Annie Duke on How to Decide, Part 11

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 9, “Decision Hygiene”

In this chapter, Annie Duke discusses the techniques that can help us make effective decisions without “contaminated” beliefs. She offers the following recommendations:

  • “Two Roads Diverged”:
    • One of the best ways to improve the quality of our beliefs is to get other people’s perspectives. The divergence of opinions or views can help expose us to corrective or previously unknown information that we can use to make a better decision.
  • Elicit Uninfected Feedback:
    • When eliciting feedback, our opinions can influence the feedback if we disclose our opinions before getting the input.
    • When we keep our opinions to ourselves when we elicit feedback, it is more likely that the input is more in line with what the person actually thinks.
    • The act of disclosing the known result can also affect the quality of feedback. To get high-quality feedback, it is crucial to put the other person as closely as possible into the same state of knowledge that we were in when we made our decision.
    • The “Framing Effect” is a cognitive bias in which the way that information is present influences how the listener makes decisions about the data.
  • Quarantine Opinions in Group Setting:
    • Soliciting initial opinions independently before sharing them with a group is one way to achieve effective decision-making in a group setting.
    • Due to the “Halo Effect,” opinions from high-status members of the group can be unhealthfully contagious to affect group decision-making.
    • Anonymizing the initial feedback collection can help combat the potential bias from the halo effect.
  • Spin Doctrine:
    • The quality of feedback that we get is limited by the quality of the information we put into the process. Since our narratives naturally live in the inside view, the best way to combat the information quality issue is to get the outside perspectives whenever possible.

Annie Duke on How to Decide, Part 10

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 8, “The Power of Negative Thinking”

In this chapter, Annie Duke discusses how we can improve our decision-making skills by applying various techniques such as premortem, backcasting, precommitment contracts, and category decisions. She offers the following recommendations:

  • Precommitting to Your Good Intentions:
    • A precommitment contract is an agreement that commits us in advance to take or refrain from specific actions. The precommitment contract also spells out the raising or lowering barriers to those actions.
  • The Dr. Evil Game:
    • Imagine a positive goal and any decisions that will guarantee to turn the positive outcome into failure. Also, imagine any given instance of that type of poor judgment with good enough rationale as its cloak.
    • When we identify a category of poor decisions that will be hard to spot except in aggregate, we can plan what options we can or cannot choose.
  • The Surprise Party No One Wants:
    • People can compound adverse outcomes by making poor decisions after a bad result. We need to be prepared for our reactions to setbacks along the way.
    • The term “Tilt” is a common reaction after a bad outcome causes us to be in an emotionally unstable state that compromises our decision-making quality.
    • There are three ways to prepare for setbacks. First, do the hard work to identify bad outcomes and potential mitigation tactics in advance. Second, learn to recognize the signs that we are on tilt to avoid compounding bad decisions. Third, we can establish a precommitment contract that we will take in the wake of bad outcomes.
  • Deflecting the Slings and Arrows of Outrageous Fortune:
    • Although we cannot control luck, we can do things in advance to soften the impact of bad luck. These mitigation steps are called hedges.
    • A hedge has three key features. First, a hedge reduces the impact of bad luck when it occurs. Second, a hedge has a cost. Finally, a hedge is something we hope never to need to use.

Annie Duke on How to Decide, Part 9

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 8, “The Power of Negative Thinking”

In this chapter, Annie Duke discusses how we can improve our decision-making skills by applying various techniques such as premortem, backcasting, precommitment contracts, and category decisions. She offers the following recommendations:

  • Think Positive, but Plan Negative:
    • When it comes to reaching our goals, most of us have an execution problem. For the most part, we know what we should do to reach a goal, but our decisions often lead us to a different outcome.
    • The gap between what we know we should do to achieve our goals and our decisions is called a behavior gap. Decision tools available can help us narrow the gap, and Negative Thinking is one of the most effective tools.
    • One tool of Negative Thinking is mental contrasting. When we conduct mental contrasting, we try to imagine what we want to accomplish and confront the obstacles that might stand in the way of reaching the goal.
  • Premortems and Backcasting:
    • Premortem is to imagine ourselves, at some time in the future, having failed to achieve a goal and look back at how we arrived at that outcome. There are four general steps to perform a premortem.
    • Step 1: Identify the goal or a specific decision we are considering.
    • Step 2: Figure out a reasonable time frame for achieving the goal or the decision.
    • Step 3: Imagine we are on the day after the decision period, and we did not achieve the goal as expected. List up to five reasons why we failed due to our actions or decisions.
    • Step 4: List up to five reasons why we failed due to things outside of our control.
    • Backcasting is the flip side of premortem. We perform backcasting in advance to imagine what our journey would be like had we succeeded. We list up to five reasons that are within and outside of our control.
    • We combine the four sets of reason from premortem and backcasting to form a Decision Exploration Table. We use the Decision Exploration Table to gain as much visibility as we can and take the following steps:
    • Step 1: Modify our decision to increase our odds of the good things happening and vice versa.
    • Step 2: Plan how we will react to the potential future outcomes to minimize surprises.
    • Step 3: We look for ways to mitigate the impact of bad outcomes should they occur.

