How to Make Smarter Decisions to Improve Quality of Life: Decision-Making Framework

Making smart decisions is not easy, but it's a skill that is worth developing. Better decisions have salutary effects on the quality of our life, they can save us a lot of money, time, and stress. Making decisions through a solid framework lens will make us more confident, calm, and successful in the long run.

We as human beings have many unhealthy tendencies that prevent us from perceiving objective premises, concluding, and understanding them. In addition, we often confuse luck with skills and create a too strong relationship between the effects of the decision and its quality.

This is just the tip of the iceberg. Therefore, based on Annie Duke's bestselling book "Thinking in bets", I decided to develop a framework that will allow us to make smarter decisions and understand the entire context that accompanies it.

Making decisions is inevitable, but making smarter decisions is a life skill, that we can grow over time.

Here’s a six-step framework to make smarter decisions.

1. Making decisions is poker, not chess. Embrace the uncertainty 

Most of the decisions that we make in life involve hidden information and some amount of influence of luck. This creates a challenge to form a framework, that needs to take into consideration two factors that don’t exist in chess.

Chess doesn’t hide any kind of information and involves almost no luck. In contrast, poker is a game of incomplete information. It’s impossible for a person who plays chess a month to beat a grandmaster, but in poker, it can happen. It draws some conclusions, that we need to keep in mind.

As I said previously, we have a problem with separating luck and skill. For example, when our decision had a positive effect, we say it's a matter of skill. On the other hand, when our decision had a negative effect, we always say that we are unlucky. Or that was a bad day, and things turned out differently than expected. We are usually wrong in both cases...

So, firstly, we need to accept that making smart decisions is not about a pure skill that can be trained just like playing chess. In decision-making process is involved both skills and luck. However, we as humans tend to rationalize and do not acknowledge that in making decisions luck is involved. What we want to do is to reduce the influence of luck in making decisions.

What good poker players and good decision-makers have in common is knowing that the world is an unpredictable place. They just embrace uncertainty and they’re comfortable with it.

2. All Decisions are Bets. Strive for objectivity.

All decisions are bets, but in a much broad sense than we usually consider bets. We usually associate betting with casinos, gambling, lottery tickets, or even addiction. But according to Merriam-Webster dictionary:

“Bet is a choice made by consideration of probabilities”

Since we are accepting that all decisions are bets, it implies two main conclusions:

• Bets depend on our beliefs and superstitions, so there’s a significant amount of subjectivity that can distract us from making good decisions.

• Bets are about an alternative future. Every decision you make, you bear an opportunity cost. According to Investopedia:

“Opportunity cost is the forgone benefit that would have been derived from an option not chosen. To properly evaluate opportunity costs, the costs and benefits of every option available must be considered and weighed against the others. Considering the value of opportunity costs can guide individuals and organizations to more profitable decision-making.”

It means that you bet on a certain future with all its benefits and risks, and there’s always exist alternative that could turn to be more beneficial or the opposite. But if you know not much about smart decisions making you can’t sense better alternatives, because of your subjective beliefs. 

The way we process information to make decisions is driven by our beliefs. We add more information in a way that matches our previous beliefs, even when they are incorrect. And the longer we have them, the more difficult it is to disprove them.

That’s why it’s so important what Annie Duke said:

“Incorporating uncertainty in the way we think about what we believe creates open-mindedness, moving us closer to a more objective stance toward information that disagrees with us.”

“Acknowledging that decisions are bets based on our beliefs, getting comfortable with uncertainty, and redefining right and wrong are integral to a good overall approach to decision-making. But I don’t expect that, having dumped all these concepts in your lap, you should somehow know the best way to use them. These patterns are so engrained in our thinking that it takes more than knowing the problem or even having the right outlook to overcome the irrationalities that hold us back.”

3. Update data, get feedback and create Learning Loop.

“Experience is not what happens to you; it's what you do with what happens to you.” - Aldous Huxley

Every time you make a decision, you get a response, sometimes immediately. However, it is more important to update our information and be able to adapt to changing circumstances. Therefore, it would be ideal to create a learning environment in which drawing conclusions based on the feedback would contribute to making better decisions. 

According to Annie Duke, poker is the perfect learning environment. You make a bet, and get an immediate response from opponents. You win or lose a hand, all within minutes. 

