Why do you need to use the “outside view” or base rates to make decisions?

From Annie Duke’s “How to Decide“

Why do you need to use the “outside view” or base rates to make decisions?

First of all, what is the “outside view”?

The outside view- “What is true of the world, independent of your own perspective. The way that others would view the situation your in.” (p. 128) This is also known as the base rate.

Examples of the “outside view”:

• The divorce rate for marriages is 40-50%.
  
  
• The likelihood a restaurant will fail within the first year is 60%.
  
  
• The likelihood a high school graduate will attend college without taking any time off is 63.1%
  
  
• Eight percent of the American population lives in a city with a population over 1 million. (p. 136)
  
  
• “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. Eighty percent of gym members who join in January—prime New Year’s resolution folks—quit within five months” (p. 138)

Your intuitive prediction is called the “inside view.“

The “inside view”- “the view of the world through your own perspective, your own beliefs, and your own experiences.” (p. 144)

• “We all naturally see the world through the lens of our own specific circumstances, from inside of our own beliefs and the experiences that are particular to each of us. It’s hard for anyone to get outside of their own head to understand how someone else would view their situation.
  
  How could it be otherwise? You’ve only had the experiences that you have had. You’ve only been exposed to the information that you have been exposed to. You’ve only lived the life that you have lived. You’re not somebody else. You’re you. You are trapped in the inside view and that makes it hard to see your own beliefs, opinions, and experiences objectively. It makes it hard to see that KICK ME sign on your back.” (p. 126)

Here are the problems with your intuitive view or “inside view.”

• “Many common cognitive biases are, in part, the product of the inside view.” (p. 144)”
  
  
• “That input is your beliefs, and there is a lot of junk in there… 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.” (p. 125)
  
  
• “The person you’re most likely to mislead is yourself. And you don’t know you’re doing it, because you’re living in the inside view.” (p. 135)
  
  
• “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)
  
  
• “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.” (p. 127)
  
  
• “Pros and cons lists amplify the inside view” (p. 144)
  
  
• “it’s hard for anyone to get outside of their own head to understand how someone else would view their situation. How could it be otherwise? You’ve only had the experiences that you have had. You’ve only been exposed to the information that you have been exposed to. You’ve only lived the life that you have lived. You’re not somebody else. You’re you. You are trapped in the inside view and that makes it hard to see your own beliefs, opinions, and experiences objectively.” (p. 126)
  
  
• “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)

The most accurate prediction will be between the “outside view” and the “inside view.”

• “One way to get to the outside view is to make it a habit, as part of your decision process, to ask yourself what is true of the world in general, independent of anyone’s point of view.
  
  A helpful way to get an idea of what’s true of the world in general is to find out if there is information available about the likelihood of different outcomes in situations similar to yours. That information is called a base rate. There are plenty of places to get surveys, studies, and statistics on aspects of relationships, health, investing, business, education, employment, and consumerism that would likely be relevant to any type of decision you might be making. In fact, we’ve already referenced a bunch of base rates in this book.” (p. 136)
  
  
• “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)
  
  
• “And to consider the outside view, you must seek it out: both how other people might view the decision and what is true of the world in general. Whether you’re trying to estimate the chance a decision will work out favorably or unfavorably, or thinking about the possible outcomes of a choice or the potential payoffs, taking the time to explore the outside view and, separately, the inside view, will get you to a place of more accuracy.” (p. 142)
  
  
• “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)

Smart people are more likely to reject the “outside view” or base rates.

• “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. 136)
  
  
• “Smart people aren’t immune to motivated reasoning and the inside view. In fact, being smart can make it worse because smart people have more confidence in the truth of their beliefs and can spin better narratives to sway other people (and themselves) toward their point of view.” (p. 144)
  
  
• “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.” (p. 128)

Here are the biases that affect the “inside view.”

• Confirmation bias– “Our tendency to notice, interpret, and seek out information that confirms or strengthens our existing beliefs.” (p. 126)
  
  
• 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.” (p. 126)
  
  
• Overconfidence– “Overestimating our skills, intellect, or talent, interfering with our ability to make decisions depending on such estimates.” (p. 126)
  
  
• 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.” (p. 126)
  
  
• Recency bias– “Believing that recent events are more likely to occur than they actually are.”(p. 126)
  
  
• Illusion of control– “Overestimating our ability to control events. In other words, to underestimate the influence of luck.” (p. 126)

A pros and cons list tends to amplify 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)

Other good quotes:

“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)

“80% of gym members who join in January quit within 5 months… 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)

“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. 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). When you learn that you’re planning on doing something that the base rates tell you is difficult, a realistic view of what the future might have in store for you will encourage you to identify the obstacles that stand in the way for most people.” (p. 138)

“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)

“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)

“Whether you’re trying to estimate the chance a decision will work out favorably or unfavorably, or thinking about the possible outcomes of a choice or the potential payoffs, taking the time to explore the outside view and, separately, the inside view, will get you to a place of more accuracy.” (p. 142)

“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)

“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)

Workbook- Perspective Tracker (p. 140)

“Just as Knowledge Tracking gets you thinking about what you know and don’t know, motivates you to go find out more, and creates a record of your beliefs at the time of your decision that creates accountability and prevents memory creep, Perspective Tracking has many of the same benefits.”

Incorporating a habit of Perspective Tracking into your decision process helps scooch your beliefs out of the driver’s seat. It helps you view your gut feelings with more skepticism. Perspective Tracking forces you to consider the outside view. And to consider the outside view, you must seek it out: both how other people might view the decision and what is true of the world in general.

Whether you’re trying to estimate the chance a decision will work out favorably or unfavorably, or thinking about the possible outcomes of a choice or the potential payoffs, taking the time to explore the outside view and, separately, the inside view, will get you to a place of more accuracy.

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)

Use the space in the OUTSIDE VIEW column to describe your situation as best as you can entirely from the outside view.

Use the INSIDE VIEW column to describe the situation from the inside view.

Notice that in the Perspective Tracking tool, 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.

Here are two tactics you might try in getting to the outside view:

1. “Ask yourself, if a coworker or friend or family member were to have this problem, how would you view their problem? How might your perspective differ from theirs? What advice might you give them? What kind of solutions would you offer?”
   
   
2. “Ask yourself if there are any relevant base rates or information you could find about what’s true of people in your situation in general.”

“Use the space below to marry the two narratives. Describe what you think is an accurate intersection of the two views.”

“Did the exercise change the way you view your situation? If yes, why?”

Workbook- Getting caught in the inside view.-(p. 130)