Last updated April 10, 2022

Tags: #literature/books/finished Status: Tags: Links: Currently Reading List - How to Decide Application

How to Decide

Introduction

Tools

• Tools for decision making should be:
  • Reliable and consistent
  • Reteachable and usable for other people
  • Can judge whether you used it effectively
    • Gut decisions are bad because we aren’t able to examine the decision making process
    • Pros and cons lists are not always effective/reliable, and promotes bias
• Tools should reduce overconfidence, hindsight bias, and confirmation bias
• An ideal tool should be like a crystal ball
  • Entails knowing about all the options and the outcomes

1 - Resulting

• Resulting is using the result of a decision to judge it’s quality
  • Prevents us from judging the actual decision made
• Resulting makes us less compassionate towards other people and ourselves when it comes to decision making

Luck

!Pasted image 20210510095517.png

Outcome quality exercise

Earned Reward

• Starting to read books
  • Made me spend my time doing valuable work
  • Has shifted my worldview
  • Taught me invaluable ideas
  • Yes, yes, no, yes, yes, no, x, no, yes
    • Should have started earlier lul Dumb Luck
• Investing in reddit stocks
  • Barely did any independent research, trusted the word of others
  • Reasons for success include the decisions of other people, the general run of the market, and the suggesters had decent reasoning for their claims
  • Could have ended up stagnating, mooning more, or crashing instantly Bad Luck
• Not selling stocks at peak
  • Decision making was good since I believe sustainable energy is a long-term play
    • It was a rather unexpected crash
  • Could have ended up stagnating, mooning, or crashing harder
• Not winning the schulich award Just Deserts
• Medv
  • Bad decision making by following reddit stocks
• Not studying enough for my chem final
  • Thought open book was going to make it way easier
  • Did not expect final to be this hard

Application

• How much is the outcome clouding the quality of a decision?
  • External factors?
• Reflect on the good from bad decisions, and the bad from good decisions
• Other possible outcomes?

2 - Hindsight is not 20/20

• Distorts our memory of what we thought about the decision prior to making it
  • Connected with certain mental and verbal cues
  • Memory creep is when we reconstruct our memory to accomodate for our hindsight bias
    • Makes us learn useless lessons as they never happened
      • Also urges to make the same decisons if the outcome was good

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5

Man: I heard you talking on the phone. I love your accent. Are you Italian?

Woman: No, I’m Greek.

Man: I knew it!

• lmao

Knowledge Tracker

• Knowledge trackers help us clarify the information we knew at each step of a decision
  • Track the information we knew before making the decision, then track the information we now know after experiencing the outcome
• Helps beat us up or others less
• Using the outcome to determine the quality of the decision is lazy

Example

Stuff I knew before the decision

• I was previously 10k across both accounts
• The market had a decent dip
• I haven’t been managing my accounts as frequently Decision
• Hold Outcome
• Lost all profits, down 2k Stuff You Know After Outcome
• It’s not that I should have held in that scenario, it’s that I should have sold after seeing 22% profits in 3-4 months
  • Next time I’ll lock in my profits whenever I beat the market, even if the stocks were initially meant for long term
• I was too greedy
  • I wasn’t satisfied with 10k, and now I paid the price

3 - The Decision Multiverse

Exercises

• Three possible outcomes for Kingdom Comb include:
  • Gaining enough money to sustainably work on it as a main job
  • Getting bought out by a larger company
  • Achieving exponential growth and success

Notes

• We should put individual outcomes in context with all the other outcomes that have occured
• Creating decision trees help us evaluate the effects of our decisions
• Putting too much emphasis on a single outcome can sway our biases
• We tend to put our outcomes into context when we end up with a bad outcome to help alleviate ourselves
  • Good mindset if paired with learning

Practice

• Identify decision
• Identify outcome
• Create a tree with other reasonable outcomes that were possible
• Explore the other opportunities to better learn about the outcome you got

4 - Three P’s

Preferences, payoffs, and probabilities

• Instead of looming over whether a decision was good/bad, a good decision process lets us check our work
• Preferences are based on our goals and values
• Payoffs are the supposed benefits and downsides of a decision
• Probabilities are the chances of the payoffs happening

Steps

1. Identify the possible outcomes
2. Identify your preference using the payoff for each outcome- to what degree do you like or dislike each outcome, given your values?
   • List them from most favorable to least
   • Consider payoffs like money, hapiness, knowledge
     • Upside, downside
       • Consider magnitude
3. Estimate the probabilities for each outcome
   • Consider the level of risk in relation to the potential reward
   • Can use actual percentages or phrases
4. Assess the overall probability of the good happening vs bad
5. Repeat 1-4 for other options
6. Compare options to one another
   • Which option has the best upside to downside ratio?

