annie duke

How to Decide (E.P. 22) | Annie Duke on Infinite Loops Podcast with Jim O’Shaughnessy

Check out Infinite Loops Podcast Page & Episode Notes

Key Takeaways

  • We cannot assess decision quality objectively
    • What we can assess is the outcome of that decision
    • The problem is that we tend to confuse a good outcome with a good decision and vice versa
  • Dealing with The Hindsight Bias
    • Create a knowledge tracker asking yourself:
      • What information did I know, or was knowable, beforehand?
        • Could I have know other relevant information at a reasonable cost?
      • What decision did I make?
      • What things were revealed afterward?
      • What was the outcome?
      • What other outcomes could have happened and what were their probabilities?
    • It’s way better to start tracking all this information as part of the decision-making process
  • Increased uncertainty from COVID-19, requires us to document our decision-making processes even more accurately that we normally would
  • When we have a thesis, we should ask ourselves how we could find out if our thesis is wrong
    • If that’s not the way you are thinking you will not be successful, except by accident” – Annie Duke

Books Mentioned

Intro

  • Annie Duke (@AnnieDuke) is a World Series of Poker bracelet winner, an expert in decision making, and a best-selling author
    • Check out Annie’s website
    • Check out these podcasts notes from Annie’s appearance on the 16z Podcast
  • Hosts – Jim O’Shaughnessy (@jposhaughnessy)
  • In this chat, Annie discusses the biases in our decision making, how to mitigate them, and much more

What Led Annie to Write her New Book

  • In Thinking in Bets, Annie was focused on the issue of uncertainty in decision-making
    • We don’t have all the information we need for a decision
    • We don’t have control over the outcome
    • The book focused more on “why” we have to deal with uncertainty and less on “how”
  • How to Decide, was Annie’s exploration of “how” we can make better decisions in the face of uncertainty and imperfect information

Problems in Decision Making

  • We cannot assess decision quality objectively
    • Instead, we can assess the outcome of that decision
    • The problem is that we tend to confuse a good outcome with a good decision and vice versa
  • A related problem is that we have the Hindsight Bias
    • After the outcome happens, we are biased to think that we should have seen it coming, that it was obvious
    • A real-life example: Hillary Clinton’s 2016 Presidential campaign
      • Today, everyone agrees that she screwed up badly in Michigan, Wisconsin, and Pennsylvania
        • It seems so obvious in hindsight
      • But why did nobody write about it before the election?

Mitigating Hindsight Bias

  • With regards to a past decision you made:
    • Create a knowledge tracker asking yourself:
      • What information did I know, or was knowable, beforehand?
        • Could I have know other relevant information at a reasonable cost?
      • What decision did I make?
      • What things were revealed afterward?
      • What was the outcome?
      • What other outcomes could have happened and what were their probabilities?
  • It’s way better to start tracking all this information as part of the decision-making process
    • It won’t remove all the bias, but it will make you more objective

COVID-19’s Impact on Our Decision Making

  • The hindsight bias is going to be amplified as information comes at us more rapidly
  • More uncertainty requires that we document our decision-making processes even more accurately that we normally would

Problems with Gut Decisions and our Narratives

  • A lot of our biases come from the confidence in our own narrative and our “gut”
    • Relying on our gut is attractive because nobody can examine and judge our decision-making process
    • This is also the big limitation of making decisions based on intuition
    • It doesn’t create any accountability or evidentiary record for the decision
  • Good decision-makers are aware of the limitations of their gut and compensate for them through analysis

Power of Negative Thinking

  • When we have a thesis, we should ask ourselves how we could find out if our thesis is wrong
    • We actively try to disprove our thesis
      • If that’s not the way you are thinking you will not be successful, except by accident” – Annie Duke
    • This way of thinking is the basis of the Scientific Method, as explained by Karl Popper
  • Many people are very attached to their ideas and find it difficult to try disproving them
    • We like to keep a positive idea of ourselves
      • Our identity feels threatened if our beliefs are doubted

Problems with Information

  • Our decisions are based on very limited information
    • “We have this huge problem as decision-makers because, the stuff we know is a speck of dust, and the stuff we don’t know is like the size of the whole freaking Universe” – Annie Duke
  • To make things worse, there are inaccuracies in the things that we believe
  • Looking for the things we don’t know can help us to deal with both of our information issues

Value of Conversations Between People with Opposite Views

  • Most of us tend to avoid interacting with people who hold different beliefs
    • Each person knows they are not going to change their mind so they assume the conversation would be useless
  • Actually, such conversations are a huge opportunity for improving, even if we are sure we are right
    • We often don’t know why we hold our beliefs
      • The conversation forces us to search for more information to explain our belief
        • A great way to start exploring the things we don’t know

Writing for Better Thinking

  • Often you think you know what you want to say, but when you sit to write you realize how much you don’t know
    • You are forced to research more deeply, understand what you don’t know
    • To explain concepts in a simple way, you have to understand them at an even deeper level
  • While writing, every day you think “I’m an idiot”, but at the end, you’re so much better
  • People who write often look at their past work and realize how wrong they were

Additional Notes

  • If Annie could make any changes in the World she would:
    • Ensure that markets are actually free
      • “Free market is the best expression of betting on human ingenuity” – Jim O’Shaughnessy
    • Make executive, legislative and judicial branches of government actually work independently and check on each other
  • Technology and Decision Making
    • Machine learning can tell us what and when to do something, but not why
      • Most people rely on narrative for decision making
        • Without a “why”, they may miss out on an opportunity to improve their decisions
Infinite Loops : ,
Notes By Giorgio Parlato

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