How to Decide - by Annie Duke
This book serves as a practical guide and workbook to complement Annie Duke’s previous work, Thinking in Bets.
Here are some text that I highlighted in the book:
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.
Psychologists call this “outcome bias,” but I prefer the more intuitive term “resulting.”
HINDSIGHT BIAS: 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.”
Hindsight bias makes you feel like the outcome was much more predictable than it was. This can cause you to repeat some low-quality decisions and to stop making some high-quality decisions.
Tracking your knowledge creates the time stamp that can get lost in the warp of hindsight bias.
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.
There are many possible futures but only one past. Because of this, the past feels inevitable.
The Three Ps: Preferences, Payoffs, and Probabilities
One person’s trash is another person’s treasure
Pros and cons lists are flat, as if (payoff) size doesn’t matter.
When you guess, the gap between perfect knowledge and your knowledge bothers you.
This way of thinking, that there is only “right” and “wrong” and nothing in between, is one of the biggest obstacles to good decision-making. Because good decision-making requires a willingness to guess.
People deflect making such estimates all the time with “I’d just be guessing.” That implies that anything less than perfect knowledge makes your answer random. We get hung up on not having all the information, which causes us to overlook all the things we do know.
You almost always know something, and something is better than nothing. You might not get it perfect, but when it comes to decision-making, you get credit for showing your work.
The value of guessing isn’t in whether the guess is “right” or “wrong.” Your guesses are like the archer’s arrows. If you were omniscient and your guesses were always exactly right, you’d score all bull’s-eyes. When you make an educated guess, you’re aiming at the bull’s-eye and, though it’s likely you’ll miss the exact answer, like the archer you will still score points for getting in the vicinity.
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.
TK Confirmation bias—Our tendency to notice, interpret, and seek out information that confirms or strengthens our existing beliefs. Disconfirmation bias—Confirmation bias’s sibling. Our tendency to apply a higher, more critical standard to information that contradicts our beliefs than to information that confirms them. Overconfidence—Overestimating our skills, intellect, or talent, interfering with our ability to make decisions depending on such estimates. Availability bias—The tendency to overestimate the frequency of events that are easy to recall because they are vivid or because we’ve experienced them a lot. Recency bias—Believing that recent events are more likely to occur than they actually are. Illusion of control—Overestimating our ability to control events. In other words, to underestimate the influence of luck.
Part of why it’s easier to see other people more objectively than you can see yourself is that you are motivated to protect your beliefs when it comes to reasoning about your own situation. Your beliefs form the fabric of your identity. Discovering that you’re wrong about something, questioning your beliefs, or admitting that some bad outcome was because of a bad decision you made and not just bad luck—these all have the potential to tear that fabric.
OUTSIDE VIEW: What is true of the world, independent of your own perspective. The way that others would view the situation you’re in.
Smart people are also better at constructing convincing arguments that support their views and reinforce the things they believe to be true. Smart people are better at spinning narratives that convince other people that they are right, not in the service of misleading those people but in the service of keeping the fabric of their own identity from tearing.
Base rates: An easy way to get the outside view
BASE RATE: How likely something is to happen in situations similar to the one you’re considering.
82% of gym members go once a week or less. Of those 82% of members going to the gym once a week or less, 77% of those memberships went completely unused.
Educating yourself about what is true of most people in your situation will give you a glimpse into the outside view that will improve your ability to compare options (such as buying in-home equipment, joining a gym, or doing something else).
Another way to the outside view: Actively find out what other people know
You’re miffed that someone didn’t tell you sooner. It’s generally not that those people are trying to be unkind, gleefully letting you suffer the embarrassment of an afternoon spinach-smile. It is that they are trying to be kind by sparing you the embarrassment of being told you have spinach in your teeth. It’s embarrassing when someone tells you that you have something stuck in your teeth. It’s more embarrassing when that stuff stays stuck in your teeth because no one told you. By “being kind” and keeping what they see from you, they inadvertently deny you the chance to get the spinach out of your teeth.
Be thankful when people disagree with you in good faith because they are being kind when they do.
Perspective Tracking is a good decision habit to develop. Intentionally considering your situation entirely from the outside view and then entirely from the inside view can get you to a more accurate view that incorporates both.
Most of the midwesterners and Californians expected that Californians would be happier, but what they actually found is that there was little difference in happiness between the students attending schools in the Midwest (where the weather is objectively not as good) and students attending the California schools.
We spend an enormous amount of time on routine, inconsequential decisions. The average person spends 250–275 hours per year deciding what to eat, watch, and wear. That’s the equivalent of the time they spend at work in six or seven weeks.
There is a time-accuracy trade-off: Increasing accuracy costs time. Saving time costs accuracy.
The key to balancing the trade-off between time and accuracy is figuring out the penalty for not getting the decision exactly right.
Happiness Test, asking yourself if how your decision turns out will likely have an effect on your happiness in a week, a month, or a year. If the type of thing you are deciding about passes the Happiness Test, you can go fast.
A freeroll is a situation in which there is limited downside. Save time deciding whether to seize a freeroll; take time in deciding how to execute it.
When you have multiple options that are close in potential payoffs, these are sheep in wolf’s clothing decisions. Close calls for high-impact decisions tend to induce analysis paralysis, but the indecision is, in itself, a signal that you can go fast.
Only-Option Test, asking yourself for each option, “If this were the only option I had, would I be happy with it?” If your answer is yes for more than one option, you could flip a coin since you can’t be that wrong whichever option you pick.
MAXIMIZING: Decision-making motivated by trying to make the optimal decision; not deciding before examining every option; trying to make the perfect choice.
That’s why many of the strategies laid out in this chapter are designed to steer you toward a more realistic approach to decisions known as satisficing (a term made from the combination of “satisfy” and “suffice”).
despite the importance of setting positive goals, positive visualization alone won’t give you the best route to success. Negative thinking helps you identify things that might get in your way so you can identify ways to reach your destination more efficiently.
Tilt is a common reaction that occurs in the wake of a bad result. The what-the-hell effect and the sunk cost fallacy are examples of tilt. Planning for your reaction allows you to create precommitments, establish criteria for changing course, and dampen your emotional reaction in the wake of a setback.
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.
Soliciting feedback independently
An added layer of protection: Anonymizing feedback