I just watched a very interesting interview conducted by leadership guru Peter Bregman. The interviewee was Annie Duke a former professional poker player who won a World Series of Poker bracelet, not an easy feat. The subject of the interview was Ms. Duke’s book “Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts.” What follows is my interpretation of the proposed probabilistic decision-making.
Normally, when we mere mortals make decisions, we judge the decision based on the outcome. If things worked out, it was a good decision, if not, we made a bad decision. The fear of making a bad decision can be enormous. We want to be 100 percent sure that the decision will produce the intended outcome. Ms. Duke has a better proposal.
Those of you who play poker know that it is a game of incomplete information. Unlike chess where all the pieces are plainly visible, a poker player has to make decisions (call, bet, raise, fold) without knowing the opponent’s cards. The great poker players have mastered the process of making decisions on probability and odds. When faced with a decision, they analyze the percentage chances that the opponent has a particular range of cards, the percentage chance that his own cards will beat that range, the expected value of making a particular decision based on these calculations, etc. Our “Hero” does not need to know for sure that he can beat the opponent. He only needs to know that his chances are maybe 55 percent that he will. If our Hero has that edge, he makes the call, if not he folds. In the long run, this is a profitable way to play poker even if the short term is a loss. So poker is not about winning or losing, poker is about making good decisions. That is probabilistic decision-making.
In business and in life, making good decisions is also critical. However the process we normally use may be flawed. First, we must realize that everything we do is based on our personal list of resources. These include our value system, biases, risk tolerance, attitude, experience, knowledge, etc. These resources will tend to distort our perception of what we need to do and how to do it. It will even distort what we think is the desired outcome.
We must be sure to perform an unbiased examination of the relevant facts and possible outcomes as possible. Poker players attempt to remove emotions from decisions by studying previously played hands so they know what to do when a similar situation arises. They develop a mindset that is based on probabilities. They constantly prepare before sitting down to play.
So what can we do? Prepare to make decisions based on the probabilities that an action will provide a particular outcome. There is no 100 percent. There is only a numeric chance of success. The analysis that is undertaken determines that number. Therefore, the analysis is critical.
First, as Stephen Covey said, in “The 7 Habits of Highly Effective People,” “Begin with the end in mind.” Determine what outcome we wish to achieve. Make sure that it is as well-defined as possible. We must know what we want and also what will be acceptable if we cannot achieve number one. Make it a SMART goal: Specific-what exactly do we want, Measurable-how will we know we got there, Achievable-make sure it can be done, Relevant-it makes sense to the project, Time bound-it has an appropriate time allotment.
Once we know where we want to go, it should be easier to know what to do to get there. It’s as if we looked at the outcome and saw what steps we took to get there.
We perform an appropriate analysis of the available information, make choices regarding the relevance of each item and assign an importance value to each item. We then decide on maybe a couple of paths we can take based on these facts. In a probabilistic decision, we are not looking for 100%. We are determining the percentage chance of attaining the desired outcome from the relevant paths. If we have done the proper analysis, we will be able to say that path A has X percent chance and path B has Y percent.
I know that the desire is to achieve 100 percent. However, what is the real difference between 55 percent chance and a 75 percent. No matter what, the choice is clear. If, after proper analysis, these are the only two choices and one is only 5 percent better than the other, what will we do? Continue analysis? Freeze and do nothing, which is in itself a decision? There is only one thing to do. Go with the percentages and then ask ourselves, “Is there any additional information that will make me change the decision?”
Now, if the decision is of minor consequence, or easily changed, then don’t go through all this stuff. If you are hungry or thirsty, then the first item that satisfies that need will suffice. Don’t perform the normal dinner dance. “What do you want for dinner?” “I don’t know, what do you want?” “I don’t really care, just pick something?” “Italian sounds good.” “Yeah, and so does Mexican.” “So which do you want?” I don’t know, you pick” “I picked last time.” Blah, Blah, Blah. Result: frustration, anger and Chinese.
© 2018, TechNation Magazine. Site designed by MD Publishing, Inc.