How to Decide: Simple Tools for Making Better Choices - by Annie Duke
Date read: 2020-10-31How strongly I recommend it: 6/10
(See my list of 150+ books, for more.)
Go to the Amazon page for details and reviews.
Recommended for anyone new to decision-making. Unfortunately, the book is a bit redundant and most of the advice is not new to someone familiar with cognitive biases.
Contents:
- RESULTING
- HINDSIGHT BIAS
- SIX STEPS TO BETTER DECISION-MAKING
- STEP 1 - IDENTIFY POSSIBLE OUTCOMES
- STEP 2 - PAYOFF FOR EACH OUTCOME
- STEP 3 - LIKELIHOOD OF EACH OUTCOME UNFOLDING
- THE IMPORTANCE OF THE OUTSIDE VIEW
- SEEKING FEEDBACK/ADVICE
My Notes
Because there are only two things that determine how your life turns out: luck and the quality of your decisions. You have control over only one of those two things. The only thing you have control over that can influence the way your life turns out is the quality of your decisions.
A good decision tool seeks to reduce the role of cognitive bias (such as overconfidence, hindsight bias, or confirmation bias) and a pros and cons list tends to amplify the role of bias.
Any decision is, in essence, a prediction about the future. When you’re making a decision, your objective is to choose the option that gains you the most ground in achieving your goals, taking into account how much you’re willing to risk. (Or sometimes, if there aren’t any good options, your objective is to choose the option that will cause you to lose the least amount of ground.)
Determining whether a decision is good or bad means examining the quality of the beliefs informing the decision, the available options, and how the future might turn out given any choice you make.
This feeling that the result of the decision tells you something significant about the quality of the decision process is so powerful that even when the description of the decision is identical (you quit your job and take a new position), your view of that decision changes as the quality of the result changes.
Whether you’re estimating the weight of a bison or the likelihood that Kingdom Comb will succeed, your job as a decision-maker is to figure out two things: (1) What do I already know that will make my guess more educated? (2) What can I find out that will make my guess more educated?
What you know is more like the size of a speck of dust that could fit on the head of a pin. What you don’t know is more like the size of the universe.
A pros and cons list is flat. It lacks information about both the size of the payoffs and the probability of any pro or con occurring. Because of that, it is a low-quality decision tool for evaluating options and comparing them to one another.
The willingness to guess is essential to improving decisions. If you don’t make yourself guess, you’ll be less likely to ask “What do I know?” and “What don’t I know?”
Resulting is a mental shortcut in which we use the quality of an outcome to figure out the quality of a decision. When people result, they look at whether the result was good or bad to figure out if the decision was good or bad. (Psychologists call this “outcome bias,” but I prefer the more intuitive term “resulting.”)
Working backward from the quality of a single outcome to figure out whether a decision was good or bad is going to lead to some poor conclusions.
When you make a decision, you can rarely guarantee a good outcome (or a bad one). Instead, the goal is to try to choose the option that will lead to the most favorable range of outcomes.
It’s difficult to reach a conclusion about decision quality from one result. That one result shouldn’t count as much as a greater quantity of data (on all the decisions the studio executives made and their overall results) or data of higher quality (on what the decision looked like as it was presented to the studios).
The tendency to believe an event, after it occurs, was predictable or inevitable. It’s also been referred to as “knew-it-all-along” thinking or “creeping determinism.”
There are obvious cues that signal hindsight bias, such as “I can’t believe I didn’t see that coming,” or “I knew it,” or “I told you so,” or “I should have known it.”
Memory creep is the reconstruction of your memory of what you knew that hindsight bias creates.
To assess the quality of a decision and learn from your experience, you need to evaluate your state of mind honestly and recall what was knowable or not knowable as accurately as possible.
Create a Knowledge Tracker:
Hindsight Bias Vaccine - As you were using the Knowledge Tracker, it may have occurred to you that it would be a good idea to journal the “stuff you knew before the decision” while you are in the process of making the decision. It can be hard to accurately recall what you knew before the fact once you already know the outcome. Journaling gives you something concrete to refer back to. Writing down the key facts informing your decision also acts like a vaccine against hindsight bias. Thinking about what you know at the time of the decision in this more deliberative way creates a clearer time stamp, preventing memory creep before it happens.
The Paradox of Experience - Experience is necessary for learning, but individual experiences often interfere with learning.