Any decision is a bet on what will likely create the most favorable future for us. And the future we have bet on unfolds as a series of outcomes. Since we know that the future is a set of outcomes, we are faced with another challenge: “Why did something happen the way it did?”. We need to figure it out, as the outcome was mainly caused by luck or it was a series of well-thought-out decisions that were predictable. 

If we determine our decisions drove the outcome, we can feed the data we get following those decisions back into belief formation and updating, creating a learning loop:

Learning from outcomes is a pretty haphazard process though because they don’t tell us what’s our fault and what isn’t. Unlike in chess, you can’t work backward from the quality of the outcome to determine the quality of your beliefs or decisions. 

To figure out achievable strategies to calibrate the bets we make on our outcomes, we should get insights into uncertainty, that trips us up. To overcome uncertainty we should reshape and rebuild our existing habits to more productive ones. 

Habits that trigger us to be more open-minded and watchful in terms of interpreting outcomes, and for that to happen we need to think in bets, and here’s Annie Duke says why we should think that way:

“Thinking in bets triggers a more open-minded exploration of alternative hipotheses, of reasons supporting conclusions opposite to the self-serving bias. We are more likely to explore the opposite side of an argument more often and more seriously —and that will move us closer to the objective truth.”

“Thinking in bets also triggers perspective taking, leveraging the difference between how we field our own outcomes versus others’ outcomes to get closer to the objective truth.”

And the more objective person will win against the bias one in the long run. To be more objective - adapt to new outcomes, determine them, and build a habit that supports your open-minded approach. Thinking in bets surely correct your course to make smarter decisions and strive for objectivity.

4. The Buddy system - two heads are better than one.

“I learned from this experience that thinking in bets was easier if I had other people to help me”

As we previously proved we as human beings have problems with striving for objectivity and we will never be able to perfectly overcome the natural biases. But we can help if with finding a group of people that help us reshape difficult to break thinking patterns.

We’re dealing with deeply rooted self-serving biases that we even couldn’t notice by ourselves. To find blind spots in decision-making and thinking patterns we need an environment that exposes us to different perspectives and alternate hypotheses. Being in a group simply by exploring alternatives and recognizing where our thinking might be biased can improve decision quality.

One of the most well-known productive groups that help people with reshaping their habits with extraordinary results is Alcoholics Anonymous (AA).

It’s a pure example of how a supportive group can help us change a habit routine simply just by its approval. They reward the engagement in doing hard work of staying sober by giving tokens or chips to celebrate the length of individual members’ sobriety. There is even a chip for being sober for twenty-four hours.

The power of a group’s approval is often a factor sufficient enough to change or reshape habits. Annie Duke wrote:

“When they complimented me for finding alternative approaches in my winning hands or understanding the contribution of luck, that felt terrific. In time, I could expand this approach to identifying learning opportunities in any hand I played, not just the winning ones”

A focus on accuracy, accountability, and openness to a diversity of ideas is the primary factors that help us get a more objective view of the world. Other people help us fill our blind spots. Developing ways to expose ourselves to contrary viewpoints simply can do wonders, especially when we think in bets. We run through a series of questions to examine the accuracy of our beliefs, which helps us to make smarter decisions.

“Accuracy, accountability, and diversity wrapped into a group’s charter all contribute to better decision-making, especially if the group promotes thinking in bets.”

5. Be skeptical and work backwords.

When it comes to making decisions it’s hard to properly process information due to conflicts of interest that arise when we interpret the world around us.

We use information in favor to confirm our existing beliefs. It allows us to take credit for good decisions and find a “reasonable” reason to shift responsibility for a bad decision from us to factors outside our control.

The only way to learn is to be open-minded and skeptical due to fact of biases that we deal with. For example, we value the truth of information based on how much we like the person delivering the message.

“For example, if you’re doing an experiment, you should report everything that you think might make it invalid—not only what you think is right about it: other causes that could possibly explain your results; and things you thought of that you’ve eliminated by some other experiment, and how they worked—to make sure the other fellow can tell they have been eliminated.” - Richard Feynman

Skepticism is the approach suggested by professor Feynman that is about finding out why things might not work rather than work.

Thinking in bets demands the imperative of skepticism. Thinking in bets embodies skepticism by encouraging us to examine what we do and don’t know. What our level of confidence is in our beliefs and predictions. This moves us closer to what is objectively true.

