Key takeaways from “How to Decide”

From Annie Duke’s book “How to Decide.“

Key takeaways from “How to Decide”

Beware of overconfidence.

“The tendency toward overconfidence vexes decision-making. In general, we don’t question our own beliefs enough. We have too much confidence in what we think we know and we don’t have a realistic view of what we don’t know. Whether it’s about the things we believe to be true, our opinions, or how we think the future might unfold, we could all use a healthy dose of skepticism.” (p. 117)
“It works to your benefit to assume that you may not know as much as you think you do, that your beliefs may not be as accurate as you think they are, and that you may need more help from others than you think you do. Approach the quality of the stuff you think you know with more skepticism. That skepticism will make you more willing to question your own beliefs and more eager to seek out what other people know. And that will improve the quality of your decisions.” (p. 115)
“When you’re smart, you’re naturally less skeptical about the things you believe to be true. 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.” (p. 135)
“The combination of motivated reasoning, the propensity to mislead yourself, and an overconfidence in intuition makes smart people less likely to seek feedback. When they do seek feedback, their ability to spin a persuasive narrative makes other people less likely to challenge them. That means that the smarter you are, the more vigilant you have to be about getting to the outside view.” (p. 135)
“A lot of the strategies in this book have been geared toward avoiding the echo of your own beliefs, maximizing the chances you uncover corrective information and unique perspectives. 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. Seek out the outside view with an open mind.” (p. 140)
“It’s hard to accurately assess a decision after the fact, in the shadow of an outcome that has already happened. But if you have a good decision process going forward, and keep a record of it, you’ll be a lot better off. You won’t have to wonder after the fact whether a decision was good or bad, under the haze of resulting and hindsight bias. Instead, you’ll be able to check your work.” (p. 68)

Beware of outcome bias and hindsight bias.

Outcome bias/Resulting- “a mental shortcut in which we use the quality of an outcome to figure out the quality of a decision.” (p. 3)
“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.”)” (p. 3)
“here’s the thing: If you misremember the past, you are going to learn useless lessons from your experience. That can mess you up in two ways: You’re not going to remember what you knew at the time of the decision. That makes it hard for you to judge whether a decision was good or bad. 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. 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.” (p. 33)

When you make an educated guess, try to make it more educated.

“There’s a lot of value in making an educated guess. The more willing you are to guess, the more you’ll think about and apply what you know. In addition, you’ll start thinking about what you can find out that will get you closer to the answer.” (p. 83)
“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?” (p. 83).

Make sure you use probabilities with your predictions and beliefs.

“Adding probability estimates to the decision tree will significantly improve the quality of your decisions versus simply identifying the possibilities and your preferences. To make better decisions, you have to consider the likelihood of any outcome occurring, including the ones you prefer and the ones you want to avoid. Without taking this extra step, it is difficult to assess the quality of any option on its own, and even harder to compare options.” (p. 91)
“When you express probabilities as percentages and offer a reasonable range around those probability estimates, you maximize your exposure to the universe of stuff you don’t know. That increases the chance that you uncover corrective information that will help you repair inaccuracies in your beliefs and improve the quality of your decisions.” (p. 112)
“When you use these blunt terms, you and the other people in the conversation are often speaking different languages without even knowing it.” (p. 105)

(Example: “When President Kennedy approved the CIA plan to overthrow Fidel Castro (known as the Bay of Pigs invasion), he asked his military advisers for their opinions about whether the attempt would succeed. The Joint Chiefs of Staff told Kennedy the CIA’s plan had a “fair chance” of success (which the writer of the assessment considered to be 25%). Because Kennedy thought “fair chance” meant something much higher, he approved it. The plan was a failure, which looked clumsy and amateurish, and embarrassed the United States at a key moment in the Cold War.” (p.106))
“Some people aren’t comfortable using probabilities expressed as percentages. After all, that’s part of why people prefer using these natural language terms. If that applies to you, you may find it easier to ask yourself: “For me to use this term to describe the likelihood of an outcome occurring, how many times out of a hundred do I think that outcome would be the one that happens?” (p. 101)
“That’s also true of decision-making. Even if you aren’t explicitly thinking about the set of possibilities, your preferences, and the probabilities, you are still making these estimates. Implicit in any decision is the belief that the option you choose has the highest probability of working out better for you than the options you don’t choose. Therefore, whether you acknowledge it or not, making a decision is making a guess about how things might turn out.” (p. 85)

Make sure you use base rates and the outside view to adjust your predictions.