Counterfactual - A what-if. A possible outcome of a decision that is not the one that actually occurred. An imagined, hypothetical state of the world.
It is not that an outcome is never informative. It is that it is informative only when the outcome is unexpected, when you didn’t anticipate the result in the set of possibilities. It doesn’t matter if the result is awesome or the worst. What really matters is whether you didn’t foresee it, because your decisions will only be as good as your ability to anticipate how they might turn out.
List the potential outcomes on the tree in order of your most preferred to your least preferred.
Advice can be an excellent decision tool as long as you are explicit about your goals and values when you are seeking that advice. Otherwise, you run the risk that the person whose advice you are seeking will assume you share their preferences and will answer accordingly.
Upside - What you gain from a decision. The positive potential of your choice. The potential gains.
Downside - What you lose from a decision. The negative potential of your choice. The potential costs.
Assessing the quality of a decision involves figuring out whether going for the upside is worth risking the downside.
To figure out whether a decision is good or bad, you need to know not just the things that might reasonably happen and what could be gained or lost, but also the likelihood of each possibility unfolding. That means, to become a better decision-maker, you need to be willing to estimate those probabilities.
Once you choose, even if you pick the option that will work out 95% of the time, you don’t have any control over how that decision will work out on that try. By definition, things will turn out poorly 5% of the time and you can’t control when that 5% will happen.
Common terms really are blunt instruments to express probabilities (e.g., usually, sometimes, always, etc.). They are inherently ambiguous, reflecting a broad target area.
If you believe something has a 30% chance of happening and you’re talking with someone who has reliable information that it has a 70% chance of happening, it is helpful to uncover that disagreement. You need the information that lives in their head to correct your belief. A failure to extract that information is a missed opportunity, and any decision based on your estimate will be lower quality as a result.
A convenient way to express where you are on the continuum from no information and perfect information is to offer, along with your exact (bull’s-eye) estimate, a range around that estimate. That range communicates the size of your target area by giving the lowest reasonable value you think the answer could be (the lower bound) and the highest reasonable value you think it could be (the upper bound).
The range around your bull’s-eye estimate defines the size of your target area and serves a key purpose: it signals, to yourself and others, how uncertain you are of your guess. It reveals where you sit on the continuum between no knowledge and perfect knowledge. The further you are from perfect information, the larger the target you’re defining. The closer you are to having perfect information, the smaller the target you’re defining. On the rare occasions when you have perfect information and no uncertainty, your target will be all bull’s-eye.
You almost always know something and the range you set should reflect that. A range that ensures the objectively true answer always falls within the upper and lower bound oversells a lack of knowledge. Likewise, an overly narrow range oversells what you do know.
The goal is to set the narrowest range you can, where you would still be pretty shocked if the bull’s-eye wasn’t in the range.
One way to think about being “pretty shocked” is to shoot for capturing the correct answer within your upper and lower bound for nine out of the ten items.
Making it a habit to ask yourself, “If I were wrong, why would that be?” helps get you to approach your own beliefs with more skepticism, disciplining your naturally overly optimistic view of what you know and getting you more focused on what you don’t know.
Your intuition serves at the pleasure of the inside view. Your gut does too. Intuition and gut are infected by what you want to be true. The outside view is the antidote for that infection.
Research across a variety of settings has shown that being smart makes you better at motivated reasoning, the tendency to reason about information to confirm your prior beliefs and arrive at the conclusion you desire.
Base Rate - How likely something is to happen in situations similar to the one you’re considering. Whatever your forecast of the future is, it needs to be in the orbit of the base rate. A base rate gives you a center of gravity.
The more you can interact with the world in a way that invites people around you to give you the outside view, the more accurate your model of the world will become.
Here are two tactics you might try in getting to the outside view:
The Happiness Test - Ask yourself if the outcome of your decision, good or bad, will likely have a significant effect on your happiness in a year. If the answer is no, the decision passes the test, which means you can speed up. Repeat for a month and a week. The shorter the time period for which your answer is “no, it won’t much affect my happiness,” the more you can trade off accuracy in favor of saving time.
Repeating Options - When the same type of decision comes up over and over again, you get repeated chances to choose options, including options you may have rejected in the past. When an option repeats, you can go even faster, because getting another shot at the decision helps reduce what little cost there is of a bad outcome, as measured in regret, from a low-impact decision.
