How to Make Better Decisions - a16z Podcast  ## Metadata - Author: **a16z Podcast** - Full Title: How to Make Better Decisions - Category: #podcasts - URL: https://share.snipd.com/episode/468a25f8-971f-4b14-bbc8-ec63075be97e ## Highlights - The Happiness Tess Summary: Happiness generally is just a proxy for or reaching your goals. So you can substitute any goald that you have in there. The shorter the amount of time in which your answer to the question is didn't affect your happiness at all, the faster you can go. Transcript: Speaker 1 Okay, okay. So you're trying to decide between those two things. If your mother-in-law, you're quizzing everybody. So let's imagine that you ordered the veggie stew and it came back and let's imagine you got this bad outcome where the food was really yucky and you didn't even finish it because it was So gross. So now let's imagine it's a year later and I say, Jeff, how are you feeling right now? Happy or sad? So you remember that horrible veggie stew you had a year ago? How much of an impact do you have on your happiness today? Speaker 2 Zero. Speaker 1 Zero. Okay, so let's imagine I catch up with you in a month and I say, hey, Jeff, feeling happier, sad right now. Do you remember that horrible veggie stew you had like a month ago? How much of an effect on your happiness to have today? Speaker 2 None. None. What if I catch you a week later, by the way? None. Now it's been the fish and it's been bad. Week made. Have been a. No, maybe. But not the veggie stew. And not the veggie stew. Speaker 1 Okay, so what I just walked through with you is something I call the happiness test. I use happiness generally as just a proxy for are you reaching your goals? Cause we're generally happier when we're reaching our goals. So you can substitute any goal that you have in there. And this is a way for us to figure out how fast we could go. Because basically the shorter the amount of time and which are answered to the question is, did it affect your happiness at all? Is no, the faster you can go, ([Time 0:17:59](https://share.snipd.com/snip/fce3efe1-00d9-4b39-afd8-5feb96ad1845)) - Decision Hyge Summary: As an operator, thereare a few decisions you make each year that are super, superimportant. You have to invest your product resources into specific deliverables. We know it's going to be a b or c. And that's the most important decision i made all year, other than possibly people. Transcript: Speaker 2 Now, one of the chapters that I loved was decision hygiene. I found this book fascinating from the perspective of both an investor and a former operator. I mean, investors, it's obvious. You're making two or three investments a year. You're seeing hundreds of companies. How do you decide? But as an operator, there are a few decisions you make each year that are super, super important, particularly the ones that used to, I used to labor over was, okay, you have to commit, You have to invest your product resources, your most eye-ballastic, your engineers into specific deliverables. Is it gonna be A, B, or C? And that's the most important decision I made all year, other than possibly people's decisions. Explain a little bit how you can maintain great ID. You've resonated in both my professional experiences in a really significant way. Speaker 1 I have to say like the decision hygiene stuff and the idea of predicting these intermediating states of the world applies so much in a startup environment because obviously kind of The nature of a startup is that you do have very little information. And you're making pretty big bets on a future that by definition is gonna be somewhat contrarian. So making sure that you don't get in this kind of group think, like I'm not saying don't believe in yourself, of course, but this is actually a way to have ([Time 0:21:59](https://share.snipd.com/snip/a6e2fe73-1cde-4616-bb73-05c2aa02ed3c)) - The Other Side of the Puzzle Summary: A lot of the cure to those kinds of problems is to get other people's perspectives. Two people can be looking at the exact same data, they can come to very different conclusions about the data. That's what a market is, its different perspectives colliding. One of the best things you can do for your decision making is finding out what other people know and what their perspectives are. Transcript: Speaker 1 What do you think the probabilities of those things occurring are? Basically your whole process is built on this foundation. Like that whole house is sitting on top of a foundation, which is your beliefs. And I believe I don't mean things like religious beliefs. I mean, just like what are your models of the world? How do you think the world operates? What are the facts that you have? What's the knowledge that you have? And that foundation that whole process is sitting on has two problems. One is that a bunch of the things we believe are inaccurate. So it's like cracks in the foundation. And the other is that we don't know very much. So it's like a flimsy foundation. The solutions to both problems are the same, which is that we need to start to explore that universe of stuff that we don't know. That's where we run into new information that helps us beef up our foundation. And it's also where we happen to run into corrective information, things that can correct the inaccuracies in the things that we believe. The other thing that helps us do, when we're talking before about the pros and cons list that gets kind of caught in your own cognitive bias, is to realize that a lot of the care to those kinds of problems is to get other people's perspectives. So two people can be looking at the exact same data and they can come to very different conclusions about the data. That's what a market is. It's different perspectives colliding. So having set that stage, one of the best things you can do for your decision making is finding out what other people know and what their perspectives are on the problems that you're considering. ([Time 0:24:14](https://share.snipd.com/snip/480e1986-23d9-4b99-9894-9a06b2a66437)) - 12 Ideas You Can Invest Behind Deploy Your Budget Summary: Figure out what it is that you're trying to get feedback about, give everybody the same information and then actually elicit those responses. So i like them to read it rite, give me it onisl zero t five, because then i can find out, like, jeff is forein and, you know, annie's a too. It maybe jeff and annie need to have a conversation, because it turns out that there's quite a bit of dispersion of opinion there. And then all of a sudden you got something that's really powerful. Transcript: Speaker 1 I could quarantine my opinion but as soon as someone else talks, as you just so nicely put, it's like everybody else's infected anyway. I'm just a really huge fan of pre-work. Figure out what it is that you're trying to get feedback about. Give everybody the same information and then actually elicit those responses. Now, the more specific, the better. So I like them to read it, right? Give me it on a scale of zero to five because then I can find out like Jeff is a foreign and, you know, Annie's a two and maybe Jeff and Annie need to have a conversation because it turns out that there's quite a bit of dispersion of opinion