Notes

• It’s important to put effort into making guesses, even if we don’t have all the information
  • Educated guesses/Archer’s mindset/Pin the tail on the donkey
    • All guesses are educated guesses
    • An archers mindset encourages retrieving already known information and finding additional information gathering is crucial
    • Data, experiences, etc
  • We always know something, and something is better than nothing
    • These small improvements in our decision making add up overtime
  • Can help us gain more information for the next run
• Using terms like probably and often help us think more probabilistically

Uncertainty

• Uncertainty stems from imperfect information and luck
  • Imperfect information comes into play when we use our beliefs to make a decision
  • Luck comes into play in between the decision and the outcome

5 - The Power of Precision

• By being precise with our opinions, there will be less room for interpretation and miscommunication
  • ex) “Probably” can mean 50% to you but 75% to someone else
  • Helps uncover disagreement
    • Helps find out the most right stance
• Ask yourself about possible information that may change your mind/provide more accuracy
  • Find the information if it’s currently available
  • Keep an eye out for it in the future if it isn’t

Range

• The range of our probabilities shows how uncertain we are of our guesses
  • Based on the amount of knowledge we have (none vs all)
    • Making broad guesses wastes our known information
      • You should be shocked if the probability was off
        • You should shoot for a 9/10 chance that your guess is right
  • Encourages other people to provide their own opinions/correct us

Guessing

a. 330k, 300k, 400k b. 3, 1, 8 (21) c. 50, 40, 70 (57) d. 1980, 1950, 2003 (1901) e. 30, 16, 40 (32) f. 70%, 50%, 90% (8%) THOUGHT IT WAS CITY g. 4 mil, 500k, 20mil (1.8 mil) h. 600m, 300m, 1km (91) i. 20, 10, 30 (20) j. 50%, 25%, 75% (25%)

Reflection

• 6/10 correct
• Yes
  • I was shocked by some of these results
    • Proof that we should be more broad with such random guesses
    • Overconfidence vexes decision making

6 - Turning Decisions Outside In

• Beliefs are like “Kick me” signs, you are aware of everyone else’s but oblivious to your own
• Other biases include
  • Confirmation bias
    • Seeking information that strenghthens or confirms our beliefs
  • Disconfirmation bias
    • Seeking information that weakens or is more critical of our beliefs
  • Overconfidence
    • Overestimating our ability to make decisions
  • Availability bias
    • Overestimating the frequency of events because of their frequency/vividness
  • Recency bias
    • Overestimating the frequency of recent events
  • Illusion of control
    • Underestimating the influence of risk
• Open-mindedness is important as people can forge different opinions from the same information
• The inside view consists of our eexperiences, beliefs, and overall perspective
• The outside view is the objective stance of worldly truths and proofs
• An ideal view is when we take both views into account
  • Being smart leads us to motivated reasoning, the tendency to reason about information to confirm our desired beliefs and conclusion, and other people are more likely to listen to us
    • Thus, it’s even more important to seek the outside view
      • Can be practiced by actively finding out what other people know
        • Be thankful when someone disagrees with you, as it shows they care about helping you improve and are willing to suffer the embarrassment for it
• Base rates are information of outcomes from previous similar situations
• Perspective tracking helps us mitigate the effects of our beliefs
  • To consider the outside view, we should view our problem as if it was someone else’s, and we should ask ourselves about any relevant base rates/information
    • Journalling the outside view helps us build the habit of looking at things objectively
    • Mitigates paradox of experience and self-serving bias

7 - Analysis Paralysis

• <10 mins on what to eat, <30 mins on what to watch, <10 minutes on what to wear
• averages are 150, 50, and 100 minutes per week
• We should strive to have a balance of time saved and acuracy when making decisions
  • Save our time for more important decisions
• Spending time on the decisions above generate low impact, as they will mean almost nothing overtime
• Ask yourself whether the outcome of the decision will have a significant effect on your happiness in a year
  • If no, speed up the decision
    • Do the same for a month and for a week
      • Helps us understand how much we can trade off accuracy for time
  • If we have the chance to repetitively make the same decision, we can go even faster
• Freerolling is a situation where the potential losses are insignificant and the potential rewards are significant
  • ex) No losses or you do not become worse off than you were prior to the decision
  • The limited downsize impiles that we should speed up our decision making process when it comes to such decisions
  • Are more abundant than we think
  • It is important to act quickly before the opportunity passes
  • We may struggle to see freerolls if we are too focused on the potential impact/significance of the decisions, even if it is one-sided in our favor
  • Application
    • Something that took me a while to decide on was whether to join in on conversations in the sfu discorf
      • I could have definitely sped up the decision by just doing it
      • Other past decisions include hitting up conversations, asking for help or opportunities, and yeah
  • Analyze the effects of repeatedly making the same decision