“The outside view disciplines the distortions that live in the inside view. That’s why it’s important to start with the outside view and anchor there, considering things like what’s true of the world in general or the way someone else would view your situation.” (p. 133)
“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.” (p. 128)
“you start with the outside view and then go to the inside view. Starting with the outside view gives you the best opportunity to anchor to what’s true of the world in general or how other people might view your situation instead of too strongly anchoring to your own perspective.” (p. 140)
“As you’re thinking about your doctor’s orders and imagining that there’s a 90% chance that you’ll go to the gym three times a week, these statistics suggest strongly that you should adjust your prediction. No matter how much motivation you think you have, it would be rare that the likelihood you’ll stick with it would be that far off the base rate.” (p. 138)

Try using a range when making predictions.

You want to be explicit about how uncertain your belief is. 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).” (p. 110)

Beware of pro and cons list. They are filled with biases.

“A pros and cons list is generated entirely from your perspective, absent the outside view, easily infected by reasoning in a way that is motivated to support a conclusion you want to get to. In fact, if you wanted to create a decision tool to amplify bias, it would look like a pros and cons list.” (p. 128)
“Want to reject an option? You’ll focus on the con side of the list, expanding that side of the comparison. Want to move forward with an option? You’ll focus and expand on the pro side of the list as the cons hide in the shadows.” (p.128)
“When we approach a decision, we have already started to form an opinion about what the right option is. Usually we don’t even know we have already formed an opinion, but that opinion can, nonetheless, end up in the driver’s seat, directing our decision process.” (p. 128)
“What is hopefully (crystal ball) clear by now is that your beliefs create a bottleneck to good decision-making. It doesn’t matter how good the quality of your decision process is if the input into that process is junk. That input is your beliefs, and there is a lot of junk in there. The shock test showed that we are pretty bad at figuring out what we don’t know. We’re pretty bad at figuring out when our beliefs are inaccurate. We have too much confidence in what we think we know. One reason for these weaknesses is that it’s very hard for us to see the world from outside our own perspective.” (p. 125)

Conduct a premortem: (p. 190)

Premortem- “Imagining yourself at some time in the future, having failed to achieve a goal, and looking back at how you arrived at that destination.”

Six steps to conduct a premortem:

“Identify the goal you’re trying to achieve or a specific decision you’re considering.”
“Figure out a reasonable time period for achieving the goal or for the decision to play out.”
“Imagine it’s the day after that period of time and you didn’t achieve the goal, or the decision worked out poorly.
“Looking back from that imagined point in the future, list up to five reasons why you failed due to your own decisions and actions or those of your team.”
“List up to five reasons why you failed due to things outside your control.”
“If you’re doing this as a team exercise, have each member do steps (3) and (4) independently, prior to a group discussion of reasons.”

Example:

“You need to get to work on time tomorrow for an early meeting. Imagine you’re late and miss part of the meeting. Why did that happen?

Reasons having to do with your own decision making:

You overslept because you hit the snooze button too many times.
You forgot to set your alarm.
You left too thin a margin for traffic.
You were texting and driving and got into an accident.

Reasons outside of your control:

The power went out and your phone died so your alarm didn’t go off.
There was a sudden blizzard.
Even though there are normally clear rounds, there was an accident on the road on your way to work.
Someone else was texting while driving and hit your car.” (p. 191)

Why are premortems better than just thinking about how things could go wrong?

