How to make better decisions: Practical exercises from professional poker

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How to make better decisions: Practical exercises from professional poker

Knowledge Tracker

A decision's outcome can distort your evaluation - and even recollection - of the decision process. A knowledge tracker helps recreate your state of knowledge at the time of a prior decision.

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In order to learn from experience, we have to learn the right lessons from the feedback we get from the choices we make. We decide and the decision turns out a certain way, sometimes good, sometimes bad, sometimes in between.

Any time we get that feedback, it is left to us to figure out whether the result we got was due to a good decision or a bad one. Accurately assessing our past decisions is necessary for improving the decisions we will make in the future.

It turns out we’re not good at closing those feedback loops.

Any decision we make can have many potential outcomes. Which outcome you actually observe is at least partially determined by luck. Yet the outcome that happens to unfold - which was one of many potential outcomes plays a disproportionate role in how you evaluate the quality of the decision.

A pair of cognitive biases that distort our view of decision quality are resulting and hindsight bias.

Resulting

Resulting (also known as “outcome bias”) is the tendency to use the quality of an outcome as an indication of the quality of a decision. If an outcome is bad, the decision must have been bad. If an outcome is good, the decision must have been good. Of course, resulting ignores the role of luck in the outcome. It is like saying that if you get in a car accident, you must have made a poor decision to proceed through the intersection, and if you get through safely, the decision must have been a good one.

The problem, of course, is that you can get in accidents even though you go on a green light, and you can remain unscathed even when you run a red light. Resulting blinds you to the possibility that good outcomes can come from bad decisions and vice versa.

If everything that happened in the world had a single, identifiable, unambiguous cause, then it would be correct that the quality of an outcome was indicative of the quality of the decision that caused it. Of course, that’s far from the case, so mental shortcuts like resulting make outcomes into a frequently incorrect, incomplete, or misleading indicator of a decision process.

Hindsight bias

Hindsight bias adds to the ruckus caused by making us believe that an event, after it occurs, was predictable or inevitable. It’s also referred to as “knew-it-all-along” thinking or “creeping determinism.” What goes along with hindsight bias is memory creep, which is the tendency to believe that you knew it all along.

Pursue a sales lead that doesn’t close? You feel like you should have known. Worse yet, there is always someone hanging around claiming they did know.

Buy a stock that goes down in value? You should have known. Buy a stock that goes up in value? You knew it was a winner all along.

The problem is, of course, that when you make a decision there is stuff you know and stuff you don’t know. And in order to learn from experience, you have to, at minimum, accurately remember what you knew at the time. Hindsight bias interferes with your ability to do that.

All this leads to the paradox of experience: Experience is necessary for learning, but individual experiences can often interfere with learning.

This exercise of recreating an initial decision with a knowledge tracker helps you separate out your knowledge at the time of the decision from knowledge that revealed itself afterward. (The main thing that’s going to reveal itself afterward is how the decision turned out.)

Instructions

Ask team members to identify (or, as facilitator, identify for participants in this exercise) (a) a past decision involving the team or the organization as a whole, and (b) the generally recognized outcome of that decision.

Identify with three key pieces of information that informed the decision. Each participant should fill this part out independently.

Describe the decision.

Describe the outcome of the decision.

Identify up to three pieces of informtation that revealed themselves only after the fact. Each participant should fill this part out independently.

After everyone has filled out their knowledge tracker individually, review results in

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The knowledge tracker is meant to help you separate what you knew at the time you made the decision from what revealed itself after the fact. Once you figure out what revealed itself after the decision, ask yourself, “Could I have known that beforehand?”

If the answer is “yes,” include that information in your decision process going forward (but don’t point fingers or otherwise turn this into an exercise of apportioning “blame” for a negative outcome).

If the answer is “no,” which will frequently be the case, this will help you keep the outcome from creeping into your attempt to learn about the quality of your decision process.

Your knowledge tracker

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Add rows

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Clear sample data

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Show everyone’s decisions/outcomes:

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Who?

What you knew before the DECISION

DECISION

OUTCOME

What you know after the OUTCOME

The amount of time people were spending away from their desks when going to lunch.

Write stuff here.

People need time away from their desks in the middle of the day.

The estimated loss of productivity (or lost work-hours) due to people going to lunch.

Write stuff here.

People would take advantage of the free lunch or order from expensive restaurants or order extra food and take it home.

Started hearing rumors of people complaining about company culture.

Write stuff here.

People threatened to quit (or took long post-2 p.m. lunches or purposely worked slowly) because the company was too controlling.

Write stuff here.

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