Similar Choices

When a decision is hard, that means it’s easy

• However, more choices gives us more anxiety
  • We can counter this by acting as if one of the options were the only choice, and whether we would be okay with it
• If we’re struggling to make a decision between two similar opportunities, we should be going fast since they have similar upsides and downsides and have little difference
• Consider how drastic the outcome would change if you were to choose one over the other
  • If it’s insignificant, then just choose lmao
    • Hidden freerolls
• Spending time on these decisions gives us illusory certainty, and wastes time that can be spent on making other decisions

Opportunity Costs

BOOKMARK QWEQWE

• When we make an option, we lose the potential gains of the other options
  • The happiness test helps us determine the opportunity costs of a decision
    • If a decision is low-impact, then there wasn’t much opportunity costs
• Quitting can be a powerful tool to gather intel and make higher quality decisons for more important things
  • If we are presented with new information that alters our perception, we should not merely continue just to persevere
    • The easier it is to quit, the more we should consider it given the appropriate circumstances
      • Allows us to go back to previously abandoned options
• A two-way-door is one where the cost of quitting is low
  • Allows us to be more risky but also learn things without much drawbacks
• Decision-stacking is when we take on smaller two-way-door decisions to help us with a one-way-door decision
  • ex) Going on various dates helps us learn about our preferences for a significant other to marry
• If available, you can try on multiple decisions to find out which are the best !Decision Speed Flowchart.png

Knowing When To Decide

• If we are aiming for absolute certainty when making a decision, we will never be finished !Final Decision Flowchart.png
• We should stop when we reach suffice satisfaction with our choice

8 - Power of Negative Thinking

My previous questionable beliefs

1. Thinking of marrying my exes

Future Questionable Beliefs

1. The slow market strategy is most optimal

• The behavior gap is the discerpancy between our thoughts and our actions
  • We are good at making goals but bad at executing them
• Negative thinking can help us narrow the discrepancy
  • There is a difference between thinking of the possible negative outcomes and believing that it is going to happen
    • The former is helpful as it provides a temporary discomfort that urges us to achieve success to prevent the discomfort from becoming reality
• We are more likely to spot flaws in our beliefs in the future

Unconscious Poor Decision Making

• To indulge in bad habits, we may spread out our behavior into small decisions
  • Death by a thousand cuts
  • Prevents us from realizing our true motives
    • When we do realize the underlying motives, we can ask ourselves about the importance of such exceptions in our behavior, and see if it has been snowballing into rather undesirable results
      • Think of future restrictions to place upon yourself to prevent any snowballing (category decisions)
        • Redefining our identity
        • ex) I am a passive investor so I will only do such things

Unexpected Bad Outcomes

• UBO cause us to act irrationally and emotionally (tilt)
• Tilt can also relate to when we are too invested in something to quit it, as our rationality is overshadowed by our emotions (both good and bad)
• Preparing for future mishaps helps us reduce tilt by:
  1. Reducing emotional impact due to understanding it’s possibility
  2. Recognizing the early signs of tilt to handle it sooner
  3. Precommitting to certain actions after recognizing tilt

Mitigating Bad Luck

• We can use hedges to counter possible bad outcomes of luck
• A hedge:
  1. Reduces impact when it occurs
  2. Has a cost
  3. You don’t waont to use it
  4. Act similarly to insurance
  • ex) If you want an outdoor wedding but are afraid of it raining, bring some tents

9 - Decision Hygeine

• You shouldn’t say your opinion if you’re trying to know someone elses (framing)
  • They may feel inclined to respond similarly to yours to prevent conflicts, or you may just change their opinion as it was weak/unfamiliar to begin with
  • Important for receiving genuine feedback and advice not influence by your already-existing beliefs
    • Outcomes should also be avoided to prevent resulting
    • Put people in the same state of knowledge as you were when making the decision
• People fail to speak up their contrasting opinions in groups
  • To counter this, we can ask people individually about their thoughts, and share all combined information during the meeting
    • Feedback can include the tools and guidelines presented in this book
      • Anonymity can help encourage people to consider opinions from less
• Group discussions can bypass the things we know and start figuring out things we don’t (constantly asking why)
• The halo effect is when we have an overall positive impression of a person because of one positive impression in a certain area
  • Could be why first impressions and external status are important, since that is the only information you have

Truth

• It’s important to not hide information to sway a persons' opinion to be similar to yours
  • Look from the outside view and think about what information you would want to hear before giving your opinion on the topic
  • Communicate what you want to accomplish
  • Create checklists for such decisions
  • If someone doesn’t have all the information, we should decline the offer as it wouldn’t be useful for both parties

Final Thoughts

• Our decisions as a whole should help us progress towards our goals

Tools

• Decision tree
• Knowledge tracker
• Decision exploration table

References: