How Do You Know Whom to Believe to Make Great Decisions?
The quality of your life is largely determined by the quality of decisions you make.
This post is part of a larger series in which we learn about decision making from cognitive behavior experts like Ray Dalio, Daniel Kahneman, and the Center for Applied Rationality. I break down their concepts and bring you useful, ready-to-use-tools you can apply in your everyday life for better decisions, more confidence and less bias.
You and I make suboptimal decisions all the time.
Have you ever picked the wrong stock, the wrong job, the wrong partner? Or failed to properly plan important projects and had to rush in the last minute to get them done? Of course hindsight is 20/20, but at least a few of those bad decisions you could have likely predicted and prevented if you hadn’t been privy to your own blind spots and mental biases.
After reading this post, you should understand
- How biases and blind spots can lead to bad decision making
- How believability-weighted decision making is better
- How to assess someones believability
How biases lead to bad decision making
On January 28th 1986, NASA personnel made the fatal decision to launch the Space Shuttle “Challenger”. NASA had spent years and millions of engineering hours planning for this mission and conducting safety tests. The shuttle ended up exploding anyway and killing all seven crew members.
How could this happen?
Enter Cognitive Biases
As a later analysis by Richard Feynman and others revealed, an engineer working for the manufacturer of the faulty parts (the infamous O-Rings) named Roger Boisjol had warned the danger of using those parts with temperatures as low as were present on launch day.
But NASA’s leadership was strongly affected by a combination of
- confirmation bias (everything is safe, we’ve run so many tests, all lights are pointing to green)
- groupthink (our desire for group harmony is larger than our desire for the truth)
- overconfidence (we are a smart group of people and we know how to launch space shuttles)
- normalcy bias (we refuse to plan for a disaster which has never happened before, also known as a Black Swan)
and decided to ignore the dissenting voice of Roger Boisjol.
The launch had already been delayed by several days and the leaders didn’t want to delay it further because of something they collectively deluded themselves into thinking was a ‘minor’ safety issue.
Wikipedia lists close to 200 cognitive biases that affect our thinking and decision making. While 200 sounds like a lot, many of them are interrelated and may have the same root causes, so it’s not important to know all of them by heart, but rather to gain an understanding of the most important ones and how they appear. We will look at those in further posts in more detail.
Could such biases have been detected?
At least two scientific studies say that you can actually train debiasing with a single intervention such as a training video or an interactive game and that people make better decisions, even two to three months after the intervention.
The alternative of training to detect your own biases, you can involve others to get better maps of understanding. How do we best do that?
Believability-weighted Decision Making
As some of you may know, I’m a big fan of Ray Dalio. He’s a very successful hedge fund manager who’s built his success through having world-class truth seeking and decision making processes. On top of that he’s an excellent teacher.
In his famous book Principles, Ray Dalio lays out his way of making decisions in the face of uncertainty.
A core concept that I find very useful is “believability-weighted decision making” — what a mouthful. But don’t fret. I will take you step by step through this idea and make it useful for every-day decision making.
What is Believability?
In order to make good decisions, you need to uncover your biases and develop accurate maps of reality. I go in depth in this article here, but in short it is collecting accurate information about how the world works for the goals relevant to you.
One Dalio’s fundamental advices to develop these maps quickly and effectively is to go and
Seek out the most believable people you can find who disagree with you
Who is believable?
Dalio defines believable people those who have a track record of
- repeatedly and successfully accomplishing the thing in question
- and possess great reasoning of the cause-effect relationship explaining why they were successful.
If you’ve ever had a salesperson recommend you something, you will know that motivations and incentives can render a person less believable. So you if you want to assess believability you should look for people who
- have acquired accurate maps around the decisions you are making
- have your best interest in mind.
Now it won’t always be as obvious as laid out here, so we need some additional prompts to assess believability.
How to assess someones believability
As we’ve seen before, when deciding whom to believe on certain subjects, we’re susceptible to a whole host of mental biases.
We should attempt to unmask those. Based on Dalio’s book and my own personal experiences, here are some questions I’ve come up with that I believe we should all ask ourselves when interacting with others and getting advice from them on important decisions.
Past experiences of the person
- How accurate is their map of reality when it comes to this area?
- How often have they achieved success in the area they are advising you about?
“George was very confident about us needing to change our database system to NeverSQL”
“How many different system has he selected, installed and maintained to the satisfaction of a diverse set of demanding stakeholders over a significant period of time? Who else has endorsed George’s ability to make such a suggestion?”
“Ummm…”
Reasoning Skills
- How well are they able to articulate the underlying principles and cause-effect relationships that lead them to conclusions?
