How To Decide With Annie Duke
Episode 262
Episode Guide
Episode Summary:
Episode Timestamps
ChooseFI Podcast Episode Show Notes
Episode Title: How to Decide with Annie Duke
Episode Summary: Annie Duke, a world champion poker player and author, discusses her new book How to Decide and the complexities of decision-making. The conversation highlights the impact of uncertainty on choices and how biases such as hindsight and resulting cloud our judgment. Duke emphasizes the need for individuals to evaluate decisions beyond outcomes, focusing instead on the quality of the decision process itself. Through frameworks like pre-mortems and backcasting, listeners learn to identify potential success or failure pathways and improve their decision-making skills. Duke encourages incorporating varied perspectives and acknowledges that decisions should be made with an understanding of both skill and luck. This episode presents valuable insights for enhancing personal and professional decision-making, ultimately leading to better life choices and outcomes.
Key Takeaways:
- Understanding Bias: Hindsight and resulting bias can distort our judgment about the quality of our decisions based on their outcomes.
- The Role of Uncertainty: Embracing uncertainty is crucial in improving decision-making skills.
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Decision-Making Frameworks:
- Pre-mortems help anticipate potential failures and enhance foresight.
- Backcasting allows for planning by envisioning end goals and identifying steps to achieve them.
- Impact of Luck: Decisions are influenced by both skill and luck; awareness of this helps in understanding outcomes better.
Timestamps and Discussion Highlights:
- Introduction to Decision Making
- The Case for Uncertainty: "Uncertainty should be front and center in your decision-making."
- Resulting and Hindsight Bias: Exploring how outcome bias affects perception of decision quality.
- Decision-Making Frameworks: Insights on how to construct effective decision processes using pre-mortems and backcasting.
- The Power of Negative Thinking: Encouraging consideration of potential failures in decision-making.
- Connecting Decision-Making and Luck: Understanding how luck factors into the decisions we make.
- Developing Decision-Making Skills: Strategies for cultivating effective decision-making practices.
- Conclusion and Resources: Summary of the episode and additional resources.
Actionable Takeaways:
- Implement pre-mortem strategies to identify potential pitfalls in decision-making.
- Focus on the quality of the decision-making process rather than just outcomes.
- Explore diverse perspectives to enrich your decision-making framework.
- Use the aggregation of marginal gains approach to continually improve decisions over time.
Related Resources:
- How to Decide by Annie Duke: Link
- Thinking in Bets by Annie Duke: Link
- Alliance for Decision Education: Link
Discussion Questions:
- How can recognizing biases improve our decision-making?
- What role does luck play in your personal or professional decisions?
- Discuss the effectiveness of pre-mortems in team decision-making.
- What are some small decisions you can make to practice decision-making skills?
Podcast Description: Join Jonathan Mendonsa and Brad Barrett as they explore the intricacies of decision-making with Annie Duke, a former world champion poker player and bestselling author. Discover how uncertainty and biases can impact your choices and learn frameworks that can lead to better outcomes, both personally and professionally.
SEO Keywords: Annie Duke, How to Decide, decision-making framework, hindsight bias, resulting, financial independence, ChooseFI, uncertainty, pre-mortem, backcasting, bias in decisions, improving decisions, financial choices, life decisions, aggregation of marginal gains.
Mastering Decision-Making: Insights from Annie Duke's Book How to Decide
Effective decision-making is a crucial skill that can significantly impact your personal and professional life. Drawing on the insights of Annie Duke, former world champion poker player and author of How to Decide, this article provides actionable strategies to enhance your decision-making abilities.
Understanding the Role of Uncertainty in Decision-Making
Uncertainty is a constant in our lives, yet many individuals fail to incorporate it into their decision-making processes. Acknowledge that uncertainty should be "front and center" in your decision-making to better navigate the complexities of life . Reflecting on past experiences is essential for improving decisions. Recognize that "improved decisions arise from reflecting on our experiences" .
