Add another layer to your #Business literacy. We at Serebral360° would love to know if the Forbes – Entrepreneurs article was helpful, leave a comment, like and share. Let’s dive in and discuss the information and put it to use to grow your business. #BusinessStrategy #ContentMarketing #WebDevelopment #BrandStrategy
Info@serebral360.com 762.333.1807 www.serebral360.com
Grap a copy of our NEW Business Stratgety Books #FFSS VOL1 and #FFSS VOL2
Annie Duke has the rare ability to weave real-world analogies and academic behavioral science studies into engaging stories, drawing upon her decades as a professional poker player, as well as her psychology research at the University of Pennsylvania.
As Annie notes, business decisions are routinely based on incomplete information, which creates an inherent degree of uncertainty. Resources must be committed before information is fully known. In many cases, the decision maker never has complete information, no matter how long they delay a decision. This realty requires entrepreneurs to make calculated bets, just like high-stakes, professional poker players and NFL coaches.
Separate Outcomes From Decision Quality
It is possible to have a ninety-eight percent probability of winning a poker hand and still lose. The same is true when making business decisions. If you lose with a strong hand, the decision to play the hand remains a good one, irrespective of the outcome.
If you gamble while holding a poor hand, the decision to bet is still a bad choice, even if you win. Betting on a weak hand is akin to driving home drunk without mishap and concluding the next day that driving while intoxicated is a choice worth repeating. Just because you didn’t hit on tree while intoxicated once, obviously doesn’t make drunk driving a good life choice.
As Annie makes clear in the following anecdote, a key to making better decisions is to parse outcomes from decision quality. For instance, if you fire an underperforming CEO and their replacement also fails, it doesn’t mean that the initial decision to remove the first CEO was erroneous. Rather than second guess your original decision, you should focus your energy reviewing the recruiting process that led you to select the underperforming replacement CEO.
I’ve highlighted below one of Annie’s most insightful decision-making stories. I’ve lightly edited the text for readability and continuity. If you want to hear Annie’s unexpurgated comments, check out the video below. If you’d rather download my entire interview with Annie (it’s free on iTunes), you can do so here.
The Best / Worst Football Play Call Ever
In Annie’s words: “So it’s 2015 and the Seahawks are on the one-yard line of the Patriots and it’s the Super Bowl. There’s twenty six seconds left in the game, it’s second down. The Seahawks have one timeout and they trail by four.
Everybody expects that Pete Carroll is going to call a handoff. He’s going to hand it off to Marshawn Lynch… (who) is going try to barrel through the defensive line. If he doesn’t get in, they call (a) timeout then maybe he’ll get another try at it.
But Pete Carroll doesn’t do that. He actually calls a pass play. Russell Wilson passes the ball and Malcolm Butler intercepts it in the end zone, and it’s a very sad day.
(The next day)… the headlines were not kind. There wasn’t a whole lot of discussion about whether it was a good play or a bad play or what the reasoning behind it was. Most of the discussion was about whether it was the worst play in Super Bowl history or just the worst play in football history period, ever.
That was the declaration. ‘He’s dumb, he’s an idiot…’ (But there) were a couple of outlying voices. For example, Benjamin Morris from FiveThirtyEight and a writer from Slate who said, ‘No actually, this wasn’t such a bad play.’
I’ll tell you why it wasn’t so bad. They only had one timeout left, it’s twenty six seconds and it’s second down. So, if Marshawn Lynch fails to get into the end zone on a running play, the only way to stop the clock is to burn the one timeout. Enough time will have run off the clock that they’ll only have one more play to run. So, if you call the running play, you’re committing yourself to two tries at the end zone. If you call the pass play and it’s dropped, the clock naturally stops, and it will stop quickly enough that you can actually get those two running plays back.
That’s really a key factor. When you call the pass play first, you can actually get in two more plays. You get three tries at the end zone, as opposed to two. Now the question is. ‘What are you giving up for that?’ If the chances of an interception were fifty percent, you wouldn’t give that up in order to have the extra chance at the end zone.
That season, in that situation, no ball had been intercepted. Historically, over the last fifteen years, the interception rate had been between one and two percent, so you’re basically paying this one-ish percent interception rate for a third try at the end zone, which actually doesn’t sound so bad.
We can argue about whether he should have done that or not, but I hope nobody in the room now thinks that’s the worst play in Super Bowl history, because there’s really actually good logic behind it.
I ask people to do a very simple thought experiment. I want you to imagine that Pete Caroll calls the pass play and the ball is caught in the end zone. What do the headlines look like the next day? ‘Smartest play in Super Bowl history, so cagey, so tricky. Wow he’s so smart.’
There’s a problem, because the quality of the decision should not be ruled by the quality of its outcome. Those two things are independent.
The quality of the outcome is clearly determining how people are viewing the quality of the decision. This is called ‘resulting’ in poker. In cognitive science, we call it ‘outcome bias.’ It’s a shortcut to get to decision quality and it’s a humongous problem.
It’s gonna be really hard for you to learn, if you’re a ‘resultor.’ If you’re just looking at when things go poorly and you think, ‘They are bad decision makers.’ It’s a terrible thing to do as a leader and as a manager. You’re going to crush innovation if you ‘result’ with your employees.
(It’s)… interesting is that Pete Carroll understood this. He was actually interviewed on the Today Show and someone was trying to get him to say, ‘Don’t you regret that call?’ and he said, ‘Well, I will agree that it was the worst result of a call in football history.’”
March 5, 2019 at 03:45PM
Forbes – Entrepreneurs