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Want to reduce cognitive bias? Employ probabilistic thinking | THINKERS Notebook

Want to reduce cognitive bias? Employ probabilistic thinking

There is an entertaining and instructive subreddit called Never Tell Me The Odds

It's entertaining because you find GIFs like this one, from a baseball game, in which a batter fouls off a pitch and the ball ... ricochets directly into the umpire's shirt pocket.

Or this one, in which a baby tosses a partially filled water bottle and it lands upright. (The baby's face at the end is priceless.)

Obviously you should only spend so much time indulging in this rabbit hole of ridiculousness, but it does offer a useful reminder that sometimes the unlikeliest outcome can happen. 

The question is: what do you do with this knowledge?

Having seen a foul ball fly into an umpire's pocket, would you expect it to happen the next time? Or even once in the next 10,000 pitches? I hope not. Sure, it could. But the reason it's funny is because of how unlikely it is to happen.

And this is idea of how likely or unlikely a future event is to happen -- i.e. its probability of occurring -- is something that we should always keep in the forefront of our mind when making decisions.

As Spencer Greenberg discussed in his recent THINKERS Workshop webinar, and in his post Three Types of Nuanced Thinking, probabilistic thinking is:

 
... where we consider our level of confidence in our beliefs, avoid having 100% confidence in anything, and consider in what situations a view will be true vs. in what other situations it could be false. Probabilistic Thinking helps us be right more often.

My THINKERS Notebook co-founder Sean Jackson also covered this topic in one of his recent essays, in which he described why his go-to source for information on the pandemic is the IMHE projections:
 
But the simple fact that they make specific projections with specific dates (daily) with a probability range for their results is what makes their projections believable!

Unlike the experts who provide vague hypothesis on future events, the data scientists behind the IHME projects provide their probability and timing for their forecasts in the public domain and update that information, and their subsequent projections, on a daily basis.

How many times have you seen those talking head TV experts do this?

Probabilistic thinking was also the topic of a recent issue of Further (another newsletter you should consider subscribing to), which described how playing poker provides valuable training in probabilistic thinking:
 
Poker delivers the perfect storm of ambiguity: neither skill nor luck alone takes the pot. Being able to assess probabilities quickly gives you a strategic edge, as does having the grit to accept that even improved odds don’t always play out.


This example hit home for me as someone who got semi-serious as an amateur poker player back in college.

The power of probabilistic thinking

The first lesson I learned from several of the poker strategy books I read was how important it is to memorize the relative probabilities of each set of cards you could be dealt -- as this would inform what my initial betting strategy should be for the hand.

For example, in Texas Hold 'Em, you have a good chance of winning the hand if you get dealt two Aces. However, if you get a dealt a 2 and a 7 of different suits, your odds of the winning hand are very poor. 

Over time, if you make a habit of betting aggressively when you have pocket Aces and folding quickly when you have 2-7 offsuit, you will win more money than you will lose. 

But here's the most important thing to remember: every now and then, just like the baseball flying into the umpire's pocket, the 2-7 offsuit will beat the pocket Aces.

Regardless of which side of the bet you're on -- the elation of unexpected victory or the frustration of a bad beat -- the emotion of the moment should not impact your assessment of the bets to come thereafter.

In other words: if you bet with the 2-7 offsuit and got lucky, thank your good fortune but realize how unlikely a repeat is; and if you bet with the pocket Aces and lost, chalk it up to bad luck and stay disciplined in your approach the next time around.

In the absence of probabilistic thinking, there is a real danger of recency bias infecting future decision-making.

If you sit down at a poker table for the first time and don't know how unlikely winning with 2-7 is, you might think it's a smart bet moving forward. So you'll be basing your future decisions on a foundation of erroneous logic ... which is the path to a quickly dwindling stack of chips.

Admittedly, poker is as pure (and esoteric) an example of the impact of probabilistic thinking as you'll find. But you can still apply these principles to your own daily decision making.

If you don't understand the relative probabilities of potential outcomes you are trying to assess, or if you consistently fall into the Truth Binary and view complex topics as either correct/incorrect or true/false, then you are unlikely to make a good decision.

Sure it could happen -- the unlikely outcome is always still possible -- but living a life always hoping for an unlikely river card to save you is probably not going to be a happy and prosperous one.

In this week's THINKERS Roundup, I've collected three additional resources on the power of probabilistic thinking and how to incorporate it into your regular decision-making process.


But first, a quick update from inside the THINKERS Workshop that includes some important information about how you can connect with us on social media. 

This Week in the THINKERS Workshop

 

Don't forget there are two replays from recent webinar events available to all members of the THINKERS Workshop:
 


And we are hosting our next virtual happy hour on Wednesday, July 22nd at 6:00 p.m. ET. Click here to RSVP.

We hope you'll join us for some fun conversation and connection with fellow community members.


And finally ...

We would love to connect with you on social media!

My co-host of the THINKERS Workshop, Mica, is doing an incredible job with our Instagram account. So if you are an Instagram user, definitely connect us there.

You can also connect with us on the following platforms:

 

 

***

The THINKERS Workshop costs $99.99 per year (or $9.99 per month) to be a member. If you own a THINKERS Notebook, then you get in free. If you haven't activated your free account, just reply to this email and let me know so I can send you the special link.
Now on to this week's links ...

Stop treating predictions like a coin toss.

Excerpt:

There are several different situations that could have resulted in the event that we saw. And when we're trying to predict the future, we need to consider each of them.

Watch: Thinking Like a Bayesian (THUNK YouTube Channel)

Probabilistic thinking can help you overcome cognitive bias.

Excerpt:

Thinking probabilistically takes some getting used to, as the human mind is naturally deterministic. We generally believe that something is true or false. Either you like someone or you don’t. There is rarely, for example, a situation when you can say that there is a 46% probability that someone is your friend (unless you are a teenager with lots of frenemies).

Our instinct for determinism may well have been an evolutionary innovation. To survive, we had to make snap judgments about the world and our response to it. When a tiger is approaching you, there is really not a lot of time to consider whether he’s approaching as a friend or a foe.

However, the deterministic approach that kept our ancestors alive while hunting in the savannah won’t help you make good decisions in complex, unpredictable environments when your natural mental shortcuts and heuristics start to fail you.

Read: Develop a “Probabilistic” Approach to Managing Uncertainty (Harvard Business Review)

Learn to find the signal in a very noisy stream of feedback.

Excerpt:

On this episode, best-selling author and professional poker player Annie Duke (@AnnieDuke) and [Shane Parrish] discuss how to disagree without being disagreeable, spotting biases that sabotage our success, how to find signal in noise, and reliable decision-making models for high stakes, high-pressure situations.

Listen: Getting Better by Being Wrong with Annie Duke (The Knowledge Project podcast)
Quote(s) of the week

“I have no certainties, at most probabilities."

-- Renato Caccioppoli

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