💎 The Corner Office #7 - Unlock Better Decisions

Read time: 7 minutes

Hey y’all,

We are the product of our choices. Better choices, better life. This holds true across every aspect of our lives. And yet, in all of the management training courses I’ve been a part of, none have addressed how to make better decisions.

Annie Duke is a professional poker player and decision psychology expert. What a great place to start learning about decision making. I cleaned up at the last poker game I played in. That was 10 years ago. It was obvious to me that it was dumb luck and not good decisions that had gotten me to the win. So I cashed in my chips for the last time at the poker table.

This week’s Corner Office Insights come from Annie Duke’s (Author of Thinking in Bets) appearance on Starting Greatness.

Insight of the Week  

Looking back on many decisions that I’ve made in life, good and bad, luck has always played a part. It can often be challenging to draw the line between luck and decision making. It doesn’t really matter. Luck is a pivotal influence on the outcome of any decision. However I do have control over my luck. Nor do any of us. The lesson is to focus on what we control.

Think in bets

There are way more futures possible than the one that happens. And so, decisions can be looked at in two ways. The first is binary. There is a right choice and a wrong one. You must choose the one right path of all the options. The second way, is to see the future as a series of probabilities. The former is limiting at best, and destructive at worst. It can create a defensive environment in which the focus shifts to who is right and not what is right. Have you ever been been the decision maker in a meeting and been very certain of your decision? What happened when someone challenged you? I’ll bet you got defensive. If you are thinking in bets, when asked about your decision you can say: “I’m not 100% sure, but here’s how I’m thinking about it". By showing your hand and your bet, you’re inviting knowledge sharing and collaboration.

Thinking in bets has another advantage. It helps dissociate between the decision and the outcome. We tend to confuse good outcomes with good decisions (and vice versa). But luck is a force that cannot be planned for. For better and for worse. By missing the attribution of luck’s part in any outcome, we miss the opportunity to improve our decision making process. In the long run, this can be disastrous. Good luck reinforcing bad decision making, and vice versa. By framing our decision as bets, we inherently recognize that we do not know how exactly any single choice might play out.

So here’s the basic playbook, a tool called The Decision Tree:

1. Define the reasonable set of possible outcomes.

2. List the payoff (magnitude/good/bad) for each.

3. List the probability for each.

4. Make your choice.

You want to choose the option that is most likely to help you advance towards your goal, while carrying the appropriate level of risk.

Good decision making = increasing your knowledge

A decision can only be as good as the information you have when making it. Looking back at The Decision Tree, the challenge is in step 3. Knowing the probabilities of each outcome. I love Annie’s explanation of the universe of stuff you don’t know (infinite) versus that of what you do know (a speck of dust on a pinhead). Use that approach to estimate the outcome probability for each outcome. Once you have your list of outcomes, you need to build a forecast for each. Assume your universe of knowledge is too small. Start by asking: “what can I go find out that’ll help me forecast more accurately.”

You don’t just need to increase your knowledge. You should also avoid confirmation bias. To enrich the breadth and quality of the information that you are consuming, research people or sources with opposing views to yours. Challenge your own assumptions by trying to disprove them. Take the opposing view, find supporting evidence, and argue in its favor. Don’t go searching with a spotlight on information that supports your pre-existing views.

Always document your thoughts

Annie’s insight here is that building a solid decision making process means creating records of it as you go. It’s not ad-hoc. Rather it’s baked into the process itself. By doing that, you create a real-time record that is searchable in retrospect. That’s important for two reasons. First, we don’t need more work. Adding another process to reflect on decisions will present consistency challenges. Second, memory creep. A phenomenon that leads to misremembering after the fact. Often giving ourselves credit for knowing more than we did. So how can you do it?

Knowledge Tracker. This is a great tool for avoiding hindsight bias. Grab and pen and paper and track these four categories for each decision: what I knew before the decision, the decision, the outcome, what I know after the decision. By tracking these in real-time you have a fair way to evaluate your decision. Want to really level up? Take the information you found out after the decision and ask yourself whether you could have known before the decision. If the answer is yes, ask yourself why you missed it and what you could’ve done to spot it. Add that step to future decision processes.

Pre-Mortem Analysis. Seneca is quoted as saying: “luck is the meeting of preparation and opportunity.” A pre-mortem enhances our preparation. Start by identifying the goal you’re trying to achieve and the decision you’re making. Imagine a day in the future, when you’ve discovered you made a bad decision and didn’t achieve your goal. Have each member of your team list 5 reasons you have failed due to things within your control, and 5 more that are not within your control. List them separately, then compare notes. Now you’ve got the blueprint to mitigate risk and increase the chance of success.

By implementing these tools you increase the chances of succeeding in making better decisions both in real-time (affecting individual decisions) and improving your process (affecting all future decisions).

Tiny thought

If you’re a pilot, you may know the 1-in-60 rule. It says that for every 1 degree error in an airplane’s heading, the plane will miss its destination by 1 mile for every 60 flown.

Simply, for every small error in input there can be a big impact on the outcome. Many of our inputs come from our decisions. We often think of decisions as something new. But decisions apply equally to staying the course. By not changing anything, you decide to maintain the status quo. With new information and every decision you make, you can improve your course and reach your destination.

Keep your stick on the ice,

Jess

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