Decisions that repeat also provide opportunities for choosing things you are less certain about, like a food you’ve never tried or a new TV show, because you don’t get penalized as heavily for taking those gambles. At little cost, you get information in return about your likes and dislikes, and you might find some surprises in there.
You can identify decisions with limited downside by asking yourself one or both of the following questions: What’s the worst that can happen? If the outcome doesn’t go my way, am I worse off than I was before I made the decision?
Once you identify a freeroll, you don’t need to think too hard about whether to seize the opportunity, but you still want to take time with the execution of the decision. Go fast deciding whether to apply to a college that is a big stretch, but take time making sure the application is high quality. Go fast deciding whether to offer on your dream house, but take time making sure the offer is sound.
When asking yourself “What’s the worst that could happen?” make sure you follow up by examining the effects of making the same type of decision repeatedly. That’s how you recognize that a free donut is not a freeroll.
When a Decision is hard, that means it's easy - When you’re weighing two options that are close, then the decision is actually easy, because whichever one you choose you can’t be that wrong since the difference between the two is so small.
The Only-Option Test - For any options you’re considering, ask yourself, “If this were the only option I had, would I be happy with it?”
Part of a good decision process includes asking yourself, “If I pick this option, what’s the cost of quitting?” The lower the cost of changing course in the future, the faster you can make your decision, since the option to quit lowers the impact by reducing opportunity cost.
Amazon founder Jeff Bezos and Virgin Group founder Richard Branson include the concept of a “two-way-door” decision in their decision process. A two-way-door decision is, simply put, a decision where the cost to quit is low.
Decision Stacking - Finding ways to make low-impact, easy-to-quit decisions in advance of a high-impact, harder-to-quit decision. If you’re thinking about buying a house in a particular neighborhood, you can rent a house in that neighborhood first.
Part of a good decision process includes asking yourself a final question: “Is there information that I could find out that would change my mind?”
Tilt - When a bad outcome causes you to be in an emotionally hot state that compromises the quality of your decision-making. When on tilt, you’re more likely to make decisions that make a bad situation worse.
Hedging - Paying for something that you hope you’ll never use to mitigate the impact of a downside event.
Thinking about how things can go wrong is known as mental contrasting. You imagine what you want to accomplish and confront the barriers in the way of accomplishing it.
You can identify more potential obstacles by combining mental contrasting with mental time travel, picturing yourself in the future having failed to achieve a goal, and then looking back at what got you to that outcome.
A companion technique to a premortem is backcasting, where you work backward from a positive future to figure out why you succeeded.
The problem with offering your opinion first when soliciting someone’s advice is that it significantly increases the likelihood that they will express the same belief back to you.
Therein lies the opportunity afforded to you when you hold a belief that is objectively true and you find out somebody believes something different. It gives you the opportunity to understand your own belief better.
The only way somebody can know that they’re disagreeing with you is if they know what you think first. Keeping that to yourself when you elicit feedback makes it more likely that what they say is actually what they believe.
Just as you can infect somebody’s feedback by letting them know your opinion, you can also infect their feedback if you tell them how it turned out.
To get high-quality feedback, it’s important to put the other person as closely as possible into the same state of knowledge that you were in at the time that you made your decision.
Using the terms “divergence” or “dispersion” of opinion instead of “disagreement” is a more neutral way of talking about places where people’s opinions differ, allowing you to better wrap your arms around disagreement.
Eliciting initial opinions and rationales from each member independently, which you then share with the team members before the group meets.
The members of a hiring committee have interviewed the finalists. Prior to any of those people having a group discussion, ask each to email their opinion about which candidate they prefer, along with their rationale. Put that feedback together and share it with the group prior to any discussion in a team setting.
This is what eliciting initial feedback and ideas independently (by email or some other means) does. It reduces the artificial appearance of overlap in opinions, better exposing where beliefs diverge.
Anonymize the initial round of feedback, which quarantines the source from the other members of the group, ensuring that the feedback of lower-status individuals gets more consideration than it generally otherwise would.
In the same way that a child exposes what you know and what you don’t know, all groups benefit from getting but-why’d.
You can get to the outside view by asking yourself, “If somebody were seeking my opinion about this type of decision, what are the things that I would need to know to feel like I could give them high-quality feedback?”
Real accountability to a checklist means that if somebody can’t provide the information necessary for you to give high-quality feedback, you should refuse to give it—not to be mean but to be kind.