TKP Insights: Making (Even) Better Decisions

This episode is packed with wisdom from previous guests on the art of making better decisions. We discuss the three types of decision-makers, how to control your emotions when making decisions, why it’s crucial to look at every decision differently, the processes for coming to the right decision, and how to learn from your mistakes when you get it wrong. The guests on this episode are author Ventakesh Rao (Episode 7), psychologist, author and professional poker player Maria Konnikova (Episode 89), Stripe co-founder Patrick Collison (Episode 32), cognitive-behavioral decision science author and professional poker player Annie Duke (Episode 37), and Shopify co-founder Tobi Lutke (Episode 41). Transcript: https://fs.blog/knowledge-project-podcast-transcripts/tkp-insights-decision-making/ -- Want even more? Members get early access, hand-edited transcripts, member-only episodes, and so much more. Learn more here: https://fs.blog/membership/ Every Sunday, our Brain Food newsletter shares timeless insights and ideas you can use at work and home. Add it to your inbox: https://fs.blog/newsletter/ Follow Shane on Twitter at: https://twitter.com/ShaneAParrish Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:15Shane Parrish?

  Welcome to The Knowledge Project. I'm your host, Shane Parrish. The goal of this show is to master the best of what other people have already figured out, so you can use their insights in your life. What you're about to hear is a special episode of The Knowledge Project. Over the last five years, I've been lucky enough to speak with some of the most incredible people in the world, and when I re-listen to these episodes, they feel like they were recorded yesterday. Except, I sound like even more of a clumsy dork than I am now. What really stands out is how the insights in these conversations stand the test of time. They're as applicable today as they were when they were recorded. So a few times a year, we'll go back to earlier episodes, some of which you may have missed, some of which you may have forgotten,

• 1:00Shane Parrish?

  and we'll pull out some gems on a single theme, weaving together multiple guests. This episode is on making better decisions. As you can imagine, this topic comes up quite often on the show, so it wasn't easy to pick some of our favorite moments for this episode. This episode includes some timeless insights from Stripe co-founder and CEO Patrick Collison, psychologist Maria Konnikova, consultant Venkatesh Rao, poker player and author Andy Duke, and Shopify co-founder and CEO Toby Luque. Let's start with Venkatesh. Venkatesh Rao is a consultant and author of Tempo, a book that examines decision-making by weaving together concepts and principles from math, cognitive psychology, and philosophy.

• 1:44Shane Parrish?

  Venkatesh appeared on episode seven of the show back in 2018, and he starts this portion of our interview by discussing the three types of decision-makers, as well as an analogy of how world-building in fantasy books like Lord of the Rings can demonstrate how mental models work. It's time to listen and learn.

• 2:09Speaker 01

  Right after I wrote the book, some of the more interesting criticisms that I encountered actually helped me see what the book didn't cover well and exploring that ended up being a very fruitful thing for me. So I'll just point out a couple of those things. One was the idea that there are a couple of major categories of decision-making styles, so to speak, and the book really is strongly focused on one of them. And I was sort of unaware of the sort of structure of the other approaches to decision-making that were equally big. So the big one that I've concluded in my mind is there's this

• 2:52Speaker 01

  approach to decision-making that you could say is based on, not reasoning per se, but it's a very conceptual approach where you think in terms of, say, mental models, what frames am I looking through, what metaphors am I using, what is the sort of significance of my decisive actions versus my random actions, what narrative is sort of framing the unfolding of events. So that's an approach that's very natural to me. It's why I think I ended up becoming an engineer. It's also an approach that's very natural to you. Farnham Street, I think, explores that in a great deal of detail from a variety of different sources. So that's, I don't know what to call it, but let's call it sort of conceptual

• 3:35Speaker 01

  reasoning as a framework for decision-making. And I would say maybe a third of humanity operates that way. It's their operating system for life, but the other two thirds does not operate that way. And the two categories that I've realized that I'm very, very unlike are, one is what I would call ethical reasoners. And ethical reasoners, very sincerely and honestly, start with a very deep and intuitive sense of right and wrong. And these people, in my opinion, right and wrong are in the sense of good and evil, not in the sense of true or false. So these people who start with a framework of good and evil.

