Lessons in effective decision making from a poker player

A poker player teaches effective decision making

Yesterday, I listened to an interview on Annie Duke, former American Poker Player who holds a World Series of Poker Gold Bracelet since the year 2004. She was the leading female earner in the history of the game and in her recent years, she had shifted her attention towards counseling and decision strategies.

Nobody can deny the importance of decision making in our day-to-day lives. Whether, as she herself refers, it’s about the simple decision of what to order from the menu or whether you should take that plunge into entrepreneurship that you always dreamed about. The truth of it is, that we’re scared to make decisions because we’re comfortable staying where we are. Risks scare us and that’s what Annie has tried to defy in her books as well as her interview; that rational fearlessness is the key to success.

Her book, “Thinking in Bets: Making smarter decisions when you don’t have all the facts” clearly explains the importance of decisions in our lives.

So, without further ado, here are a few points of her interview that might help the average person in making daily life choices.

 

“Did I play right and got unlucky or did I just play wrong?”:

The influence of luck in our decisions can not be ignored. At times we take the right decision but it doesn’t turn out well for us. But this outcome could not, or rather should not, change the fact that the decision itself was a smart one.

Annie gave quite a simple example for this in order for the listeners to comprehend. Consider a green traffic light. Normally, a green light signifies that you’re supposed to go. So, if you run through a green light and then into an accident, that doesn’t mean that the decision you took was a poor one, it only signifies that luck wasn’t on your side in that case and there’s not much you can do about it.

Never equate the quality of a decision by the quality of its outcome:

This is something we all do. We perceive the quality of our decisions by considering whether the outcome was favorable for us or not. But that is not necessarily true for all decisions.

Annie highlights that there are two ways to look at a decision. One is Hindsight which refers to the mindset of “Of course that was going to happen and you should have known.” The other way to look at it is Reasoning which leads to more logical thinking because it takes into account the aforementioned “luck factor.” A decision whose outcome wasn’t favorable doesn’t necessarily fall into the “bad decision pile.”

A common example that any Sub-continent cricket fan might be able to relate to would be Misbah-ul-Haq’s paddle sweep in the 2007 world t-20’s final. The shot itself was a smart choice if it could be pulled off. The fact is that it didn’t and Pakistan lost a match that they were certainly on their way to win.

 

The concept of hidden information:

It is important to understand that no one has all the information about any aspect in life. We always make decisions according to the information that we know and think of a logical option that might help us the most.

A common example would be hiring an employee. During the interview, the employers can only see the CV and the general presentation of the person regarding how he speaks and carries himself. Considering that 10 people gave the interview for a post at a particular firm, the firm would definitely be hiring the person that they think is best for the job.The point to consider over here is that the only information they have about that person and his character is the CV and the experience of one meeting.

Let’s say that that employee quits after a week or two because he simply could not bear sitting in front of the desk all day long. Now, it would be unreasonable for the interviewers to blame it upon their poor decision to hire him because they couldn’t have imagined this outcome beforehand. That is where the factor of hidden information comes in and needs to be acknowledged.

A poker player teaches effective decision making

The importance of guessing in decisions:

Decision making involves a whole lot of guess work due to the factor of “Hidden Information.” Since we do not have all the information, we need to weigh in all the possibilities before making a decision. The smarter choice at this moment would be to acknowledge the possibility of the decision to backfire and to draw a percentage conclusion out of it. Like if I start my own business and considering I can manage to convince a couple of friends to get some funds, then there’s a 60% chance that this might work out, all the while taking into account that there’s a 40% chance that it won’t.

 

Never consider the 30% or 40% to be zero:

Unfortunately, the human mind has a setback where it automatically perceives the possibility with a lower weightage to be false but that is not the case. The 30% or 40% that we seem to ignore is still a force to reckon with.

Annie explains the phenomena as considering the percentages as days in a week. 30-40% of a week is about the whole of Monday, Tuesday and half of Wednesday. So, unless you’re astonished that it’s Monday again, you shouldn’t think of it as out of this world for the lower weightage to prove to be true.

A popular example might be the 2016 US election’s poll by Nate Silver. About a week before the election, it was showed 35% to Trump against 65% to Hillary. When Trump won, people went like “Nate got that one seriously wrong,” but that’s a false statement. He got it right because he said there is a 35% chance of Trump winning the elections.

 

Related: How to know beforehand who will be the future president of any country.