The Impact of Biases: Hindsight and Resulting
Biases can dramatically skew our perception of decision quality. For instance, hindsight bias can lead us to believe outcomes were predictable based solely on results, rather than on the decision-making process itself. To combat this, focus on evaluating decisions based on the information available at the time, rather than retrospectively judging their outcomes.
Strategies to Minimize Biases
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Use Effective Decision Tools: Consider integrating decision tools that help discipline bias. As Duke suggests, "a good decision tool should be disciplining bias" .
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Practice Pre-Mortem Analysis: Anticipate potential reasons for failure before making a decision. Imagine what could go wrong and why. This allows you to tackle issues proactively and improve your decision's chances of success .
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Adopt the Power of Negative Thinking: While it might seem counterintuitive, contemplating possible failures can enhance your decision-making. By identifying risks, you prepare better for outcomes, creating a more thorough decision framework .
Frameworks for Better Decision-Making
Pre-Mortem and Backcasting
Utilize pre-mortem and backcasting techniques to evaluate decisions. A pre-mortem involves envisioning a future failure and brainstorming reasons for that failure, categorizing factors into "skill" and "luck". This method prepares you for potential pitfalls and enables you to devise countermeasures.
Conversely, backcasting focuses on positive outcomes. Visualize a successful result and reflect on the reasons that could lead to that achievement. Doing so helps reinforce effective strategies and ensures that your decisions align with desired goals.
Aggregation of Marginal Gains
Adopt the principle of "aggregation of marginal gains." Small, incremental improvements can compound to produce significant benefits over time. Focus on making continuous, minor adjustments in your decision-making approach, leading ultimately to enhanced outcomes.
Enhancing Decision-Making Skills
Reflect on Your Process
Rather than solely focusing on the outcome of specific decisions, evaluate the process that led to those results. Questions to consider:
- How did I gather information?
- Did I account for biases?
- What can I learn from the outcome, whether positive or negative?
Use a Decision Exploration Table
This tool can facilitate comparing the outcomes of your pre-mortem and backcasting efforts. By organizing potential pitfalls alongside pathways to success, you develop a thorough framework for any decision-making venture.
Building a Support System for Decision-Making
Surround Yourself with Diverse Perspectives
Engaging with a group of individuals who think differently from you can lead to more rounded decisions. Identify peers who value truth-seeking over consensus to create a supportive decision-making pod. This encourages honest conversations about potential decisions without judgment.
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Elicit Feedback Before Sharing Your Opinion: Encourage the sharing of ideas by exploring the perspectives of others before voicing your own judgment. This counteracts the "groupthink" phenomenon and enriches the decision-making process.
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Foster Open Dialogue: When discussing potential decisions, ensure that everyone feels comfortable sharing dissenting opinions. Recognizing differing viewpoints enhances the collective understanding of the decision at hand.
Key Takeaways for Better Decision-Making
- Incorporate uncertainty into your decision-making.
- Acknowledge and mitigate biases using structured tools.
- Utilize frameworks like pre-mortem analysis and backcasting.
- Focus on small, continuous improvements to foster better outcomes over time.
- Collaborate with a diverse group to expand your decision-making perspectives.
Recognizing that luck and the quality of your decision-making combine to create your outcomes, commit to enhancing your decision-making process. Remember, "quality decisions enhance both personal lives and society" .
By focusing on the intricacies of decision-making, you can improve not just your financial independence journey, but your life’s various facets as well. Embrace the process, learn from every experience, and strive for better outcomes through informed decisions.
Annie Duke
- Website: Alliance for Decision Education
- Books: Thinking in Bets: Making Smarter Decisions When You Don't Have All the Facts and How to Decide: Simple Tools for Making Better Choices
What You'll Get Out Of Today's Show
- Annie Duke is a world champion poker player and author of Thinking in Bets, a book which makes the case for embracing uncertainty in our decision-making framework. In Annie's latest book, How to Decide: Simple Tools for Making Better Choices, she answers the question, what does a good decision-making process look like and how to incorporate that into your own life.