• 4:14Speaker 01

  Uh. Not only do I not resonate with them, I often really struggle to understand why they're thinking the way they're thinking. Hmm. Invariably, when I disagree with people very strongly about something, it's uh usually the fact that they're starting from good and evil premises. And it's not as unsophisticated as we tend to think, that these are just, you know, like, uh, not very sophisticated religious thinkers, for example. That that's a subcategory of people who use ethical reasoning as a framework. But there's um, it's much broader and it can get much more sophisticated. So I think that's a big blind spot in my own thinking that I've only slowly become aware of and explored a lot more. And the other, which I would say the second um third of uh the category of people I don't uh truly get

• 5:00Speaker 01

  is people whose entire decision-making process and framing is based not on something that goes on in their own heads, but in the sort of collective consciousness of the group they belong to. So these are what a friend of mine, Greg Rader, uh, he phrased as affiliational thinkers. People for whom every decision basically boils down to which group do I want to be like? Which group do I want to uh belong to? And they do that by saying, all right, let's take a issue like abortion, or is Trump good for uh being president? And I'm not going to process that through examination of the issue itself.

• 5:40Speaker 01

  But which group would can I belong to that their views on the topic are comfortable for me to be socially? Does that make sense? It's it's your social skin. That's your first consideration. So those are my three big buckets of types of human decision-making. And you and I, I think, represent the first kind, which is explored quite a lot in Tempo and your blog. The second is uh these people who start with good and evil, uh, who I understand a little bit now, a little better four years down the line. And the third is official affiliational thinkers or tribal thinkers, whatever you want to call them. Uh, these are the people I understand the least because in a way, understanding these people individually is. The wrong thing to even attempt.

• 6:23Speaker 01

  You have to understand sort of how their groups or tribes think and think of these individuals only in terms of which tribes they choose to join. So that's the only decision that ever matters in their life, which is which tribe should I join? Every other decision or thought process they go through is really somewhere in the collective consciousness.

• 6:43Shane Parrish?

  Do you think those tribe decisions are based on the particular decision that you're making or are they based on the tribe at large? So if I, am I gravitating towards a tribe on particular issues? Or is it that I want to be like that tribe in all issues?

• 6:59Speaker 01

  I think it's the latter because if you're talking about being like the tribe on particular issues, you're way too individualistic. You're making decisions based on the merits of a particular case. Like you might say that on capital punishment, I'm with liberals and I'm against it. And I'm referring to a US context, of course, here. So you might say on capital punishment, I've thought through the issues and I'm against it, therefore I'm with the Democrats. But on gun control, I've thought through it and I'm with the Republicans on that. That's too much thinking. It's, it shows that you're not a tribal thinker. For a tribal thinker, it would be who do I want to be with as sort of the operating system of my life? Who do I want to have barbecues with?

• 7:44Speaker 01

  Who do I want to hang out with? Who do I want sort of as my friends in my bowling league? That sort of issue, it's not explicit. They don't sit through and say, all right, these are the 50 activities and habits that define my life, therefore I'm going to pick the optimal tribe to join. No, it's not like that. It's, it's more a process of emotional resonance. And after that, you basically are partisan in a predictable way on all issues. And to people who are more individualistic and discriminating thinkers, this seems kind of stupid. It's like, how could you possibly take this huge set of like 50 different issues with very different contexts and considerations and basically agree with one tribe on all 50 of those issues?

• 8:27Speaker 01

  But if you look at just how tribal reasoning works, it is possible and that's kind of how it does in fact work. And I would say that this is my total, I know nothing kind of guess that each group is a third, a third, a third. It could be that tribal thinkers are actually much more numerous than the other two kinds.

• 8:44Shane Parrish?

  And do you think that, I mean, between? The framing of those, I mean, it leads us to the obvious conclusion that the first one is better, you know, not putting it in a good versus evil context. Do you think people approach the good versus evil in terms of I'm the hero and I'm trying to right this evil? Or do you think it's more nuanced than that?

• 9:04Speaker 01

  Well, first, I would resist the temptation to conclude that the first approach to thinking and decision making is the best. It's the one most suited to certain personalities, certainly. And in certain situations, it makes for like much higher probability of survival and success and thriving, right? Like, in, say, the American context, because of whatever the social operating system for the country at large is, for better or worse, Americans tend to believe in individualism, the myth of individualism, even though Americans are not super individualistic. But if you believe in the myth of individualism, the first approach to decision making, where you kind of maintain this fiction of processing

• 9:49Speaker 01

  everything on your own and staying away from tribal pandering and so forth, that tends to work very well. Whereas if you go over to like strongly traditional Asian cultures, the reverse might be true, where everything is framed with respect to the context of the social environment, and that might be a much better survival strategy if you want to actually succeed in that environment. So I'd say whether or not one is better than the other is a question of context and what you mean by better. But to your other question of good and evil types, I don't know. I've been thinking about it for quite a while

• 10:30Speaker 01

  yet. And at a philosophical and a practical and a reasoning kind of level and epistemological level of are they actually exploring the truth about the way the world works? I think they're kind of full of shit on all those fronts. But there's something Hardwired, deep in human nature that uh seems to work very well with good versus evil reasoning frames. And I think here's my hypothesis on why that is the case. Why is it that this is buried so deep in our firmware? If you think about most species of animals, their survival concerns all have to do with their material environment, which is uh can I get enough water? Can I get food? Uh can I hunt my prey, right?

