As it turns out, betting on decisions can improve the quality of the choices a leader makes.
Most major decisions are fraught with uncertainty, hidden information, risks, and unintended consequences. Luck plays a bigger part in most decisions than leaders are generally comfortable to admit. But coming to grips with luck and uncertainty is exactly how the best leaders become better decision-makers.
Decision-making author and professional poker player Annie Duke suggests most decisions are bets on the future and leaders should begin thinking about them in that way. The decisions leaders make aren’t right or wrong, Duke insists, as much as they represent the shades of gray of the beliefs that underlie them. Without a thorough examination of those beliefs, leaders succumb to making assumptions, many of which are faulty.
Whenever a leader is challenged to bet on a decision by stating the probability of a good outcome, it’s a trigger to explore their level of conviction and to take a full inventory of the evidence that led them there. Why is that the probability? What makes us think so? By thinking in bets, leaders are forced to validate their beliefs and come face-to-face with their biases.
Framing a decision as a bet encourages a more honest assessment of alternatives, tradeoffs, and the probabilities of different outcomes. By stating how confident they are about a given fact, leaders invite others to challenge them and add to their thinking rather than simply confirm their assumptions.
For instance, saying, “I’m 80 percent sure our primary competitor will not match our new product price,” encourages others to explore what makes the leader think so. On what basis do they reach such a conclusion? What facts would give them even more or less confidence?
The best decision-makers identify their key beliefs and give them a probability of certainty. They then explore the underlying reasons and assumptions they depend on to make such a guess. That is what it means to think in bets. Are you 50 percent likely to begin assigning probabilities to your critical beliefs when making a major decision? How come? Now, you’re thinking in bets.
I agree that thinking in terms of bets or probabilities can help. In addition to assessing decisions. Learning to use a decision tree with probabilities gives a great tool for complex situations.
Another consideration is the you should also think about WHY you are estimating probabilities. That is, what is the underlying decision (or is there one at all)? Sometimes your action/decision is fixed and the probabilities don’t affect anything. Examples are when the payoff is so high that the bet mist be made regardless of whether it s 70% or 30%. I recently had a case where we are one of three bidders on a major sale. Without more information, it was pointed out to me that this meant we only have a one in three chance of winning (67% chance of losing). Some of my team members felt it was important to mention this and “be realistic”. The only decision was whether to bid or not.
Focusing on the “realistic” bet was demotivating. If we have a 67% chance of losing, why stay up late refining our proposal and making if more clear and more compelling? Why make the effort to dig into costs to see if we can be more price competitive? Why try to come up with innovative ways to differentiate our solution. Just use the standard template and hope for the best, we are probably going to lose anyway, right?
Remember that you are just guessing at the bet probabilities. Dig deeper and look at how you can CHANGE the probabilities, not just decide to bet or not.
Don’t forget that saying the probabilities out loud affects how your team behaves so be intentional about it.
Clever topic this AM!
The assurance of that “Bet” can really be justified in the design and manufacturability of the product.
Another way is product generation. While the current generation could be Labor intensive the learning curve and design of the second generation can be so improved through robotics and assembly free labor touch time that the cost improvement (opening the door for out the door sell lower) price cannot be matched.
Innovation, time and being Driven!
Great topic!
Have a Great week Ya’ll!