I’m reading through professional poker player Annie Duke’s upcoming book, How to Decide.
(Duke is scheduled for an upcoming Persuasion Play Podcast interview; subscribe to my email list for details.)
The majority of Duke’s new book revolves around managing risk and communicating our understanding of risk with others, and working to expand our understanding of a situation and the variables involved so that we have a better chance at a desired outcome.
One reason you (and I) fail to understand risk is because of the vague nature of our language.
You might use words like “often” or “occasionally” or “reasonable chance” to describe the likelihood of an outcome — words which mean different things to different people.
Your “reasonable chance” might be an estimated 80% chance of something happening, for example, while for someone else a “reasonable chance” may only be 20%.
It’s difficult to communicate clearly with others when our understandings can be so different.
You’re also swayed by how much you like or desire a particular outcome. When you start to base your behavior on how much you desire (or fear) the outcome, and not the likelihood of that result happening, you begin to make choices that don’t line up with reality or your values.
You say you value relaxing in your free time… but you spend that time reading the news, filling you with anxiety and anger.
You say you want to grow your business… but you spend your time tinkering with your logo instead of trying to solve problems for clients.
Decision Trees
To help eliminate your biases towards liking an outcome or possibly misunderstanding the likelihood, Duke suggests creating a decision tree with each possible option listed, and the potential outcomes of each option, including how much you like or dislike them.
Then, translate those outcomes into percentages, which should sum up to 100% for each course of action.
For example: Should I communicate with a potential client before I cold-call?
Option 1: No previous communication.
- Outcome 1: Cold call goes well. 5%
- Outcome 2: Cold call is polite but doesn’t go anywhere. 60%.
- Outcome 3: Cold call gets hung up before I can understand if I can help them. 35%
Option 2: Send an email introducing myself and mentioning an upcoming call.
- Outcome 1: Email is read; call gets a bit more traction and interest, 10%
- Outcome 2: Email is read; call is polite but doesn’t go anywhere: 25%
- Outcome 3: Email is lost among the noise and is unread; call is polite but doesn’t go anywhere, 40%
- Outcome 3: Call gets hung up, 25%.
Option 3: Send a postal letter introducing myself and mentioning an upcoming call.
- Outcome 1: Letter stands out and gets read; call gets a bit more traction and interest, 25%
- Outcome 2: Call is polite but doesn’t go anywhere: 50%
- Outcome 3: Call gets hung up, 25%.
Now, these aren’t all of your options, the percentages aren’t exact, and a lot depends on what your letter (or email) reads, what your offer is, who you’re targeting…
but an exercise like this helps you to visualize how likely you estimate things will happen, and pushes you to uncover additional variables (from the Inside View and Outside View) that you may have overlooked.
And armed with this information, you can start to make better decisions.
Free Money
Duke also covers the idea of a “free roll,” as she calls it: a low-risk, high-reward situation where you’d be foolish to not take advantage of an opportunity.
For example, if someone offers you money for a correct guess at a trivia question, but you have to split your winnings with another person, would you still take that chance?
The low-risk, high-reward option would be yes, take the chance. It’s free money!
A recent example in my life is the purchase of a day planner. The year 2020 is nearly over, so 2020 day planners are deeply discounted at stationary and office supply stores.
Meanwhile, my own schedule is more complex than ever, with client meetings, client deadlines, school and childcare schedules, and more filling up my future.
Two weeks ago, while shopping for envelopes and stationary, I saw one of these 2020 day planners for $2 at a local Paper Source.
I didn’t buy it.
Yesterday, I found myself making the 40 minute round-trip drive to purchase that planner. For $2, it was a very low-risk purchase, and the “reward” of not missing deadlines is immeasurable.
We’re often surrounded by these types of decisions, and the “status quo” keeps us comfortable, even when the risk is low.
What low-risk, high-reward options do you find yourself passing on?
Be well and keep your focus,
Jeffrey
P.S. Annie Duke’s book is scheduled to come out on September 15th, 2020. Pre-order it today: learning how to make better decisions for your future is itself a low-risk, high-reward opportunity. Find How to Decide here on Amazon.