Supported by Greenhaven Road Capital, finding value off the beaten path.
This seems a good point to recap some decision-making advice.
1/ Check your ego at the door. Good decision making means always learning. “Humility,” wrote Tariq Farid, “is never a sign of weakness. Rather, it is a sign of willingness. Unlike seventh-grade history, the world changes. Good decision makers are curious, nosey, insatiable.
2/ Think in dials not buttons. Yes and No are not the only possible outcomes. There are always shades of gray.
3/ Go with the base rate. Too often we don’t follow the base rate when we are unsure. Annie Duke explained to Barry Ritholtz that people don’t like to do things rotely. Instead, she has to reframe the situation to her clients, that, you have to be very wise to figure out the base rate is the right strategy.
4/ Record the decisions. People (please sit for this) have this tendency to make themselves look good. Luckily for you and I, this is mostly other people. WE keep a decision journal.
5/ Talk with others. Whether it’s red teaming or something else, the best decision makers get feedback from other people. This could be a formal process or emerge on its own. Josh Wolfe said that the worst investment decisions his firm makes are when everyone agrees. “The biggest mistakes are when an entrepreneur comes in and we won’t let them leave, we want to give them terms on the spot.”
6/ Recognize the role/roll of luck. Dice are the canonical example but there’s some luck in anything we do. Michael Mauboussin put it this way; anything out of your control can be considered luck. Anything in your control is a skill. So…
7/ Build up your skill.In Mauboussin’s work, he uses the two-jar model to explain outcomes. While the luck jar is independent, the skill jar is entirely dependent on what we spend our time on. “People often talk about following your dreams,” said Brian Koppelman, “but you also have to work ferociously hard.”
8/ Schedule your tweets before the second glass of wine. Annie Duke said that we tend to make wise long-term resolutions but make dumb short-term implementations. I want to lose weight but I also want to eat potato chips. We can design a solution, such as the one-hour diet. For the one-hour a week we’re in a grocery store we don’t buy potato chips.
9/ Biases are like coffee grounds; filter and swallow. This morning I discovered my coffee filter had a hole after I started drinking the coffee. Biases are like that. We can design our life (#8) and get help from friends (#5) but we’ll never be able to eliminate all the biases we have. That’s fine. Notice the mistakes, learn from them, and move on.
10/ What kind of distribution is this? There are two big distributions types to be aware of; normal and power laws. Normal distributions like height have helpful means. Power laws have unhelpful means, and a whole lot more going on. We looked at Brian Arthur’s work in this podcast episode. Knowing what kind of system you’re in affects what kind of information you’ll see.
Thanks for reading.