• 11:13Shane Parrish?

  Mm hmm.

• 11:13Speaker 01

  Uh whereas humans, a great deal of their survival depends on other humans. It's how do I get along with the group? Does the leader of the troop of monkeys like me or not? What will happen to me in a tropical environment if I'm kicked out of the monkey troop versus a temperate environment versus an arctic environment, right? So ninety percent of our consequential survival behaviors as a human social species depends on things having to do with other people.

• 11:44Shane Parrish?

  Right.

• 11:44Speaker 01

  And good and evil, if you think about it, is a very, very good way of simplifying that whole area of decision making, where if you simply decide that a certain group is good and other groups are evil, everything else gets massively simplified. So that's how you get, I think, the abstract good and evil uh approach to thinking. It's it's a ray fired form of tribal affiliational thinking. So i- if you want to stack them in sort of evolutionary primacy order, I think tribal affiliational is the sort of uh most ancient of our decision making frameworks. The good and evil framework is slightly more recent in evolutionary history because you have you need a certain capacity for abstract thought before you can frame good and evil as categories. And then the kind that you

• 12:29Speaker 01

  and I try to promote in our writing and thinking is the most recent of all. It might be, I don't know, no more than five hundred years old.

• 12:35Shane Parrish?

  I was just thinking that they were almost inverse from the way that you had mentioned them from an evolutionary perspective. And the two, the two and three, so the good versus evil and the tribal tend to blend, right?

• 12:46Speaker 01

  Yeah.

• 12:46Shane Parrish?

  Uh more so than uh the other one. Uh it was mental models that first. Um. Drove me to your book. I mean, one of my friends read it and um they pointed out that you were talking about mental models in your book. And at the time, and I mean, to a large extent today, so few people are talking about that. What's your definition of a mental model?

• 13:07Speaker 01

  Well, I have a sort of technically inspired definition in the book, as you may recall. So I use something called the believe, desire, intention model of Michael Brockman, who's a philosopher at Stanford. And it's been the basis of a lot of artificial intelligence research. So that's one sort of effective way to get at defining what a mental model is. It's a set of beliefs, desires and intentions. But I think that sort of definition is useful for certain narrow technical needs. UI people have similar sort of technical definitions. Politics people have similar definitions, like you've mentioned George Lakoff a couple of times in your writing, I think. And Lakoff has one based on conceptual metaphor.

• 13:49Speaker 01

  All these narrower technical definitions of mental models, they're useful for certain certain questions that are honestly a little, I don't know, too detailed and deep for a general mass audience. They're not interesting. So for a mass audience, I would say the best definition of a mental model is a world in the sense of science fiction or fantasy, right? So you've got, say, a universe like the Harry Potter universe or the Lord of the Rings universe. And so there's the world and then there's the story that's told in the world. And look at the way the most popular science fiction and fantasy is written. You're told the story, but through learning the story, you also learn about the world.

• 14:33Speaker 01

  And stories differ in their ability to do that elegantly. So Lord of the Rings is sort of has a poetic elegance to it in that you don't feel like you're learning about the world, but by the time you're done with the trilogy, you actually know a lot about it.

• 14:47Shane Parrish?

  Right.

• 14:48Speaker 01

  Whereas Harry Potter is a little bit more heavy handed, where a lot of it is very clearly world building and you kind of get the tedious sense of reading a geography book or being asked to memorize a list of countries. That's sort of explicitly learning a world in which a story's set. But if you look at the movie versions, you realize that in a way J K Rowling is a product of her time. Where she's not really the author of a book so much as a media property that she was at least at some level aware. Would turn into a movie, an online world, a game and so forth, right? So it could be that she's just a product of our times and they're two very different worlds.

• 15:31Speaker 01

  But that's basically my idea of what a mental model is. It's your sort of implicit understanding of what the world is. And it's very easy to see in the case of like fictional universes with a few rules that are different from our own. But this, the same thing is true for much more realistic worlds as well. So like take the Law and Order franchise. You've got, I don't know if it is popular around the world as much as it is here, but you've got this. Franchise of TV shows, Criminal Intent, Special Victims Unit and so forth. And this sort of gives you a sense of an entire universe of police work and crime.