“If you’re like most people, doing the premortem helped you identify some reasons for failure that you wouldn’t have thought of otherwise. Research suggests that when you combine mental time travel and mental contrasting, you can produce 30% more reasons for why something might fail.” (p. 192).
“Premortems help teams solve the groupthink problem by exposing and encouraging different points of view. When you do a premortem as a group, being a good team player means coming up the most creative ways the decision might fail, coming up with reasons that the consensus opinion is wrong.” (p. 193)

Make big impact decisions SLOWLY.
Make small impact decisions FAST.

“The smaller the penalty, the faster you can go. The bigger the penalty, the more time you should take on a decision. The smaller the impact of a poor outcome, the faster you can go. The bigger the impact, the more time you should take.” (p. 150)
“The challenge for any decision-maker is that you want to accomplish two things at once: You don’t want to waste too much time and you don’t want to sacrifice too much accuracy. Like Goldilocks, you’re looking for a balance that is “just right.” Given the stats on picking what to eat, watch, and wear, for most people getting to “just right” will mean speeding up.” (p. 149)
“A recurring theme of this book has been that you should be laser focused on looking for ways to extract information from the world, transforming some of the universe of stuff you don’t know into stuff you do know. The information you gather is not just about learning new facts, or figuring out how things work, or refining your estimates of how things might turn out. It’s also about figuring out your own preferences, your own likes and dislikes. The more you know your own preferences, the better your decision-making will be. One of the best ways to figure out your likes and dislikes is to try stuff. The faster you make decisions, the more stuff you can try. That means more opportunities to experiment and poke at the world. That means more opportunities for you to learn new stuff, including new stuff about yourself. So let’s get to figuring out how to speed up.” (p. 150)
“You can identify low-impact decisions with the 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. If a decision passes the Happiness Test and the options repeat, you can go even faster.” (p. 177)
“You will face lots of high-impact, one-way-door decisions that carry a high cost to unwind (like buying a house, or moving to another country, or changing professions). When you know that you have such a decision on the horizon, consider whether there are lower-impact, easier-to-quit decisions that you can stack in front of the high-impact choice to help inform your one-way-door decision.” (p. 170)
“The very thing that slows you down—having multiple options that are very close in quality—is actually a signal that you can go fast, because this tells you that whichever option you choose, you can’t possibly be that wrong, since both options have similar upside and downside potential.” (p. 162)”

Try low cost experiments before you make the big impact decision.

“You will face lots of high-impact, one-way-door decisions that carry a high cost to unwind (like buying a house, or moving to another country, or changing professions). When you know that you have such a decision on the horizon, consider whether there are lower-impact, easier-to-quit decisions that you can stack in front of the high-impact choice to help inform your one-way-door decision.” (p. 170)
Decision Stacking: “Finding ways to make low-impact, easy-to-quit decision in advance of a high-impact, harder-to-quit decision.” (p. 171)
“Dating is a natural application of decision stacking. If you go out on a lot of dates, you learn more about your likes and dislikes before deciding about a committed relationship. Likewise, if you’re thinking about buying a house in a particular neighborhood, you can rent a house in that neighborhood first.” (p. 170)
“Quitting doesn’t deserve its nearly universal negative reputation. Quitting is a powerful tool for defraying opportunity cost and gathering intel, intel that will allow you to make higher-quality decisions about the things you decide to stick to. Whenever you choose to invest your limited resources in an option, you’re doing so with limited information. As your choice plays out, new information will reveal itself. And sometimes that information will tell you that the option you chose isn’t the best option for advancing you toward your goals.” (p. 168)
“As you learn more, it could be that you figure out that a decision you thought was great actually has much more downside potential than you realized and so has a higher probability to cause you to lose ground rather than gain it. Or it could be that you are gaining ground with the option you chose, but you would gain even more ground if you made a different choice. That’s a good time to consider quitting. Poker players understand this, as does everybody who has heard Kenny Rogers sing “You gotta know when to fold ’em.” (p. 168)

Why do you need to consult with other people to see things more objectively?

