BOOK SUMMARY 64 Think Twice
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Summary written by: Ingrid Urgolites
"You needn’t think twice before every decision.
Since most decisions will be straightforward, with clear-cut repercussions, the
mistakes in this book will not be relevant. We all make lots of decisions every
day, and the stakes are generally low. Even when they are not low, the best
course is often obvious enough. Think Twice’s value comes in situations where
the stakes are sufficiently high and where your natural decision-making process
leads you to a suboptimal choice."
- Think Twice, page 137
Have
you ever wondered why smart people make bad decisions with formidable
consequences? In Think Twice, Michael J. Mauboussin teaches us to
make better decisions when it matters most. I liked the polysemous cover. From
a distance, the white letters appear to read Thin Ice, but a
closer look reveals the dark blue letters in the center completing the
words Think Twice. It alludes to the book’s subject: making
rational decisions when the situation includes risk and ambiguity. When the
stakes are high, we have a tendency to rely on emotion, first reactions, false
beliefs and misleading advice.
The
core of Mauboussin’s methods is developing mental flexibility, introspection
and the ability to evaluate evidence effectively. He teaches us about eight
concepts that we can learn to help us recognize errors in our own decisions and
the decisions of others. Once we recognize the mistakes, we can see how the
routines we use to simplify everyday decisions do not work well when we make
complex decisions. The goal is to apply what we have learned and create a new
set of useful mental tools to make better decisions when it matters most. It
enables us to reconsider an automatic response at a crucial time, Think Twice
and make a rational choice. He says his personal goal is to identify when he is
in a danger zone and slow down and identify the right perspective before making
the decision.
I
envisioned some of his ideas as virtual time travel. Take a trip with me and
explore your decision destination. To prepare, we will evaluate how much we
control the outcome. We want to have goals we can reach. Success in reaching
our desired destination depends on whether or not our trip requires navigation
skill. We do not need to put effort into navigating decisions that are mostly
luck. We do not determine the destination of those trips.
The Golden Egg
Try to Lose
"Here’s
a simple test of whether an activity involves skill: ask if you can lose on
purpose. Think about casino games like roulette or slots. Winning or losing is
purely a matter of luck. It doesn’t matter what you do. But if you can lose on
purpose, then skill is involved."-
Think Twice, page 132
Some
things we might like to think we are responsible for such as success at work or
profitable investments are mostly luck. They are too complex for us to control
all the aspects or predict all the outcomes. Reasons they succeed or fail are
not in our control. Mauboussin points out when something good happens we
usually attribute it to our skills. When something bad happens, we often blame
luck. Our error is making the judgment based on the outcome. Instead, we need
to focus on the process. The process is what caused the result. Effective
decisions come from focusing on processes we control not trying to control what
happens by chance.
If you
cannot lose on purpose, your decision is not directly responsible for the
outcome. If you can, then you need to evaluate whether or not you have the
skill necessary to achieve your desired result.
If
your decision involves skill, building skills takes focused time and deliberate
practice. Mauboussin says most experts do not come close to satisfying the
requirements for deliberate practice and cautions us against overconfidence.
Honest introspection is important as well as openness to high-quality feedback
to expand our perspective—both are essential in building skills. Keep your
decisions in line with your degree of skill.
Gem #1
Imagine the Future
"But
Gary Klein, a psychologist, suggests what he calls a premortem, a process that
occurs before a decision is made. You assume you are in the future and the
decision you made has failed. You then provide plausible reasons for that
failure. In effect, you try to identify why your decision might lead to a poor
outcome before you make the decision."- Think Twice, page 142
Most
of our daily decisions have clear consequences for our actions. Decisions
like not paying our electric bill would cause our electricity to be
disconnected. Complex decisions may not have obvious consequences. It is useful
to imagine a worst-case scenario. For example, perhaps you are planning to
move. Imagine the move went badly; now list all the reasons why. You can identify
possible problems before they happen and take proactive measures. (Maybe you
forgot to have the electricity turned on before the move.)
Gem #2
Examine the Past
"If
you are serious about improving your decisions and are open to feedback, there
is a simple, inexpensive technique of great value – a decision-making journal.
Whenever you make an important decision, take a moment to write down what you
decided, how you came to that decision, and what you expect to happen. If you
have the time and the inclination, you can also note how you feel physically
and mentally."- Think Twice, page 141
Journaling
enables us to audit our decisions. The more information we record about our
decision, the more useful it will be later on. We have a tendency to evaluate
results of past decisions and think we knew more than we did. We also might
make spurious connections and think there is a correlation between unrelated
events. Keeping a record that we can examine helps us develop a less biased
perspective. It also might identify useful patterns in good and bad outcomes.
Honesty and open-mindedness are essential. After all, we want to find our
mistakes to improve future decisions.
If you
are already in the habit of journaling, you have information that can help you
now. I keep a journal and I was able to look back at the decisions I made three
years ago and compare them to similar decisions I am making now. If I had
designated the journal as a decision-making journal and kept concise notes, it
would be more useful. Although it is incomplete, the information I recorded has
given me some important insights.
It can
be difficult to make good decisions especially if you are aware you lack sufficient
skill in an unfamiliar area. Friends and family often offer quick advice that
makes them feel helpful and allays their fears. It might be well meant but it
is not qualified and it supports their bias. Often they do not suffer the
consequences if their advice is faulty. Experts are hard to trust because their
qualifications can be difficult to verify and their expertise is assumed.
Sometimes they are rewarded if they persuade you to make a decision that is not
in your best interest. It might be hard to determine if their recommendations
fit your situation. If they have a panacea, it is certainly bad advice. This is
why we need to have these mental tools to help us navigate to the best possible
outcome.
This
book does not offer a precise formula for guarding against bad decisions.
Instead, it teaches us how to think more rationally and identify our
opportunities. Not all decisions will have a positive outcome, but over time
the most rational thinkers come out ahead.
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