How to Decide

Author

Annie Duke

tendency to look at whether a result was a good or bad to figure out whether a decision was good or bad
loose coorelation between quality of decision and quality of outcome

Luck intervenes between your decision and the actual outcome
You can’t tell that much about the quality of a decision from a single outcome, because of luck
You notice bad luck but overlook dumb luck

Goal is to make a decision that will lead to the most favorable range of outcomes
Resulting reduces compassion when it comes to how we treat others and ourselves

tendency to believe that an outcome, after it occurs, was predictable and inevitable
Two ways: should have known and knew it all along
Memory creep: things that reveal themselves after the fact creeps into your memory of what you knew or what was knowable before the decision
Hindsight bias leads to lack of compassion for ourselves and others

Paradox of experience
Experience is necessary for learning, but individual experiences often interfere with learning
Exploring the other possible outcomes is a form of counterfactual thinking
our willingness to example outcomes is asymmetrical
we are more eager to put bad outcomes in context than good outcomes

Preference is individual to you, depends on your goals and values
Payoff is how an outcomes affects your progress toward or away from a goal
Some possibilities will have payoffs where you gain something of value
These compromise the upside potential of a decision
Some possibilities will have payoffs where you lose something of value
These compromise the downside potential of a decision
Risk is your exposure to the downside
When you’re figuring out if a decision is good or bad, you’re comparing the upside to the downside
Does the upside potential compensate for the risk of the downside potential?
Pros and cons lists are flat, low quality decision making tool
These lack information both about the size of the payoffs and the probability of any pro or con occuring

Identify the reasonable set of possible outcomes.
Identify your preference using the payoff for each outcome, what degree do you like or dislike each outcome?
Estimate the likelihood of each outcome unfolding
Assess the relative likelihood of the outcomes you like and dislike for the option under consideration.
Repeat steps 1-4 for other options
Compare the options

Likely and unlikely are ambiguous terms, it leads to miscommunication
Expressing probabilities as percentages is more useful and precise
Size of range of signals indicates what you know and what you don’t know
Shock test: would you be surprised if the correct answer was outside your range?

Inside view is your view of the world
Many cognitive biases are in the inside view
Pros and cons list amplify the inside view
Outside view is the way others would see your situation, indepedent of your own perspective
Accuracy leaves at the intersection of the outside view and the inside view

When you pick an option, you’re passing on the potential gains associated with the options you don’t pick
Higher the opportunity cost, the higher thee penalty for making choices that are less certain

Gap betwen the things we know we should do and the decision we later make is known as the bahavior gap
Think positive
Plan negative
Mental contrasting is thinking about how things can go wrong
Mental time travel: picturing yourself in the future having failed, and looking back at what got you to that outcome
This is a premortem
Backcasting is when you work back from a positive future to figure out why you succeeded
Don’t confuse the destination with the route.
Your reaction to a bad outcome can make things worse.
Backcasting is when you work back from a positive future to figure out why you succeeded
Don’t confuse the destination with the route.
Your reaction to a bad outcome can make things worse.

Beliefs are contagious
Halo effect: tendency for an impression created in one area to influence opinion in another area