“It works to your benefit to assume that you may not know as much as you think you do, that your beliefs may not be as accurate as you think they are, and that you may need more help from others than you think you do. Approach the quality of the stuff you think you know with more skepticism. That skepticism will make you more willing to question your own beliefs and more eager to seek out what other people know. And that will improve the quality of your decisions.” (p. 115)
“The shock test showed that we are pretty bad at figuring out what we don’t know. We’re pretty bad at figuring out when our beliefs are inaccurate. We have too much confidence in what we think we know. One reason for these weaknesses is that it’s very hard for us to see the world from outside our own perspective.” (p. 125)
“We naturally make decisions from inside our own perspective. Often, however, the world looks very different from the outside. We’ve all experienced this when we’re with someone who is struggling with their distorted perspective and unable to recognize it. It’s like the friend who can’t recognize their own part in their disastrous dating history and thinks the best solution to their latest relationship problem is to look for an exorcist. You know you can see their situation accurately, while they are clueless. You can see their KICK ME sign. I’m betting that lots of examples come to mind of interactions you’ve had with someone who’s trapped in the inside view. If those examples flow so easily, it stands to reason that you’re doing it too.”
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.

We are all motivated to keep that fabric intact. When it comes to your own reasoning, your beliefs end up in the driver’s seat steering you toward a narrative that protects your identity and self-narrative. (I’m not the jerk! They are!)” (p. 128)
“The value of getting other people’s perspectives is not just that they know facts that you don’t know that might be helpful to you. It is not just that they might be able to correct inaccuracies in the facts you think you know. It is that even if they had the exact same facts as you, they might view those facts differently. They might come to a very different conclusion given the exact same information.” (p. 128)

Why can’t I just ask people for feedback?

“Just asking for advice or feedback isn’t enough to ensure that you get the outside view, because people are mostly reluctant to disagree for fear of being unkind, for fear of embarrassing you by challenging your beliefs, or for fear of offering a perspective that might cast you in an unflattering light. Worse, we all like to hear the inside view repeated back to us and we seek out people we suspect view the world the same way we do.” (p. 139)
“most people answer that the things they are thinking to themselves are different from the things they would say out loud to their friend who always has a bad dating story to share. You are trying not to hurt your friend’s feelings. You are trying to be kind. But in doing so, you’re denying them valuable input that could improve the quality of their future dating decisions. In being kind to your friend in the now, you are being unkind to the versions of your friend in the future who will have to make new dating decisions. When you look at it that way, you realize that withholding your perspective is the greater harm to your friend.” (p. 139)
“Another way to get to the outside view is to seek out other people’s perspectives and feedback. It’s important, however, that they feel comfortable expressing disagreement or a perspective that might cast you in an unflattering light. Otherwise, they’re only amplifying the inside view, strengthening your belief in your accuracy because it feels certified by others. You should be eager to hear people disagree with you and motivate them to do so.” (p.144)
“Be thankful when people disagree with you in good faith because they are being kind when they do.” (p. 139)
“That’s why we naturally end up in echo chambers. The inside view feels especially good when it’s sold as the outside view, in the guise of someone supposedly offering an objective perspective that merely confirms what you believe. But that only serves to amplify the inside view, strengthening your view of the world because it feels certified by others.” (p. 140)

Smart people are less likely to seek feedback.

“Smart people often think more highly of their beliefs and opinions. They are less likely to think the stuff they know needs correcting. They have more confidence in what their intuition or gut tells them. After all, they’re really smart. Why wouldn’t they have more confidence in those things?” (p. 135)
“When you’re smart, you’re naturally less skeptical about the things you believe to be true. 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.” (p. 135)
“The combination of motivated reasoning, the propensity to mislead yourself, and an overconfidence in intuition makes smart people less likely to seek feedback. When they do seek feedback, their ability to spin a persuasive narrative makes other people less likely to challenge them. That means that the smarter you are, the more vigilant you have to be about getting to the outside view.” (p. 135)

Create precommitment contracts. This will help you make better decisions when you are emotional or on tilt.

“Like other precommitments, you can set advance criteria for how you’ll react. If you think you could fall for the sunk cost fallacy, refusing to quit when quitting is the appropriate response, come up in advance with the conditions under which you would quit. Write those down and commit to changing course when those conditions arise. That’s particularly effective in a team setting.” (p. 207)
Precommitment Contract (also known as Ulysses contract)- “An agreement that commits you in advance to take or refrain from certain actions, or raising or lowering barriers to those actions.