• 16:14Speaker 01

  And a sense of the world as a very dangerous place where you've got these brave defenders protecting you. And that's a mental model, right? So while you're watching Law and Order episodes, that mental model is active in your head. And it allows you to make sense of the stories you're being told very efficiently. So mental models allow you to very efficiently make sense of stories. And if you are not familiar with the mental model, then the author must build the mental model. And that's what happens with science fiction and fantasy. But the interesting thing is when you read, say, extremely foreign fiction. So fiction that's very alien to you in terms of mental models. The author may assume you understand the mental models, but you may not.

• 16:57Speaker 01

  So for example, Japanese comic books, the couple of times I've tried to read them. They just feel so bizarre to me. There are sort of conventions for indicating, you know, emotions and actions and so forth. They're just so unintuitive to me that the world kind of. That should be in the background and implicit and I should just be able to reference it like an operating system. It sort of becomes a little too visible for me to read the fiction seamlessly. So it's like I'm trying to run a Windows program on a Mac computer without realizing it. So I think that sort of is the best way to understand mental models for.

• 17:34Speaker 01

  I don't know, people who don't need to deal with them in any technical way.

• 17:39Shane Parrish?

  That's Venkatesh Rao from episode seven, The Three Types of Decision Makers. Check out the show notes for a link to the full episode. Next up is Maria Konnikova, a professional poker player, psychologist, and author of three New York Times bestsellers, including The Biggest Bluff, How I Learned to Pay Attention, Master Myself, and Win. Maria holds a PhD in psychology from Columbia University and took a unique route to becoming a professional poker player. But as you'll hear in this segment, she mastered the game by closely observing her own emotions when it came to making high stakes decisions at the poker table.

• 18:16Speaker 02

  And I started playing online first. So even though I was going to be playing live poker, that's what I wanted to do. Online is an easy way to learn because of the sheer volume of hands. You have a computer dealing hands, so it's just, it's really quick. So whereas in live poker, you know, in an hour, you might play, I don't know, 30 hands, maybe even fewer, depending on the table you're sitting at, you know, one slow player and suddenly you're playing 10 hands an hour. But online, it's hundreds. And so you just get a lot of experience quickly because you see all of these situations unfolding before you. I did not enjoy playing online.

• 18:56Speaker 02

  It did not make me want to become an online player, but it did allow me to get more experience quickly. And it also allowed me a really important tool that Eric and I could use because I could record myself playing. So we actually were able to go through my games and he could explain what things I was doing wrong, what things I was doing right, what I could change about my thinking. Because the way that he approached it is, he never said, this is a mistake. He would say, what are you thinking here? Why did you do this? And that's how he taught me. It was not a prescriptive, this is what you do here. It was a, why did you do this? What motivated you? What were you thinking?

• 19:40Shane Parrish?

  That's fascinating because you're getting a lot of iterations and you're getting feedback. But what you're really getting is reflection, like by making you walk through your thought process, you're reflecting on what you were thinking, given the information at hand.

• 19:54Speaker 02

  Exactly, exactly. And just, you can't underestimate how important that is. One of the things that I suddenly realized after we did this a few times, was that I started thinking better because I just started thinking in advance, what am I going to tell Eric? And that made me actually stop and reflect for that extra second. Whereas before I would have just acted because, well, you know, let's do this and it seems right. Now I'd say, okay, if I say that to Eric, he's going to say, well, that's not good enough. That's not a decision process. That means that this is a mistake. Even if you did the right thing, it's still a mistake.

• 20:35Speaker 02

  So one of the things that he really taught me is that you have to distinguish the action and the outcome from the thought process. As long as your thought process is solid, as long as you're thinking through things correctly, then you did well, even if you ended up coming to the wrong conclusion. Because that means that eventually with better inputs, you'll come to the right conclusion. And even if you came to the right conclusion, but then the cards went against you and you were, you had a bad outcome. In both of those cases, as long as your thought process is solid, then you've won, basically. Then that's all you need.

• 21:17Speaker 02

  And so forcing me to actually think through, what am I going to tell Eric? Forced me to start thinking and to start thinking better and to start reflecting on elements of my thought process. That I didn't even realize were there because I would just kind of do things. And it really, let me tell you, transferred out of poker very quickly. And I found myself doing this in all sorts of situations. But at the time, it was just helping me become a more thoughtful player. And through being more thoughtful, a better player, not necessarily a player who was winning right away. Because I didn't know enough, I didn't have enough experience. All of those input variables weren't there.

