Summary of A16z Podcast Episode: Annie Duke: Innovating in Bets - a16z Podcast with Andreessen and Chokshi
Podcast: A16z
5 min. read
— Description —
Learn the art of decision-making by analyzing outcomes, taking risks, and considering the long-term impact Discover how to express confidence while acknowledging uncertainty Improve your decision-making skills and remove biases to make better choices.
Annie Duke: Innovating in Bets - a16z Podcast with Andreessen and Chokshi
Table of contents
Key Takeaways
- Once the outcome of a decision is known, it’s hard to look back retrospectively to determine its quality
-
When analyzing a decision always look up, down, and orthogonal – ask:
- “Could I have lost less?”
- “Should I have lost more?”
- “Should I have even been in this position at all?”
- It’s very hard to get the non-consensus/right results unless you’re willing to take risks and take on the non-consensus/wrong results
-
Not making a decision IS making a decision
- This has to do with ALL the resources you invest – time, money, attention, and energy
-
When considering options for a decision, zoom out and ask:
- What does my life look like going with Option A/B/C a year from now?
-
“Don’t confuse confidence and certainty”
- You can express uncertainty in a decision and still convey confidence
-
You make THOUSANDS of decisions per day
- Getting even a little better at the art of decision-making by removing biases and thinking more probabilistically will prove very worthwhile
Intro
- Hosts – Marc Andreessen (@pmarca) and Sonal Chokshi (smc90)
-
Annie Duke (@AnnieDuke) is a professional poker player
- She’s the author of Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts
- Annie has also founded the national decision education movement How I Decide
Decision-Making
- Once you know the outcome of a decision, it’s hard to look back retrospectively to determine its quality (this is known as resulting)
-
Analytics show that in the NFL, if you’re on your own one-yard line on 4th down, you should always go for it
- Why? – If you punt, you’ll likely only punt to mid-field (so the other team is essentially guaranteed 3 points anyway)
- BUT – this is very uncommon, most teams punt in this situation
- Human beings very often choose the less controversial option (to avoid judgment) even though it might not be the most statistically optimal
The Decision-Making Matrix
-
Marc brings up the above 2×2 grid (right/wrong is related to the outcome)
- “Consensus/right is fine, non-consensus/right is fine, consensus/wrong is fine, non-consensus/wrong is REALLY bad”
-
Some notes:
- For consensus/wrong decisions, that consensus almost always provides an invisible clock against blame
- For example – If someone dies in a car crash, we don’t say, “What a moron for getting in a car”
- If an autonomous vehicle kills a pedestrian, it currently falls under the “non-consensus/wrong category”
- Now consider the reaction when a pedestrian dies because of a human driver – it falls under the “consensus/wrong category”
- Similarly, for market crashes:
- When a crash results from human beings selling stock, people say – “The market went down today”
- But when an algorithm causes a crash – It’s a “flash crash”
- This results in people pointing fingers and discussing whether algorithmic trading should even be allowed
- For consensus/wrong decisions, that consensus almost always provides an invisible clock against blame
A Good Thought From Marc
-
It’s very hard to get the non-consensus/right results unless you’re willing to take risks and take on the non-consensus/wrong results
- But people just emotionally can’t handle the non-consensus/wrong outcomes and will do nearly anything to avoid them (no matter how much we understand the above)
- What can we do about this?
- Revert from:
- Giving non-consensus/right decisions too much praise
- Giving non-consensus/wrong too much criticism
- Revert from:
Outcomes and Process
-
In the workplace, outcomes tend to dominate
- If sales were 10% above expected, everything’s fine and everybody goes about their day (no one’s trying to figure out why this happened)
- But if sales were 10% lower than expected – all hell breaks loose, resulting in a discussion about what went wrong
- “You have to make it very clear to the people who work for you that you understand good outcomes will come from good processes”
-
Advice for the workplace:
- Focus more on forecast quality (aka the model quality) rather than outcome quality
- In addition, know in advance what would have to be true (or the circumstance that would have to present themselves) for you to rethink/re-evaluate your model
- Always look up, down, and orthogonal – ask:
- “Could we have lost less?”
- “Should we have lost more?”
- For example:
- If sales were 10% lower than expected, don’t just try to figure out why sales weren’t 10% higher, also consider the fact that perhaps you should have lost more, and you actually got lucky
- In the VC world, why does no one consider the question (related to a bad investment) – “Maybe we should have invested more money and we actually got lucky?”
- For example:
- “Should we have even been in this position at all?”
- ALSO – In investing, when discussing a win, consider the fact that you may have “oversized the bet” and actually got bailed out by a fluke win
- Focus more on forecast quality (aka the model quality) rather than outcome quality
No Decision IS a Decision
-
“Not making a decision is making a decision, we just don’t think about it that way”
- This has to do with ALL the resources you invest – time, money, attention, and energy
- REALIZE – There is a set of possible futures that exist for NOT making a decision, in addition to the possible futures that exist from choosing among a set of options
Time Traveling
-
When considering options for a decision, zoom out and ask:
- What does my life look like going with Option A/B/C a year from now?
- Related to this: “Doing certain things today is like stealing from your future self” – Sonal
Decision-Making Tips
-
When soliciting feedback, don’t do it in a group setting (to avoid the pile-on effect)
- Go to people individually
-
“Don’t confuse confidence and certainty”
- You can express uncertainty in a decision and still convey confidence
- For example:
- Option A will work out 60% of the time (what you choose)
- Option B will work out 30% of the time
- Option C will work out 10% of the time
- For example:
- To better express uncertainty when talking to people, use percentages
- For example – “I’ll get this to you by Friday 80% of the time and by Monday 99% of the time”
- You can express uncertainty in a decision and still convey confidence
- Instead of asking, “Are you sure?”, ask – “How sure are you?”
Parting Advice
-
You don’t need to improve that much to get really big dividends
- You make THOUSANDS of decisions per day
- Getting even a little better at the art of decision-making by removing biases and thinking more probabilistically will prove very worthwhile
- You make THOUSANDS of decisions per day