We Study Billionaires - The Investor’s Podcast Network

TIP623: The Art Of Decision Making w/ Annie Duke

Apr 14, 2024

01:10:25

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Annie Duke discusses decision-making, base rates, improving investing processes, using kill criteria to quit investments, dissociating from ideas, and the importance of a quitting coach in making better decisions.

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Quick takeaways

Understanding base rates enhances decision-making by providing expected values.

Using kill criteria in investing helps improve decision-making and quit losing investments.

Dissociating from investments reduces endowment effects and biases for rational decisions.

Transferring skills from one domain to another boosts decision-making abilities.

Deep dives

Annie Duke on Decision Making and Investing Insights

Annie Duke, a former professional poker player and author, shares valuable insights on decision-making and successful investing. She emphasizes the importance of mental tools for maximizing returns and making smarter choices, drawing from her experience in poker where decision-making is crucial. By discussing pre-commitment devices in investing, she highlights the significance of having strategies to avoid costly mistakes and enhance profitability. Duke's emphasis on creating data points for long-term investments showcases how anticipating business downturns and making informed decisions can lead to more profitable outcomes.

Starting with Base Rate in Decision Making

01:41

Monkeys and Pedestals

02:06

Exploring the Outside View in Decision-Making and Rational Portfolio Management

04:16

Closing Feedback Loops and Power Law

01:06

Introduction

2min

From Academia to Poker: A Journey of Decision-Making

14min

Exploring Probabilistic Thinking and Expected Value in Investing

4min

Anchoring Decisions in Reality

13min

Navigating Investments: Luck vs Skill

9min

Exploring Near and Far Transfer in Learning and Decision Making

6min

Insights on Alternative Investments and Business Solutions

3min

Setting Kill Criteria and Monkey Juggling in Decision-Making

23min

Kyle Grieve chats with Annie Duke about her own story of quitting and how it helped sparked the idea for one of her books, the importance of base rates in helping us make better decisions, how to improve our investing processes when we have long feedback loops, the importance of using kill criteria to quit an investment or hypothesis, how to use a quitting coach to help you quit things we hold onto for too long, the importance of dissociating ourselves from our most cherished ideas, and a whole lot more!

IN THIS EPISODE YOU’LL LEARN:

00:00 - Intro

02:28 - Annie's own story of quitting and how it got here to where she is today.

15:50 - Why expected value is so crucial for investors to manage risk best.

20:15 - The importance of understanding base rates.

20:15 - How we can use base rates to help us best understand expected values of our investments.

24:55 - How we can reframe our analysis of a business to close feedback loops on long-term investments.

32:40 - How we can get transfer from one skill to another far away skill (e.g. chess to investing).

45:28 - How we can use kill criteria in our investing decision-making to improve our abilities to quit a losing investment.

45:28 - How to engineer your decision-making to give yourself an outside view.

51:11 - How we can disassociate ourselves from our investments to reduce the impacts of the endowment effects.

51:32 - How to set up a quitting coach by permitting them to disagree with you.

And so much more!

Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences.

BOOKS AND RESOURCES

Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Stig, Clay, Kyle, and the other community members.
Buy Quit: The Power of Knowing When to Walk Away here.
Buy Thinking in Bets: Making Smarter Decisions When You Don't Have All the Facts here.
Check out Annie’s substack here.
Learn more about Annie Duke here.
Related Episode: RWH015: Betting Better In Markets & Life w/ Annie Duke | YouTube video.
Related Episode: TIP231: The Mind Of A World Poker Champion w/ Annie Duke | YouTube video.
Learn more about the Berkshire Summit by clicking here or emailing Clay at clay@theinvestorspodcast.com.
Follow Kyle on Twitter and LinkedIn.
Check out all the books mentioned and discussed in our podcast episodes here.
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