“Vegan product sales increased this month because of the new Guac-Kale-Mole we introduced. We should introduce more products containing Kale again next month”
In fact, the Guac-Kale-Mole (really WholeFoods!?) only made 5% of all vegan product sales, and sales rose by more than 20%. It’s unlikely that the new product led to a 15% increase of the already existing products.
Truth seeking and open-mindedness
- Are they really seeking to understand the situation?
- How many questions are they asking about the situation?
- Are they updating their views as new, contradictory information is coming along?
“What career should I go into?”
“Well I think Fintech and Biotech. They are pretty hot right now.”
The person giving advice doesn’t know anything about my desires, skills and past experiences…
Reputation
- Who else has been endorsing this person’s believability on this subject? What is their believability of assessing this person’s believability? (This is sort of how Google’s PageRank works)
“Tom is a really bad mice catcher”
“Says who?”
“Jerry. He’s lived with him since 1940 and is still alive”
- Stereotyping & Authority bias: Am I trusting this person more than warranted because we went to the same school or because I perceive them to an authority?
“Professor Smarty, who teaches Marketing at Harvard, told me to bet everything on augmented ideality marketing for our kale-based doughnuts”
“Has he ever been an entrepreneur? Ever sold or at least studied how to sell a food product to liberal soccer moms?”
Incentives and Emotional States
How might their judgement be biased consciously or unconsciously by their own biases, emotions and incentives?
In an ideal world, people really want the best for you and aren’t influenced by their own agenda, but let’s face it, even the most noble of us have agendas we are pursuing.
- Skin in the Game. How much skin in the game do they have? If they are telling me to invest in a stock, have they invested in it as well? How much?
“You should invest in that Guac-Kale-Mole company I was telling you about”
“How much have you invested?”
“Errr. Some decent amount..?”
- Jealousy & Envy. Does the person have a reason to be jealous or envious if you succeed with your plan and might give you ‘bad’ advice because of it?
- Anger & Revenge. Does the person have a reason to be angry at you in a subtle way and seek to derail your ambitions?
- Greed Are they trying to sell you something or get some kind of behavior from you?
The website of a new innovative cosmetics manufacturer
“Our unicorn-burp infused deodorants will make you smell better than even Grenouille’s latest perfume could ever do.”
Synthesizing all of the above
Dalio ranks believability like this
- People with a track record of success AND great reasoning
- People with EITHER a track record of success OR great reasoning
- People with NEITHER of the above.
I added the pieces about incentives and emotional states. Dalio doesn’t talk about them for some reason yet they seem critical to make the advice more generalizable.
Scoring Believability
While Dalio has a very elaborate setup to rank believability on multiple subjects at BridgeWater, for us beginners it seems helpful to simply use numbers from 1–5 when thinking about believability. Putting a number on someone and ourselves may seem harsh, but if forces you to really think and justify your choice based on the facts present and is crucial for believability-weighted decision making.
Going back to our space shuttle story.
What was the believability of the engineer warning of the launch in cold weather, Roger Boisjol from 1–5?
What was the believability of those managers who argued to discard his warnings from 1–5?
Doing this exercise will help you understand how to behave when talking with others.
Dalio:
Be clear on whether you are arguing or seeking to understand, and think about which is most appropriate based on your and others’ believability.
If both parties are peers, it’s appropriate to argue.
But if one person is clearly more knowledgeable than the other, it is preferable for the less knowledgeable person to approach the more knowledgeable one as a student and for the more knowledgeable one to act as a teacher.
From that follows whether you or the other person should ask more questions.
Triangulating between highly believable people
In general, Ray Dalio’s advice is to triangulate from different high believability people.
Even highly believable people can be wrong, as he highlights with his scary story about a doctor who recommended removing his esophagus to prevent death from cancer. Ray consulted three other believable doctors and through that was able disqualify the irreversible suggestion from the first doctor.
Only after you’ve asked several people and weighed their advice by their believability are you in a good position to make an important decision.
Summary
- A host of of mental biases can prevent you from seeing things clearly
- A great way to debias your views is to speak with (dissenting) believable others
- You should triangulate the views from believable others and weigh their opinions by their believability
- Establish believability by asking yourself a set of key questions when receiving advice from someone
Your Turn
How can you apply this into your life?
Where are you about to seek opinions from others and how will you establish their believability?
If you’ve enjoyed this read and want others to benefit as well, I will really appreciate if you send me some claps!
If you have questions or feedback, please leave them below or send to my email address flavio.rump@gmail.com.
In future posts, we’ll dig deeper into better decision making with more tools from Dalio and others.
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