- The Simplified Newsletter
- Posts
- The Science of Decision Making
On this episode of the podcast/newsletter we decided to dive in to a topic that I had been studying recently, decision making. We all make decisions, some good and some bad. When you boil it down, there are really two things that ultimately determine how our lives turn out: luck and the quality of our decisions. The goal obviously is to gradually increase the number of good decisions in our life and decrease the bad ones.
We discuss two books that I had recently read, Thinking in Bets and Quit, both by the author Annie Duke. Annie was a poker champion and uses poker as a framework that echoes how the real world functions. Poker is a game of decision-making under conditions of uncertainty over time, just as in life. There is an element of luck always at play that influences outcomes. The notion of uncertainty combined with luck can create blind spots in our decision making process.
The first phenomenon we discuss from the books is the notion of resulting. This is the tendency to judge whether or not a decision was good or bad based solely on the result of the decision. Instead, understand that good decisions can turn out poorly and bad decisions can turn out well. If you only take into account the result, this could lead you to learn the wrong lessons. Instead, take into account the entire decision making process and see if you did proper due diligence, or if you fell prey to one of the many biases in decision making.
We mainly discuss three of these cognitive biases in the podcast. The first is the self-serving bias. As we field outcomes, we are more likely to take credit for good outcomes, and chalk up the bad outcomes to bad luck. This can lead to learning the wrong lessons.
The second is the status quo bias. We see this a lot in the corporate world. This is the tendency to be more tolerant of bad outcomes that result from sticking to what we are already doing. We are less tolerant of bad outcomes that come from switching to something new. This can lead businesses to not change when they need to, and it can have devastating consequences.
Finally, we touch on the sunk cost effect, which is taking into account the cost (money, time, resources) that were sunk into an endeavor when trying to make decisions about whether to continue to spend more.
We discuss two tools in decision making that are outlined in the books. The first is backcasting. Identify the goal you are trying to achieve and work backwards in order to map out the future. Imagine you achieved your goal and then identify how you did it. What went well? What didn’t? Putting this roadmap together can be very helpful when making decisions.
The second is doing a premortem where you imagine not achieving your goals in order to identify why. Imagining obstacles in the way of your goal can actually produce surprising results and prepare you to navigate the future.
Simplified Takeaways…
Life is similar to one long game of poker, where you are making decisions with imperfect information, luck plays a role, and you will probably take some losses.
Beware of resulting which is judging a decision as good or bad simply based on the result.
Recognize that many cognitive biases can wreak havoc on your decision making ability.
Practice backcasting and premortems in order to improve your decision making ability.
Disclaimer: This newsletter is for general informational purposes only and does not constitute the practice of medicine, nursing, or other professional healthcare services, including the giving of medical advise. No doctor/patient relationship is formed. The use of information on this newsletter or materials linked from this newsletter is at the user’s own risk. The content of this newsletter is not intended to be a substitute for professional medical advise, diagnosis, or treatment. Users should not disregard, or delay in obtaining, medical advise for any medical condition they may have, and should seek the assistance of their health care professionals for any such conditions.