• 21:57Speaker 02

  But the player who was building, kind of creating the building blocks that would enable me to be a successful player down the line.

• 22:05Shane Parrish?

  I want to double click on two things you said there. First, the thought process, like, how do we know we have a good thought process? Especially if you're a novice in it. Do you need a mentor or a coach? Or can you ascertain that for yourself? And then how did you apply that to life? Like, outside of that?

• 22:21Speaker 02

  Well, I, yeah, I do think you need someone to tell you if you're a complete novice. I mean, I would have had no way of knowing what I should be paying attention to, what I should be thinking through, what I should be doing if I didn't have Eric to direct me. I mean, I could have gotten some level of that from online tutorials, online videos. But it just would not have been the same. The fact that it was personalized, the fact that it was directed at me, at how I was playing, at how I was thinking, and that it was kind of this direct feedback. I think that was crucial in enabling me to improve as rapidly as I did. And to actually appreciate what was going on.

• 23:02Speaker 02

  So sure, you can get some of those tools elsewhere, but I do think it's very important to have someone else. And I actually think this is true of everything, not just poker. I mean, the way that I became a better psychologist is because I had great mentors who were able to talk me through my thought process along the way. The way I improved as a writer was obviously doing it myself. And you have to, with all of these things, nothing will supplement or nothing will completely override the need to just do it and do it and do it and practice and kind of get better that way. But I also had amazing writing mentors. I had people who really helped me learn, how do I think through pieces? How do I think through writing? How do I think through all of this?

• 23:45Speaker 02

  People who taught me to take apart other people's books so that I could figure out how they did. What they were doing and how, you know, how I could apply that to my own writing. So I think in everything in my life, that was incredibly important. And I think that, you know, my, my first book was about Sherlock Holmes. And I think that one of the really interesting things, people talk about the Sherlock Watson relationship as, you know, Watson being this foil for Holmes. And that's true, but Watson also plays an incredibly important role in forcing Holmes to think better, to be actually a better detective, to be better at his job, to have

• 24:27Speaker 02

  a clearer thought process because he asks questions and Holmes needs to respond to him and needs to bring him through his thought process and tell him how he arrived at a certain conclusion. And doing that helps Holmes see flaws in his logic that he didn't see before. And I think he actually becomes a much better detective through their friendship and through kind of that evolution that happens only because he had to talk things through with Watson. So I'm, I mean, I'm someone who works by myself. I'm a writer and in poker, I, you know, I play by myself. No one else is playing my cards for me. But I do think that forming those relationships, having someone to talk to, being able to

• 25:12Speaker 02

  verbalize your thought process, I just think it's so crucial in becoming a good thinker, no matter what you're doing.

• 25:19Shane Parrish?

  I think that's really insightful and poker gives you sort of like the added component of you have something at stake, right? And didn't Emmanuel Kant say something about the role of betting in his critique of pure reason?

• 25:31Speaker 02

  Yes, he did. He did. And I was so excited when I found that section of critique of pure reason and was able to, to apply it to poker. Kant says that betting actually forms an integral part to improving your decision process and improving your level of certainty in something because people can say all sorts of stuff and just make all sorts of pronouncements if they're not held accountable for it. However, if you're forced to put a monetary value on your opinion, on how certain you are of something you're saying, on how certain you are about, you know, if you're a doctor, how certain you are about your diagnosis, if you have to bet on it.

• 26:16Speaker 02

  All of a sudden, it forces you to stop for a second and think, okay, am I really this sure? How much do I value it? And Kant even proposes a thought experiment to start upping the values. You know, would I, would I say this and stand by it for $10? Yeah, sure. What about for 100? Okay, yeah, that seems reasonable. 1,000? Okay, well, maybe I need to look through some of my assumptions. Give me a second. A million? Okay, okay, right. I'm not, I'm not that sure anymore. I really need to figure it out. Or, you know, a million? Yes, I will bet even a million. I'll bet everything because that is how certain I am that I'm right. It really forces you to take a step back and reflect because all of a sudden

• 26:58Speaker 02

  you have something very, very tangible on the line. And Kant uses this as an experiment for, you know, how to, how to make people reason better, how to make people better thinkers, how to make people actually stop to consider what they're saying rather than just spewing stuff and being experts. Um, and when I, when I was reading this and working on, um, rereading Kant and, and thinking through all of this, it just made me realize how relevant he is to the modern world and to social media and to the internet. Once suddenly, you know, everyone's an expert on everything and everyone is so certain about everything. And you have all of these amplified opinions online.