- The only way we can become better at making decisions is from our own experience, and our experience is going to be the outcomes of past decisions we've made. We need to understand the way in which knowing how something turned out can mess with our ability to figure out why.
- In a thought experiment concerning the 2015 Super Bowl between the Seahawks and the Patriots, Annie reviews a play called by Pete Carroll in the last seconds of the game. Though widely panned as the worst play called in Super Bowl history, Annie states that it's hard to evaluate the quality of the play called when we already know the outcome.
- Had the outcome of Pete Carroll's play been a touchdown, the reaction would have been the opposite. This phenomenon is called Resulting, where the quality of the result is attributed the quality of the decision.
- Reviewing the actual odds of the result of that specific play, Annie determines that Pete Carroll's decision was far from the worst play called of all time as there was only a 25 likelihood of that specific result.
- Annie applies what she's learned playing poker, specifically realizing that what you see happen doesn't change the decision that you make, to other aspects of life.
- The paradox of experience is that while we know we need all of these experiences to learn, we see how things unfold and we take our lessons for individual experiences, not in the aggregate.
- Poker has some surprising similarities to real life in that your outcome is a combination of luck and the quality of your decisions.
- The definition of luck is what you don't have control over. You cannot control your own luck. You can control the quality of the decisions you make and reduce the chance that luck has an influence that will turn out poorly for you. While we are all under the influence of luck, we are also very much under the influence of our own decisions.
- In our decision making, we should see the luck clearly and make the decisions that are more likely to advance our goals. Brad ties that to ChooseFI's philosophy of the aggravation of marginal gains and striving to do 1% better.
- We have a lot of cognitive bias that delude us into believing things are much more stable than they really are. COVID has torn that away from us. We are also feeling the effect of imperfect information. COVID is not a special case, it's just something we can't hide from the uncertainty.
- COVID does give us an opportunity to think about how to navigate uncertainty which will improve all decisions we make.
- A pro and con list has no dimensions to it, specifically missing are the magnitude of the payoff or how much will it advance or take away from your goal, and what is the probability of each con. These lists also amply biases you already have and can be gamed to reach a predetermined decision.
- With inside view thinking, our personal models create cognitive trenches. When new information comes in, we mold it into a model we already have rather than be objective.
- An outside view is what is true of the world.
- To try and avoid inside view thinking, we need to expose ourselves to different perspectives of corrective information.
- The foundation we base our decisions on is flimsy and full of inaccuracies. We should increase the probability that we collide with perspectives and information we don't know.
- It's okay to say you don't know very much and decide to get more information to become a better decision-maker.
- Making a good decision with one stock doesn't necessarily make you a good investor, you would have to look at all the decisions made with your portfolio.
- When getting to your outside view, it helps to get yourself into the future because it helps us look back on ourselves. We also need to realize that we tend to believe we are more likely to be successful than we actually are. It's helpful to think about all the ways in which you might fail.
- A pre-mortem is the idea that time travel and negative thinking will result in an outside view and lead to better decision making.
- A backcast is the opposite of a pre-mortem where you look at the luck and skills that lead to a positive outcome.
- To find groups of people to get the best opinions from, find people who are interested in finding what is true in the world, but by putting the framework in place, you can turn anybody into an amazing true-seeking pod.
- When seeking other's opinions, it's best not to divulge your own opinion beforehand. It results in one of three ways: it might show the other person's opinion is right, the truth may lie in the middle somewhere, or it may show your opinion is right and help you to understand it better.
- Annie believes that mostly we should be making decisions faster than we do. The decision-making process is a skill and it takes time to understand which we should be taking our time we should take our time with and which could be faster.
- The speed of our decisions should be made by the impact of the decision and optionality available.