How to Decide

the important thing is to take aim. Aiming for that bull’s-eye by making an educated guess gets you closer to a precise hit because it motivates you to assess what you know and what you don’t know. It motivates you to learn more.

An educated guess is better than no guess at all.

Mapping out the possibilities and probabilities gives you a better view of the quality of the decision.

Adding probability estimates to the decision tree will significantly improve the quality of your decisions versus simply identifying the possibilities and your preferences.

Much of the focus of this book has been about doing things to help you choose the better option. But your choices can’t guarantee great outcomes, because of luck.

Incorporating preferences, payoffs, and probabilities into a decision tree is an integral part of a good decision process. Preference is individual to you, dependent on your goals and values. The payoff is how an outcome affects your progress toward or away from a goal.

[8] The Three Ps Wrap-up These exercises were designed to get you thinking about the following concepts: Incorporating

Incorporating preferences, payoffs, and probabilities into a decision tree is an integral part of a good decision process.

Preference is individual to you, dependent on your goals and values.

payoff is how an outcome affects your progress toward or away from a goal.

Payoffs can be measured in anything you value (money, time, happiness, health, the happiness or health or wealth of others, social currency, etc.).

Probabilities express how likely something is to occur.

Combining probabilities with preferences and payoffs helps you more clearly evaluate and compare options.

The willingness to guess is essential to improving decisions.

Identify the reasonable set of possible outcomes.

Step 1—Identify the reasonable set of possible outcomes.

Step 2—Identify your preference for each outcome—to what degree do you like or dislike each outcome, given your values?

Step 3—Estimate the likelihood of each outcome unfolding.

Assess the relative likelihood of outcomes you like and dislike for the option under consideration.

When you use these blunt terms, you and the other people in the conversation are often speaking different languages without even knowing