Did you know that losing $1000 and then winning $900 (i.e. getting a result of -$100 in total) is more pleasant than winning $1000 and then losing $900 (i.e. getting a result of +$100 in total)!??
What has happened in the RECENT PAST drives our emotional response much more than how we are doing overall! It is a problem if you are making important prediction.
There are to ways to overcome this problem:
I’ve already told about the truthseeking group (The Buddy System) as a great way to improve decision-making process.
How to share information inside such a group and how to disagree efficiently (to find a good solution)? And how to communicate outside of such efficient group?
There is a set of rules called “CUDOS” that can be used for this…
People are not ready to consider themselves the source of the problem they are facing (their skill), they blame other people/circumstances (luck). How to overcome this issue?
One of the solution is to create “truth-seeking group” with your colleagues/friends/partners/“buddies”. And such a group should follow specific rules that would increase rationality…
How people should learn by watching outcomes and why they do not learn?
There are many unknown circumstances - so we do not know the real cause of the outcome. Luck also plays a big part here, so we don’t know if it’s luck or skill.
Also we are distorted with our biases:
- self-serving bias
- and inverted self-serving bias
How to overcome our biases and learn better?
Poker players make decisions by making bets. Why do we all need to learn to make decisions using bets too?
There is a trap of “Motivated reasoning” bias. But, fortunately, there are facilitating questions that direct our minds in the right direction.
We must also move away from using the all-or-nothing confidence scale. Instead, we must learn to measure our confidence in percentages. This will not only help us win more, but it will also make us more credible communicators and make teamwork around us more efficient.
Our Rational Answer books club has selected a book for February. It is “Thinking in Bets” by Annie Duke: https://www.amazon.com/Thinking-Bets-Making-Smarter-Decisions-ebook/dp/B074DG9LQF
This book is written by a multi-million dollar poker tournaments winner (and her brother is also a multi-million dollar poker tournaments winner - so it’s a family business ;))
She teaches how to apply poker thinking to make decisions in financial markets, strategic planning, human resources, law, entrepreneurship…