there. What this allows you to do is, first of all, it actually disciplines your decision process because you have to think about what are the things that matter to this decision that I'm trying to elicit opinions about? And let me be clear, it's not that I don't think people should provide rationales. I think those are actually quite important. It's just that they need to have something that's much more precise. It's like a point estimate, right? Because I need to see where the dispersion is and then let them give the rationale. Speaker 2 I used to give a hypothetical budget. You have a million dollars. Here are the 12 ideas you can invest behind. Deploy your budget and each person would deploy. And then all of a sudden, you've got something that's really powerful ([Time 0:27:40](https://share.snipd.com/snip/13304c6c-687e-45b9-9987-38905403fec7)) - You Don't Need To Agree To Decide Summary: CNN.com's John Sutter takes a look at what happens when people share their views about the world in an online forum. The idea that all of you would be on equal agreement about whether you do something or not is absurd, says Sutter. "You don't need to agree to decide. You need to inform to decide," he adds. Transcript: Speaker 1 And then Annie, you believe there's a slide, is there something you didn't understand? Now notice in no way am I, is anybody saying you're wrong or you haven't thought about it this way or whatever? It's I get to tell you, here's something I don't understand. And then we sort of get to the point where I say, okay, I explained your position. There's really amazing things that come out of that process. Thing number one is you get much more comfortable with the idea that everybody doesn't have to agree. Number two is people have different mental models. And so you get to expose everybody to those different perspectives and the different facts people are bringing to the table. So the whole group becomes more informed, which is awesome. The third thing is that the person who is conveying their position becomes more informed. Why? Because in the process of having to defend why I believe the earth is round, I discovered that I actually can't explain that very well. So maybe I have to go Google some stuff or look it up. And there's gonna be good stuff that comes out of that because I'm gonna be more likely to actually moderate because I'm sort of poking around in my knowledge a little bit. And then the last thing I think that comes out of this, that's really good is that once you get into this idea of convey versus convince, you realize that you don't need to agree to decide. You need to inform to decide. And that the idea that all of you would be on equal agreement about whether you should do something or not is completely absurd because we don't have to because that's a little point. If you thought that that was the goal, why do you have more than one person on the team? ([Time 0:30:57](https://share.snipd.com/snip/c12bbafc-06e0-4e32-8cf5-7bbb07d7da72)) - How to Get a Good Turnout in a Poker Game? Summary: Thespetially, i think it gives you a tool to be able to do that. You have your tat wodary, wait and be right. Like how a mi doing in terms of celebrating around how likely i think this company is to fail. The other thing that comes from that is that when you make yourself so to break this into its component parts,  i think it actually improves the knowledge that goes into it. It makes you be more foxlike, rather than hedgehog like because you know that there is going to be a look back. Transcript: Speaker 1 This actually I think gives you a tool to be able to do that because you have no secondary way to be right. Like how am I doing in terms of like calibrating around how likely I think this company is to fail? You know, in what ways is it gonna fail? What does that actually look like? The other thing that comes from that is that when you make yourself sort of break this into its component parts, when you actually force yourself to do that, I think it actually improves The knowledge that goes into it because you have to start thinking about what are the things that I know? What are the things that I can find out? What are the perspectives that I could consider? What are the mental models that I could apply that will help me with this prediction? Because it is now recorded. It is part of that evidentiary record, which we have already said is incredibly important, that allows you to have that look back. And because you know that you're accountable to it, I think it actually improves the accuracy of the original decision because it makes you be more fox-like rather than hedgehog-like Because you know that there's gonna be a look back. Basically, fox-like thinking is looking at the world from all sorts of different perspectives applying lots and lots of different mental models to the same problem to try to get to Your answer. And hedgehog is like you approach the world through your one big idea. So you can think about like investing, you have like one big thesis. Instead of looking at it from all sorts of different angles. Generally, what you find is that fox-like thinking is generally gonna win the day. And this is something like Phil Tutlock, I'm sure a lot of people are familiar with super forecasting, talks a lot about sort of apart from the fact that you can speed up the learning cycle. I think it actually improves the decision ([Time 0:35:48](https://share.snipd.com/snip/f58054bd-0afb-486a-863f-363ca935e916)) - Is Optionality a Good Option? Summary: As investors, we get the benefit of being able to make a basket of decisions. O diversification. But what is the impact of optionality? How doyo wonal that one decision? So first of all, here's te secret. Your decisions are a portfolio, because you make many of them in your lifed. And i understand one decision like this particular product decision, but that's actually kind of like a false segregation,. Because you're kind of working across different decisions. Transcript: Speaker 2 And we may start implementing that at the firm really soon. You know, as investors, we get the benefit of being able to make a basket of decisions, you know, diversification. A lot of the people are making decisions are making like one decision. What is the impact to optionality? And how do you deal with that one decision? Speaker 1 So first of all, here's a secret. Your decisions are a portfolio because you make many of them in your life. And I understand one decision like this particular product decision. But that's actually kind of like a false segregation because you're kind of working across different decisions. But I do understand that some decisions you're making are, feel like they're much higher impact. Like when we go back to the happiness test, obviously like when you're sort of putting your eggs in one product basket, this is something that if it goes wrong, it's gonna have a very big Effect on your ability to achieve your long-term goals. But that doesn't mean that you can't think about how can we just sort of move fast and then how would we then apply this to making a higher quality decision about something like that. ([Time 0:37:32](https://share.snipd.com/snip/640a5a24-eae6-47e0-ba55-3a9f1bbdd065))