What poker can teach us about how to make good decisions

14 Oct What poker can teach us about how to make good decisions

From what to wear to which project to tackle first, we all make hundreds of decisions every day. Many are inconsequential—it doesn’t really matter if you wear sweats or jeans, especially if you’re working from home—but others have an impact on the quality of your life.

“There are only two things that determine how your life turns out: luck and the quality of your decisions,” says Annie Duke, former professional poker player and author of How to Decide: Simple Tools for Making Better Choices. “You have control over only one of those two things. When you make better-quality decisions, you increase the chances that good things will happen to you.”

Duke, who won more than $4 million in tournaments before retiring in 2012, honed her decision-making skills at the poker table.

“We tend to think of decisions as being right or wrong as opposed to in-between,” she says. “The way we figure out if it is right or wrong is if it worked out or not. The problem is that just because something worked out well or poorly, it doesn’t tell you if the decision was good or not.”

It’s easy to understand with poker that the outcome doesn’t reflect the quality of the decision because there’s the luck of the draw. But it’s true for any decision you make.

“The most useful way to think about a decision is that it’s a prediction of the future,” says Duke. “Once we understand that, it can help how we approach making that decision.”

Duke makes her decisions based on three Ps:

Preferences

To make good decisions, you have to understand your goals and values, which will inform your preferences for various outcomes.

“A goal could be general, but it’s helpful to define specific goals,” says Duke. “For example, a hiring rubric could tell you what you value in a candidate and what type of person you’re trying to hire. To get more specific in defining the goal, think about characteristics of employees who have worked out the best.”

Preferences are unique to you, which means you can’t base your decision off of what worked for someone else.

“My goals aren’t necessarily your goals,” says Duke. “For example, we might both go on an island vacation and it ends up raining. It could be a bad outcome for you if your goal was to relax on the beach and get as much sun as possible. But if my goal was that I wanted to catch up on mystery novels, then a bunch of rain isn’t that bad of an outcome for me because I can read in the hotel room.”

Payoffs

The next step is to measure the potential payoffs, looking at how an outcome affects your progress toward or away from a goal. Decisions could have potential upsides or downsides, and most have a mix of both. Some payoffs include gaining something of value, such as money, time, and happiness, while others can cause you to lose something of value. When making your decision, ask yourself if the potential upside outweighs the risk of the downside.

“What are the different ways things could turn out?” asks Duke. “If you hire somebody and your biggest pain point is employee turnover, narrow your focus to the likelihood that they’ll be with your company six months, a year, two years, longer. This will allow you to more clearly assess the aspect of the decision that is most important to you.”

Probabilities

The final step is determining how likely each outcome is to occur. To figure out if a decision is good or bad, estimate each of the probabilities. With each decisions, there is a certain amount of skill that goes into it as well as a matter of luck.

“Outcomes don’t come with guarantee,” says Duke. “Part of a good decision process is trying to be as accurate as possible about how much luck is in equation. Some things have much less luck involved. For example, [tennis player] Dominic Thiem getting his first serve in is mostly skill for him with a tiny bit of luck. But on a very windy day, you need to add more luck into equation. To make a decision, think about what you have control over and keep a better eye on things that are more likely to occur.”

Making better decisions involves shifting your mindset. In the end, decisions are educated guesses. By combining preferences, payoffs, and probabilities, you can think in a more useful way about what the future might hold, and improve the quality of the decisions you make.

Source: Fast Company