Annie Duke on How to Decide, Part 8

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 7, “Breaking Free from Analysis Paralysis”

In this chapter, Annie Duke discusses how we can spend our decision-making time more wisely and reaching working decisions faster. She offers the following recommendations:

  • A Sheep in Wolf’s Clothing:
    • We often get trapped and slow down in a decision-making process based on the closeness of the options. When two options are close to each other in payoff or quality, we become much slower in choosing.
    • Annie asserts that, when weighing two close options, the decision is easy. She also suggested that we ask this assessment question, “Whichever option I choose, how wrong can I be?”
    • When two options are close in payoff or quality, we can break through the bottleneck and decide quickly because, whichever one we choose, we cannot be so much far off or wrong.
  • Quitters Often Win, and Winners Often Quit:
    • Opportunity cost is another tool we can use to enhance our decision-making skills. When we pick an option, we lose the potential gains associated with the choice we do not pick.
    • Part of a good decision process includes asking ourselves, “If I pick this option, what’s the cost of quitting?” The lower the cost of quitting, the faster we can go. It is easier to unwind the decision and choose a different option, including options we may have rejected before.
    • Once we understand the importance of quitting a decision and making course adjustments, we can use the tool of decision stacking. Decision stacking is the prioritization habit of finding ways to make low-impact, the easy-to-quit decision in advance of a high-impact, harder-to-quit decision.
  • Is This Your Final Answer?
    • For every decision, there comes the point when we should stop analyzing and just decide. If our goal is to get to certainty about our choice on every decision, we will never be finished with the analysis.
    • We can ask ourselves this question, “Is there additional information that would establish a clearly preferred option or cause us to change our preferred option?” If yes, find that information first. If no, decide and move on.

Annie Duke on How to Decide, Part 7

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 7, “Breaking Free from Analysis Paralysis”

In this chapter, Annie Duke discusses how we can spend our decision-making time more wisely and reaching working decisions faster. She offers the following four recommendations:

  • The Happiness Test:
    • We spend an enormous amount of time on routine, inconsequential decisions. Recognizing when decisions are low-impact can maximize our opportunities to make high-impact decisions more effectively.
    • Every decision will have a time-accuracy trade-off. Increasing accuracy costs time and saving time costs accuracy.
    • The Happiness Test asks us if how our decision turns out will likely have a significant effect on our happiness in a year. If the pending decision passes the test, we can speed up the decision-making process.
    • Often, a decision can fall into the “repeating options” category. That is when the same type of decision comes up repeatedly. When we have these “repeating options” decisions, we can go even faster.
  • Freerolling:
    • Freerolling is a situation where there is an asymmetry between the upside and downside because the potential losses are insignificant. The key feature of a freeroll is a limited downside.
    • When we identify a freeroll, we should spend less time deciding whether to engage with the opportunity. The faster we engage, the less likely it is that the chance goes away.
    • We should go fast on a freeroll, but we still want to take time to plan and execution of the decision.

Annie Duke on How to Decide, Part 6

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 6, “Turning Decision Outside In”

In this chapter, Annie Duke discusses how difficult it can be to see our decision-making blind spots and what technique we can take to mitigate the risks. She offers the following recommendations:

  • The inside view is the world’s view through our perspective, our beliefs, combined with our experience. Many common cognitive biases are, in part, the product of our inside view.
  • Our inside view can create a bottleneck to good decision-making. It does not matter how good our decision-making process is. If we feed that process with junk information, the resulting decisions will not be high quality either.
  • The outside view is what others would see in our situation, or it can be what is true of the world in general. Exploring the outside view is vital for our decision-making even when we feel we have a firm grasp of the decision’s facts or truth.
  • The outside view serves not only to improve the data set we can use for decision-making but also counter the negative influence of our internal biases and inaccuracies.
  • The accuracy of our decisions lies somewhere at the intersection between the inside view and the outside view. This is important to keep in mind because our beliefs are in the driver’s seat when it comes to reasoning about the world.
  • Motivated reasoning is a trap we often fall into when making decisions. It is human nature to want to process information to conclude we want to see rather than do the hard work to discover the truth.
  • To mitigate the negative effect of motivated reasoning, the outside view is a countermeasure. One way to discover the outside view for our situation is to look for any base rates that might apply to our situation.
  • Perspective tracking is another tool for addressing the paradox of experience. When things go badly, instead of turning to the inside view and blame the failure on luck, look for an outside perspective for skill or execution deficiencies. When things go well, instead of turning to the inside view again for overselling the skill and underselling the luck, look to the outside view for a more objective assessment.

Annie Duke on How to Decide, Part 5

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 5 “Taking Dead Aim at the Future: The Power of Precision”

In this chapter, Annie Duke discusses how imprecise we can be when we try to factor probability into decision-making. She offers the following recommendations:

  • We should avoid relying too much on natural language terms that express likelihoods, such as “very likely” and “unlikely.” They can be useful occasionally, but they are still blunt instruments for analyzing and communicating probability.
  • To improve our decision-making, we need to find ways to improve our estimates continually. If we hide behind the safety of a general, vague term for probability, there is very little motivation to check our information and learn more.
  • General terms that express likelihood also mean very different things to different people. Using those ambiguous terms can lead to confusion and miscommunication with people we want to engage for help.
  • What we need to do is to be more precise by expressing probabilities as percentages. Using specific numbers can help us uncover information that can correct our beliefs’ inaccuracies and broaden our knowledge.
  • In addition to making a precise (bull’s-eye) estimate, we should also include a range, with a lower and upper bound, around that estimate to express our uncertainty. This notion of using range is similar to the concept of the confidence interval in statistics.
  • Annie also suggests using the “shock test” to gauge whether our upper and lower bounds are reasonable. In other words, would we be shocked if the correct answers ended up outside that range? Our goal should be to have approximately 90% of our estimates capture the objectively real value.

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.