Such agreements can be with others (for group decisions or to create accountability to another person) or with yourself.”(p. 199)
“Or let’s say things aren’t going your way on some project in which you’ve already invested a bunch of resources. You’re unlikely to quit in those situations, even when an objective observer would see that quitting is appropriate. In the wake of a bad outcome, it’s difficult to see the situation rationally. If you could get to the outside view you would quit, but you don’t because you’re stuck in the inside view. That’s the sunk cost fallacy, another example of tilt.” (p. 206)

Ask yourself this final question before making a decision.

“part of a good decision making process includes asking yourself a final question: “Is there information that I could find out that would change my mind?” (p. 175)

Examples:

“You flipped a coin and it comes up “Paris.” Is there information you could find out that would make you switch your choice to Rome?” (p. 175)

“You go through a meticulous hiring process and decide on Candidate A. Is there information you could find out that would switch your choice to a different candidate or cause you to continue your search?” (p. 175)
“Pretty much every decision is made with incomplete information. This final question gets you to imagine what information would be helpful if you were omniscient, if you had a crystal ball. If you could attain a state of perfect knowledge, is there something that would cause you to change your mind? If the answer is yes, ask yourself if that information is available, absent omniscience or psychic powers.” (p. 175)
“If you think decisive information is available and believe that it’s worth it and you can afford it, then go find it. But if the answer is no, just go ahead and decide.” (p. 176)

If you want to improve your decision making skills and avoid outcome bias, you must create a decision journal.

“Making a habit of journaling the outside view and the inside view will help you get better feedback about how you thought about your decision. As the future unfolds, which inevitably changes your perspective, you will have a record of how you viewed the situation at the time, creating a higher quality feedback loop and adding a layer of accountability to your process.” (p. 142)
“Our memories aren’t time stamped. When you open a file on a computer, you can see “date created” and “date modified.” Our brains, unfortunately, don’t work like that. Left to your own devices, the memory of your knowledge at the time of a decision can get distorted by knowing the outcome. You can help remedy memory creep by taking the time to deliberately reconstruct what was known before a decision and what was revealed only after the fact.” (p. 34)
“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.” (p. 38)
“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. Asking yourself why you might be wrong will also increase the accuracy of the things you believe, the opinions you hold, and how you think the future might unfold. That’s because when you ask yourself what information you could discover that would make you change your mind, you can actually go find out some of that stuff. And in asking and answering the question, you are just more likely to go look for it.” (p. 117)
“Asking yourself why you might be wrong will also increase the accuracy of the things you believe, the opinions you hold, and how you think the future might unfold. That’s because when you ask yourself what information you could discover that would make you change your mind, you can actually go find out some of that stuff. And in asking and answering the question, you are just more likely to go look for it.” (p.117)
“Hopefully, this exercise and the shock test have shown you a better approach to these kinds of estimates. It works to your benefit to assume that you may not know as much as you think you do, that your beliefs may not be as accurate as you think they are, and that you may need more help from others than you think you do. Approach the quality of the stuff you think you know with more skepticism. That skepticism will make you more willing to question your own beliefs and more eager to seek out what other people know. And that will improve the quality of your decisions.” (p. 115)
Now take some time to think about what could have been better about the decision. Some questions to consider:

Could you have gotten more or better information before deciding? YES NO Could you have decided more quickly? YES NO

Could you have taken more time with the decision? YES NO

Was there information you learned after the fact that you could have known beforehand that might have changed your decision?YES NO

Were there even better outcomes possible than the outcome you got? YES NO

If yes, if you had made a different decision, could you have increased the probability of those better outcomes occurring? YES NO

Can you think of any reasons why you would make a different decision if you had to do it over again? YES NO

Even if you would likely come to the same decision, can you think of ways you could improve your decision process if you had to do it over again?

Key takeaways from “How to Decide”

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