Are You Sure About That? Our Chat With Annie Duke About Decision Strategy in Uncertain Times
When we sit down with thought leaders, founders and industry insiders, we glean the nuggets of knowledge that can be instructive for founders, and hand-select the most salient points for their benefit. Whether it’s personal experiences that altered their career trajectory; what they look for in founders or new hires; investment themes that are piquing their interest; or their views on capital market trends, our conversations are as dynamic as our guests.
We recently sat down with best-selling author, speaker, World Series of Poker champion Annie Duke, to discuss decision making in uncertain times. She’s the author of Thinking in Bets and most recently, How to Decide: Simple Tools for Making Better Choices and the co-founder of The Alliance for Decision Education.
Our conversation went deep into how COVID ripped open the curtains on reality; “the decision equation,” which equals imperfect information + luck; and creating feedback loops in decision making processes. Annie works with us here at Renegade, which has led to many fascinating conversations and has stretched us to build an organization that is constantly looking inward and outward to adjust our understanding of the world and refine our decision-making processes.
Here are just a few of the highlights from our discussion:
We’re Not In Kansas Anymore
Annie likens the Emerald City in The Wizard of Oz to our current situation in terms of coming to a better understanding of our reality. In the book, the Emerald City was really just plain buildings but because people who entered the city were forced to put on green glasses that locked in place, the city looked green. She says we all walk around with our own version of green glasses, which is thinking that things are more stable than they really are. We also tend to believe that we have more perfect information. “What COVID did was just sort of unsnap the glasses and take them off and say, ‘Hey, now I'm going to give you a look at what the world really looks like when you're making really any decision.’”
One of the opportunities of the current environment, she says, is that determining the kinds of strategies and tactics you would employ in order to deal with decision making under these circumstances, are actually strategies and tactics that you would want to bring into your regular decision making. “We can start to let go of that illusion of control and delusion that things are more stable.”
Controlling What You can to Make Quality Decisions
“One of the biggest mistakes that you can make is to assume that the past will be the future,” Annie says. In any outcome there are things we can’t control that come from luck, and factoring that in with objectivity is key to making good decisions. We tend to look at previous outcomes and make decisions based on that experience; we forget to factor in luck, both good and bad. And yet, there are important lessons to learn from our experience with luck and imperfect information that can be helpful in determining strategies and tactics for the next scenario. This is what Annie calls the experience paradox; that experiences are necessary for learning, but any individual experience that you have can actually interfere with your ability to learn.
It's not until you see things in the aggregate that you can start to really understand what the decisions you made mean. It’s a matter of taking away the right lessons from the outcome and accepting that the information you have at any point in time is imperfect.
Feedback Loops
A common misconception about feedback is that you have to wait until the end, when in reality, “there's actually all sorts of stops along the way that give you very good feedback. You just have to make sure that you're thinking about what your predictions about those road markers are.”
Striking the balance between overconfidence and underconfidence is important to being well-calibrated to what's true of the world. Creating very tight feedback loops is part of that calibration. In other words, what you are implicitly predicting, is what you now have to make explicit, so that you’re constantly giving yourself feedback about how you are as a decision maker. Your focus is on calibration, as opposed to being right or wrong.
The more accountable you are, the more likely you are to have flexible and easily-updated models of the world. “The more that you can have flexible models of the world as new information comes in, the better off you are.”
Our thanks to Annie for a thought provoking and poignant conversation, and to our ongoing work with her.