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20VC: Annie Duke on Reversible vs Irreversible Decisions, How To Evaluate Risk, The Theory of Sunk Cost in Venture & How to Optimise Both the Discussion and Quality of Investment Decisions

26 snips

Jan 11, 2021

Annie Duke, a former professional poker player and bestselling author, dives deep into the art of decision-making. She discusses the nuances of reversible versus irreversible decisions, emphasizing how many choices often seem more permanent than they truly are. Duke explores the distinctions between effective solo and group decision-making and highlights common biases in venture capital. She also sheds light on the dangers of sunk cost thinking and advocates for pre-mortem analyses to enhance investment strategies, offering practical insights for navigating risk.

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ANECDOTE

From Academia to Poker

Annie Duke transitioned from cognitive science to professional poker due to an illness.
Her brother, a world champion poker player, suggested it as a temporary income source.

INSIGHT

Early Poker & Risk

Early poker offered a larger informational advantage, making it easier to win.
Annie views decisions as non-permanent, reducing perceived risk and enabling pivots.

ADVICE

Reversible Decisions

Treat irreversible decisions as having higher reversal costs, not as truly irreversible.
Focus on building accurate models of the world for high-cost decisions.

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Annie Duke is a former professional poker player and the author of National Bestseller, "Thinking in Bets" & "How To Decide". During her poker playing days, Annie was a World Series of Poker bracelet winner, the winner of the 2004 Tournament of Champions and the only woman to win the NBC National Poker Heads Up Championship. Today, Annie is also the founder of How I Decide, a non-profit that creates curricula and tools to improve decision making and critical thinking skills for under-served middle schoolers.

In Today’s Episode You Will Learn:

1.) How Annie made her way from professional poker player to National Bestselling author and coach to the world's leading investors?

2.) How does Annie evaluate the nature of risk? What is good risk vs bad risk? How does Annie think through reversible vs irreversible decisions? What is her framework? Why does Annie believe most irreversible decisions are actually reversible? How does it change your thinking?

3.) How does effective solo-decision-making differ from effective group decision-making? What decision-making biases does Annie often see venture being guilty of making? What 3 things can one do to improve the decision-making of the collective group?

4.) How does Annie think about sunk cost? How does one know when enough is enough and you have to walk away? How does this tie into Annie's thinking on portfolio theory? How does Annie think about pre-mortems? How should they be structured? What is included?

5.) How does Annie define critical thinking? What tips would Annie give to someone in really advancing their level of critical thinking? What behaviours can one implement to seek to protect critical thinking? How does this differ in team environments?

Item’s Mentioned In Today’s Episode

Annie’s Favourite Book: The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing

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