it to before the decision point instead of after. One technique to consider is Suzy Welch’s 10-10-10 process. By taking regret into account and planning, we can devise a plan to respond to a negative outcome instead of just reacting to it.

Annie Duke on Thinking in Bets, Part 6

In her book, Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts, Annie Duke draws on examples from business, sports, politics, and poker to share tools anyone can use to embrace uncertainty and make better decisions.

These are some of my favorite concepts and takeaways from reading the book.

“Reshaping habit”

Habits operate in a neurological loop with three parts: the cue, the routine, and the reward. When we have a good outcome, it cues the routine of crediting the result to our excellent decision-making ability, delivering the reward of a positive update of our self-narrative.

A bad outcome cues the routine of off-loading responsibility for the result, delivering the reward of avoiding a negative update of our self-narrative. We invert the cue and the routine parts for our peers, so we continue to get a reward of feeling good about ourselves under similar circumstances.

How can we leverage this technique to initiate and build good habits? One approach is to substitute the routine of truth-seeking for the outcome-oriented instinct to focus on seeking credit and avoiding blame. If we put in the work to practice this routine, we can field more of our outcomes in an open-minded way to drive learning.

It is not productive to compare ourselves with others or get a good feeling when the comparison favors us. However, it is fruitful to use that urge for comparison to strengthen our focus on accuracy and truth-seeking. Sorting outcomes into the luck and skill buckets can carry a high amount of risk at the expense of learning from our experience.

“The hard way”

Thinking in bets or treating outcome fielding as a bet can have some advantages as a decision-making tool.

First, the prospect of a bet can make us examine and refine our beliefs. Only a few things carry a high degree of absolute certainty in life. We also should make the appropriate adjustments to our decision-making process to account for those uncertainties.

Second, when we treat outcome fielding as a bet, we are better positioned to field outcomes more objectively into the appropriate buckets.

Third, thinking in bets also triggers a more open-minded exploration of alternate hypotheses. We are more likely to explore the opposite side of an argument more often and more seriously.

However, thinking in bets is also hard to do it well, at least initially. It must start as a deliberative process, and it will feel clunky and slow at first. Despite the difficulties, striving for accuracy through probabilistic thinking is a worthy routine to get right.

Thinking in bets is a worthy approach because the benefits of recognizing just a few extra learning opportunities compound over time. We can think of our decision-making ability as a ship traveling on a long journey. A small degree of the course might not be seen as significant at first or even noticeable. Over time, the error compounds, and we find ourselves strayed miles away from the intended destination.

Thinking in bets can be our tool for correcting the course as we go. A string of small corrections and learning and compound over time helps us get to our destination more safely and without wasting too much time.