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TIP623: The Art Of Decision Making w/ Annie Duke

We Study Billionaires - The Investor’s Podcast Network

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Distinguishing Luck from Skill in Outcomes

In evaluating outcomes, distinguishing between luck and skill is challenging, especially in a single decision. The speaker illustrates this through the example of betting on a coin flip, emphasizing the need for multiple data points to assess the luck-skill differential. The complexity lies in understanding whether the outcome was a result of luck or skill. By generating more outcomes, such as in frequent poker games, investors can better gauge the effectiveness of their process, as a single outcome may not be indicative of skill. The key is to accumulate sufficient data points to draw meaningful conclusions and assess the influence of luck versus skill in the final outcomes.

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