• 27:42Speaker 02

  And I just wish all of them would just do that thought exercise and be forced to, you know, actually forced to go through with it, that we had some mechanism by saying, okay, before you tweet something out, you know, how much money are you willing to bet on the fact that what you're saying is actually correct? I think that could lead to some pretty interesting results.

• 28:02Shane Parrish?

  Yeah, it's definitely, it forces you to think about not only your thought process, but, but sort of like, how confident am I that this is? Um, so how, how did that just thought process, like explore this with me a little bit in terms of how that changed outside of poker? Did you find yourself thinking out loud and like self critiquing your thought process? Or did you go to somebody and you're like, here, I want you to hear my thought process on this and then point out?

• 28:27Speaker 02

  So I started critiquing myself a lot more and I started being my own fact checker a lot more than. I had been used to doing in the past. So no, I'm someone who

• 28:39Shane Parrish?

  What does that mean, your own fact checker?

• 28:41Speaker 02

  Yes. So I'm someone who is a fairly opinionated person. And I'm also prone to exaggeration, especially when I speak. And it's just kind of for rhetorical effect. And I never really, I've never really thought about it. It's just something that I do. But all of a sudden, I actually started saying, okay, well, if this isn't accurate, maybe I shouldn't say it. And maybe I should verify the accuracy before saying it. You know, let me start fact checking myself a little bit. And if I'm offering an opinion, there was a really, really funny thing that happened. When I was pretty, pretty young, maybe 15 years old or so.

• 29:22Speaker 02

  My mom and I were taking a walk and I grew up in the Boston suburbs. And we were in the city, visiting and walking around. And we got a little bit lost. And I just so confidently said I knew where to go. And really thought I did and just got us further and further lost. And at some point, this was obviously before smartphones. This was before everyone had a GPS on them. All of a sudden, we just, we were deep in Chinatown and had no idea where we were or how to get anywhere. And my mom had actually kind of known where we were before. But I was so confident that she just deferred to me. And, and I, I, I've done things like that a few times. Not a few, a number of times in my life in the past,

• 30:07Speaker 02

  where I think I know something and so I just confidently do it. And poker and thinking about things in this more meta cognitive way, where you have to think about your thinking and not just think, oh, I think I know what this is. And I'm pretty confident in it. It actually, I think, made examples like that much less likely to occur. These days, I'm actually much less confident in any of my opinions. And in any, even my opinion of which way we should turn in order to get back to where we were trying to go. You know, something as simple as that. I've learned to really tone it down and to really question myself every single time and say, okay, wait, why am I sure?

• 30:52Speaker 02

  Why am I so confident in this? Is the data reliable? Is it something that I can trust or not? You know, where is that confidence coming from? Because one of the things I learned in psychology is that, you know, we have intuitions all the time and we are actually horrible, horrible, horrible at being able to tell the correct intuitions from the wrong intuitions. We're about 50/50 and that's, that's a really bad track record. And sometimes our intuitions are spot on and sometimes they're completely wrong, but we can't tell the difference. And poker really thing forced me to, to go deeper into that and to figure out, why can't we tell the difference?

• 31:34Speaker 02

  And how can you become more confident in your intuitions? Well, you have to go back and say, do I have a basis for this? Do I have the experience in this? Do I have, you know, is there a reason my intuition should be right? Because what correct intuition is, is all of this experience that we've accumulated in something that we don't necessarily have conscious access to, the process of acquiring. And so your intuition should only be trusted if you're an expert in this area, if there's a reason why you should be confident here. And learning to kind of disentangle that and learning to spot false confidence for what it is, I think is a crucial skill just in absolutely anything.

• 32:18Shane Parrish?

  How, how to, like, i- if you factor in a continuum between rational and emotional, how, how does that factor into your thought process and how you're thinking about something?

• 32:29Speaker 02

  I think that we are all necessarily emotional if we're human. I mean, even Sherlock Holmes was someone who experienced emotions, even though people think of him as this kind of cold, almost computer-like person. What he did, and this is, it's interesting, there are actually a lot of ways that writing about Sherlock Holmes helped me become a better poker player because it's, it's a lot of things, a lot of things overlap there. And this rational, emotional thing is one of them. So what Sherlock Holmes does is he acknowledges his emotions, he recognizes that they exist, and then he dismisses them if they're irrelevant to the decision. So he says, you know, sure,

