How to Decide, Convey vs. Convince, & More

Oct 8, 2020

Dive into the psychology of decision-making, where choices range from what to eat to major life investments. Explore strategies for distinguishing between critical decisions and those that can be made on the fly. Discover the 'happiness test' to evaluate choices based on personal goals. Learn about the importance of decision hygiene in teams, utilizing structured discussions and feedback to reduce biases. With insights from a decision expert and poker player, this conversation provides tools for mastering the art of better choices.

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INSIGHT

Paradox of Experience

Experience is necessary for learning, but individual experiences can be misleading.
Focus on the aggregate, not isolated incidents, to avoid misinterpreting luck as skill.

ADVICE

Analyzing Decisions

Reconstruct your knowledge at the time of a decision to separate what you knew then from what you learned later.
Analyze outcomes using a 2x2 matrix (good/bad decision vs. good/bad outcome) to see the influence of luck.

ADVICE

Ditch the Pro-Con List

Avoid pro-con lists for important decisions; they lack the dimensions of magnitude and probability.
Instead, use a decision tree to explore potential outcomes and their likelihoods for each option.

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It seems like investors are especially obsessed with the psychology of decision making -- high stakes, after all -- but all kinds of decisions, whether in life or business -- like dating, product management, what to eat or watch on Netflix -- are an "investment portfolio" of decisions... even if you sometimes feel like you're making one big decision at a time (like, say, marriage or what product to develop next or who to hire).

Obviously, not all decisions are equal; in fact, sometimes we don't even have to spend any time deciding. So how do we know which decisions to apply a robust decision process too, which ones not to? What are the strategies, mindsets, tools to help us decide? How can we operationalize a good decision process and decision hygiene into our teams and organizations? After all, we're tribal creatures -- our opinions are infectious (for better and for worse) -- so how do we convey vs. convince, and not necessarily agree but inform to decide? Especially given common pitfalls (resulting, hindsight bias, etc.), and "the paradox of experience", including even (and more so) winning vs. losing.

Decision expert (and leading poker player) Annie Duke comes back on the a16z Podcast -- after our first conversation with her for Thinking in Bets, which focused mainly on WHY our decision making gets so frustrated -- to talk about her new book, which picks up where the last left off, on HOW to Decide: Simple Tools for Better Choices. In conversation with a16z managing partner Jeff Jordan (and former CEO of OpenTable and former GM of eBay among other things) -- so, from all sides of investing, operating, life -- Annie shares tips for decision makers of all kinds making decisions under uncertainty... really, all of us.

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