Annie Duke played poker. She was damn good at it. So good that she holds a World Series of Poker Golf bracelet from 2004. So good that her lifetime earnings from poker exceeded a whopping $4 million. She has also, not surprisingly written a number of instructional books for poker players. Annie Duke, before turning professional was also awarded a National Science Foundation Fellowship to study cognitive psychology at the University of Pennsylvania. She brings both the facets of poker and psychology to bear in her latest book, “How to decide”. As the title confesses, the book contains numerous checklists, practice exercises and toolkits to aid and abet the reader to make decisions in a logical, rational and practical manner.
At the heart of Ms. Duke’s book, lies the concept of the 3 ‘P’s – Preferences, Payoffs and Probabilities. Every preference is unique to the one engaged in making the decision. In order to ensure that the decision is made in a scientific and implementable manner, the decision maker needs to comprehend her goals and values, which will inform her preferences for various outcomes. Payoffs succeed preferences. Potential payoffs look at how outcomes impact advancements in either attaining the goal or straying from the objective. Every decision that is made has both payoffs as well as risks – upsides and downsides. Upsides and downsides may be both tangible as well as intangible. The key aspect to be considered prior to evaluating payoffs is to ascertain whether the potential advantages/upside is greater than the corresponding risk/downside. The final P in the troika is Probabilities. This involves defining the probability of the likely occurrence of each outcome.
Ms. Duke also urges her readers to employ the “Happiness Test” to assist them in their process of implementing decisions and instituting the attendant mechanisms. “Ask yourself if the outcome of your decision, good or bad, will likely have a significant effect on your happiness in a year. If the answer is no, the decision passes the test, which means you can speed up. Repeat for a month and a week. The shorter the time period for which your answer is “no, it won’t much affect my happiness,” the more you can trade off accuracy in favor of saving time.”
Ms. Duke also warns her readers about getting stuck in the quagmire of what she terms “resulting.” When we get muddled between the quality of decisions and the quality of outcomes, incorrectly trying to find a connection between the two, we risk repeating decision errors that, thanks to luck, preceded a good outcome. We may also avoid repeating good decisions that, because of luck, didn’t work out.
The most interesting chapters in the book are the ones dealing with what Ms. Duke terms “analysis paralysis.” In vogue even before the time of Aesop and his Fables, popularized by Voltaire when he immortally stated “perfect is the enemy of the good” and formally given the phrase by Igor Ansoff in his book, “Corporate Strategy: An Analytic Approach to Business Policy for Growth and Expansion”, “analysis paralysis” refers to spending a lot of time on inconsequential matters. “The time the average person spends deciding what to eat, watch, and wear adds up to 250 to 275 hours per year. That’s a lot of time spent on decisions that intuitively feel like they are inconsequential.” With a view to assist her readers in making decisions in a prompt and timely fashion especially where the potential positive payoffs outweigh its potential negative counterpart, Ms. Duke provides the following flow chart:
The term “freeroll” in the chart refers to situation where there is an asymmetry between the upside and downside because the potential losses are insignificant.
“Sheep In Wolf’s Clothing” is a situation where one has multiple options that are close in potential payoffs. These options are sheep in wolf’s clothing decisions. Close calls for high-impact decisions tend to induce analysis paralysis, but the indecision is, in itself, a signal that you can go fast.
Another innovative solution offered by Ms. Duke is the one relating to “Premortem” analysis. Unlike a postmortem analysis whereby facts leading to the success or failure are dissected post the actual occurrence of the outcome, premortem analysis involves identifying the goal one is trying to achieve or a specific decision one is considering. The steps in a pre-mortem analysis according to Ms. Duke involves:
Figuring out a reasonable time period for achieving the goal or for the decision to play out;
Imagining it’s the day after that period of time and the decision maker didn’t achieve the goal, or the decision worked out poorly. Looking back from that imagined point in the future, the decision maker has to list up to five reasons why she failed due to her own decisions and actions or those of her team;
The decision maker has to list up to five reasons why she failed due to things outside her control.
If the decision maker is going about this as a team exercise, she can have each member do the above steps independently, prior to a group discussion of reasons.
The same process may be undertaken even assuming the decision maker manages to achieve the goal. Such a positive analysis is termed “Backcasting” instead of a pre-mortem exercise.
Even though the concepts propounded, and the philosophy espoused by Ms. Duke in her book might be old wine in a new bottle, the container makes all the difference. It is not a mere repackaging exercise or an endeavour that reinvents the wheel. It is more of a reimagining process that goads on the readers to institute paradigm shifts in the way they act, think, speak, plan, react and most importantly decide.