• 33:11Speaker 02

  you know, I feel sympathy for this woman. Sure, I, I see that she's, you know, a really good person, but now I'm going to dismiss all of that because it's irrelevant to the decision. So I feel the emotion, I experience it, and then I put it away and do not use it when I'm coming to a decision because it's not relevant. In poker, there's this idea called tilt, which Eric introduced me to, and which is just, it became one of my favorite words in the world. I use it all the time now. Another way that poker has filtered its way into my life is that now I, I say that I'm tilted and things put me on tilt, and that something is tilting all the time without even thinking about it because

• 33:54Speaker 02

  it's such a, such a convenient word. What tilt means is that you've let emotion into your thought process, irrelevant emotion into your thought process. Usually it's negative. So, and by negative, I mean the negative emotion. So for instance, you lose a really big pot, so you lose a lot of money and you get angry, or you get, you know, really frustrated. And so that affects how you're playing because you start making decisions, not because that's the right decision to make, but because you want to get those chips back, or you want to punish the person who took them from you because you think that he's being a jerk or whatever it is. But it can also be positive. So sometimes there are positive emotions

• 34:35Speaker 02

  that also are irrelevant to your decision process. So in poker, the, the example would be you've won a lot of money, you, you've won a number of pots, and all of a sudden you think you're invincible. And so you have kind of this very, you're feeling great, you're feeling so confident, but, and then you start maybe taking risks you shouldn't take and making decisions in a way you shouldn't be making decisions because you're letting that emotion seep into your decision process. So when you say something is tilting, it means it's something that's getting under your skin, making you Kind of emotional when you say that you're on tilt, it means, oh, you're emotional. You're not thinking as rationally, you're not thinking as clearly anymore.

• 35:18Speaker 02

  What the goal should be, and this actually also relates directly to what I did my PhD on, because Walter Michel, what he studied with the Marshmallow Kids was self-control and hot and cool decision-making. How do we, in the face of a marshmallow, which we can use just as a symbol for anything that is enticing, anything that we want, kind of this craving, this hot condition, in the face of that, how do we resist? How do we cool it down? How do we let rational thought processes prevail when we're four years old and we just want to eat the marshmallow? And all of his work was basically centered on how do you teach self-control?

• 36:02Speaker 02

  How do you teach people to cool down hot processes? How do you go off-tilt? How do you actually learn to cool down your emotions so that you can make the correct decision? In the case of the marshmallow, don't eat the thing, wait for your second marshmallow. Or in the case of poker, you know, maybe I should fold this hand, or whatever it is. You can make the analogy to basically any decision that you want to make where you're being emotional. So, all of these things kind of came together and helped me understand that you can't ever be purely rational because you're always going to experience emotion.

• 36:42Speaker 02

  And yet, what you can do is learn, this goes back to the being kind of more self-reflective and going through your thought process, learning to be more mindful about the emotions you experience, to say, okay, I am experiencing this emotion right now. Why? What made me experience it? Because sometimes emotions are actually incredibly relevant to a decision. It's the irrelevant emotions that you need to, that you need to get rid of. There's psychological work that shows that people who can't experience certain emotions like fear because they have neural damage.

• 37:20Speaker 02

  They actually make really bad gambling decisions and they go broke because they just don't care. They have no risk aversion whatsoever. Well, that's also not good, right? They're completely not emotional, but in that particular case, the fear was important. It was integral to the decision and they no longer had that emotional feedback. So what you need to learn is to identify the emotion, figure out that you're experiencing it, because a lot of times you don't even realize, you know, you don't realize you're angry, you don't realize you're frustrated, you don't realize you're hungry, you don't realize that all these things are going on. So first you identify it, then you try to identify the root cause. Is this something that's totally incidental or is this something that's actually integral? More often than not, it's incidental. And then you say, okay,

• 38:05Speaker 02

  now I need to dismiss it, figure out how does this normally affect my decision process? And how do I correct for that? How do I actually take it out of the decision process? And the funny thing is, just the very process of identifying and kind of going through that thought process tends to cool you down because all of a sudden you've kind of distanced yourself from the immediacy of the event. All of a sudden, you're actually thinking about it in a different way. And so by the time you even get there, you're already calmer, you're already more rational. So it helps in more ways than one.

• 38:41Shane Parrish?

  That's Maria Konnikova from episode 89, Less Certainty, More Inquiry. Check out the show notes for a link to the full episode. Next up, we hear from Patrick Collison, co-founder and CEO of the leading online payment processing company Stripe. If you've purchased anything online over the past few years, there's a good chance that Stripe facilitated that transaction. We'll start this portion of our interview with Patrick's thoughts on the biggest differences in his decision-making practices from five years ago up until now.