6. Final chapter: Four Time-travel techniques for better decision-making

“When making decisions, isolating ourselves from thinking about similar decisions in the past and possible future consequences is frequently the very thing that turns us into a blob, mired by in-the-moment thinking where the cope of time is distorted. As decision-makers, we want to collide with past and future versions of ourselves”

The best decision-makers developed a practical way to incorporate their long-term goals into the moment of making a decision. We make the possibly best decisions when we think about the past and future, engaging our deliberative mind that improves our ability to make rational decisions.

Time-travels strategies in making decisions are complementary, they increase chances of good outcomes. There are four strategies designed to recruit past-and future-us to help with all the execution decisions we have to make to reach our long-term goals:

1) 10-10-10 Strategy

This idea was developed by Suzy Welch in her bestselling book “10-10-10: A Life Transforming Idea”.

It’s a simple philosophy of making decisions that highlight the importance of long-term consequences, bringing a future version of us into consideration in the moment of making a decision.

Every time you make a decision you start the process of asking three questions: ”What are the consequences of each of my options in ten minutes? In ten months? And in ten years?” This set of questions triggers our accountability which invokes more rational tools in the aspect of making quality-good decisions.

We can also reverse this set of questions and ask ourselves: “How would I feel today If I had made this decision ten minutes ago? Ten months ago? Ten years ago?” No matter in which direction travel you choose, you reactive the brain pathways that are less prone to emotions, and more focused on rational executive functioning.

2) Reconnaissance

Reconnaissance is about exploring different scenarios plans instead of using data to draw a particular conclusion.

To make better decisions we need to reconnaissance on the future. We train our brains to figure out the range of various possibilities and potential futures as much it’s possible.

“The idea is to consider a broad range of possibilities for how the future might unfold to help guide long-term planning and preparation.”

After identifying the various case scenarios. We take stab at probabilities, making the best guess at the probability of each plan.

By acknowledging that the future is uncertain, we turn our worldview to be more realistic. By figuring out the various futures we are better prepared, and rather than be reactive we anticipate the positive and negative outcomes of our strategy that we’re able to respond to. By exploring various numerous case scenarios we are less likely to fall into the trap of hindsight biases.

Reconnaissance of the future dramatically improve decision quality, focusing ourselves on preparation and taking action, instead of being reactive to a set of outcomes.

3) Backcasting

Since reconnaissance was focused on planning, and exploring a different set of possible futures, backcasting is about working backword from a positive future. We imagine that we’ve already achieved the goal, and we think about how we were able to get there.

In backcasting, we identify the reasons that made us successful, what kind of events occurred, and what kind of decisions we made. Backcasting by spotting strategies and tactics allows us to understand the actions that needed to be implemented to achieve the goal.

Imagining a successful future and backcasting from a positive place is a useful time-travel technique to spot all the necessary steps for achieving our goal.

4) Premortem

Premortem is the reversed technique of backcasting. Since the second one was focused on working backward from the positive future, this technique is about working backward from the negative future.

It’s a good complement to backcasting that allows us to get the full picture of what actions needed to be done to get good outcomes.

Annie Duke found a couple of researches that show that we are more likely to execute our goals if we think about a negative future. Avoiding a negative future is more motivating for us than reaching the positive one.

We start a premortem by imagining why we failed to reach our goal. Then we imagine why all those reasons why we didn’t achieve our goal help us anticipate potential obstacles and improve our likelihood of succeeding.

Imagining both positive and negative futures allows us to view the world more realistically, preparing ourselves for a wider variety of challenges. Which influences our way of dealing with bad outcomes. We are less likely to be surprised by them and can better prepare contingency plans.

Summary:

1. Embrace that future is uncertain. Be comfortable with the fact that decisions involve both skills and luck.

2. We as human being has a lot of counter-productive beliefs that don’t allow us to be as objective as we need. To make smarter decisions you need to be open to all kinds of information that don’t go well with your existing beliefs.

3. The more objective person will win against the bias one in the long run. To be more objective - adapt to new outcomes, determine them, and build a habit that supports your open-minded approach.

4. Find a motivating group that promotes a diverse view of the world and the full spectrum of ideas. Accuracy, accountability, and diversity wrapped into a group’s charter all contribute to better decision-making.

5. Be skeptical and work backwords - thinking in bets embodies skepticism by encouraging us to examine what we do and don’t know.

6. Use the power of the time-travels technique to make smarter decisions. As decision-makers, we want to collide with past and future versions of ourselves to get the full picture of what’s needed to get the positive outcomes.

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