 

Placing decisions as bets:

Now comes the phenomena that Annie explained in her book, “Thinking in Bets.” We need to make decisions in life as if we’re betting on them. The reason is that we mix our rigid biases with the truth. So, if you start thinking on it as “would I place a bet on this being true”, you might actually start to realize that in a lot of these cases, you won’t really be confident about the bet.

An important point to consider before making a decision is that how much of the decision depends upon luck and how much does the quality of your decision alter it.

A guideway to success can be to assess your future using this technique. Like if you do take this decision, would you bet that you’ll reach this particular destination in five years from now? This might help in clarifying the overall picture of the scenario.

Embracing the Uncertainty:

Fearlessness is the key to success. No matter what happens, the successful people are always those who embrace the fact that they are uncertain about a decision. They then take into account the “Hidden Information” factor, respect the weightage of the decision to backfire and go all in to make their decision a successful one. If you’re always going to play it safe and never choose any option until there is absolutely no element of uncertainty in it, then you aren’t getting anywhere in life.

Embracing the uncertainty doesn’t mean that you’re making rash decisions like a drunk maniac in the street. It is just the outlook of respecting that you don’t really know if it will work out but you’re willing to try. This sort of outlook in particular helps in being mentally prepared for adversities and failure. It prepares you for falling back on different plans in case the first one doesn’t work out.

To explain this, Annie used the first example of the green traffic light and explained that if you run a green light, you might go through safely or there is still a chance that you might run into an accident. But the uncertainty of something bad happening shouldn’t stop you from crossing the road. It should only make you more aware.

 

 

 

 

Examining both sides of a situation and the level of risk you’re willing to take:

Every person has a different level of tolerance for risk taking and that’s a very natural thing. Not being the sort of person who’s up for taking outrageous risks isn’t a bad thing, it might actually even be smart. A man of 50 might not be willing to take a huge risk in life or his ending career because he doesn’t have many years to play. But a young man of 25 has the ability to be flexible and try new things on the name of risks.

So, before making a decision, it is important to account for two things;

-How much risk is involved?

-How much risk am I willing to take?

 

Choosing a scenario that is worthwhile:

Once you have concluded the amount of risk that is involved in your decision and the amount that you’re willing to take, only then can you reach to a rational conclusion if it’s worthwhile for you to give it a go. It is important to remember that you are not supposed to always choose the most probable situation, but the one that is actually worth the risk.

Say, that you think there’s a 30% chance of your new business plan to work out. Now that doesn’t mean that you give up on it because of its lower weightage. The 30% for you might totally be worth it! In this scenario, you are absorbing the probability of failure whilst acknowledging that the act itself is worth it even if I fail. This helps in abolishing the self-blaming in case things don’t work out.

 

The power of Premortem:

Towards the end of her interview, Annie stressed on the power of premortem which means the analysis of probable failure. We, as a society, have praised positive thinking for too many years now and it might work for a lot of people. But to many, it has led to irrational day-dreaming. We are almost always certainly thinking that our plan will work out and we would reach this set goal in the next five years and we’ll double that ten years from now.

The thing to focus on right now is that we probably had been planning such things five years ago but we still haven’t reached the place where we thought that we would. And that’s the beauty of life. The only man who can move forward is the one that realizes his mistakes and why he lacks. Only after self-analysis of our failure can we overcome this problem.

 

Negative thinking:

The importance of negative thinking has been ignored by many writers, psychologists and sociologists. The fact of the matter is that negative thinking actually leads to more rational decision making. Unfortunately, we’re used to living in this bubble of positivity and can’t bear a word of failure in front of us. True winners are the ones that use their negative emotions to their own strength and build upon their failures to reach unparalleled success. One should not be driven by positive emotions; rather positive goals are what should drive you. And negative emotions are what would help you achieve these positive goals far better than anything else.

 

How do I start making better decisions?

A very simple yet effective technique that one can use for making better and more rational decisions is finding two other people to discuss your decisions with. These people are supposed to be bold enough to shatter your “Echo Chamber”, when needed.

The Echo Chamber refers to the human psychology of always wanting to hear what you think is true or right. The people that you choose shouldn’t just agree with you on every matter, rather they should present their opinion on what they think you should do whether or not it complies with yours. The technique is only helpful if the chosen people are not afraid to say no. In turn, you can help them make their decisions.

 

These points on decision making definitely helped to widen my horizon on the subject and I’m sure it would be helpful for every person who understands the concept of “Thinking in Bets.”

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