• 39:12Speaker 03

  I think there are four big differences. The first is I now just place more value on decision speed in that if you can make if you can make twice as many decisions at half the kind of half the precision, that's actually often better. And then, given the fact that sort of the rate of improvement of decision making with additional time almost necessarily tends to kind of flatten out, I think that most people, certainly the Patrick of five years ago and potentially even the Patrick of today included, should be sort of earlier, should be operating earlier in that curve, make

• 39:55Speaker 03

  more decisions with less confidence but in significantly less time, right? And just recognize that in most cases, you can course correct and treat fast decisions as a kind of asset and capability in their own right. And it's quite striking to me how some of the organizations that I hold in the highest regard tend to do this. The second thing is not treating all decisions kind of uniformly. I think the most obvious kind of axes to break them down on are degree of reversibility and magnitude.

• 40:36Speaker 03

  And things with low reversibility and great impact and magnitude, those ones you do want to really deliberate over and try to get right. But I think it's very easy, sort of absent care, to have maybe this mechanism you put in place for those decisions to seep into decision making for the other categories. And really, in the other three quadrants, you can afford to be sort of much more flexible and much more fluid and again, really just to prioritize speed because obviously, if it's very reversible, then by definition, you can almost correct it later. And if it's of low import, then who cares, right? And so that's kind of the second one.

• 41:21Speaker 03

  And just being kind of cognizant of that and before making the decision, trying to categorize, well, what kind of decision is it? The third thing is I now try to fairly deliberately just make fewer decisions in that, why am I making the decision? And for some kinds of decisions, there are some Good reasons for that. I mean, there are some decisions the CEO ought to make and is kind of fundamentally on the hook for, but there were some decisions where if I'm making it or if I have to make it, that probably suggests that something else organizationally or institutionally has broken. And I think the need for a decision from anyone, not just from me, is often like only a sort of an epi phenomenon and there's really some other underlying issue that's causing you to have to make in the first place. And so

• 42:04Speaker 03

  thinking about that and concretely doing more to push others to make decisions and sort of pushing them back sort of to people who ought to be the domain experts. And then fourth, when I realize that I would make a decision differently to how someone else is making it, not even really discussing the decision itself, but trying to dig into what is the difference in our models such that you want to make decision A and I want to make decision B. And one thing we're currently spending a bunch of time on here at Stripe is having different parts of the organization write down what they're optimizing for essentially, like what their mission is, what the long-term key metrics are for

• 42:48Speaker 03

  kind of their part of the organization, what, who their customers are, either internally or externally. And so things of this kind of persistent, ongoing, underlying nature such that hopefully, once there's agreement on those longer-term things, then maybe a difference on, on sort of any particular decision might just be, well, we differ sort of on what the most instrumentally effective way to achieve this outcome is, but we're both really unified on what the desired end state is. And there, I think disagreement over sort of instrumental efficacy, you know, well, that's rarely that problematic a disagreement because well, if you're right, then we'll soon learn that. If you're wrong,

• 43:32Speaker 03

  reality will probably sort of make that pretty clear in short order. I think the more troubling ones and the ones that tend to cause more kind of persistent friction in an organization are where sort of there is latent disagreement in what you're actually optimizing for, but that's kind of never explicitly surfaced and uncovered. And so now, I guess, again, in decision-making, I place kind of more importance on making sure that we have the right sort of foundational agreement such that the kinds of disagreement that then tend to arise are of the sort of essentially more superficial sort and their agreement is actually less important.

• 44:06Shane Parrish?

  Part of culture is learning from the decisions the organization makes. What do you do at Stripe to make sure that people are learning? And what do you do personally to make sure that you're learning from the decisions that you've made, both positive and perhaps ones that you, in retrospect, would have wished you could make differently?

• 44:28Speaker 03

  I'm inclined to say, I don't know if I actually believe this, but I'm inclined to say in response to that question, that decision-making in organizations is slightly overrated in that organizations are not like investment entities or funds or managers. In that organizations, well, with investing, it's fundamentally very binary. There is a moment at which you either buy or don't, or sell or don't, or whatever. And maybe it's somewhat more continuous in the case of, say, public market investing and so on, but given sort of constraints on just decision-making time, I think you have to treat it as a bit more binary.

• 45:08Speaker 03

  You assess the stock and you make a buy or not decision. Whereas in organizations, everything is much more fluid and continuous. It's much more about, I think, designing the feedback mechanisms.

• 45:20Shane Parrish?

  More biological.

• 45:21Speaker 03

  Yeah, exactly. And there's the famous sort of water model of the economy, you know, with the sort of circulating fluids and you can vary the interest rate or the inflation rate or whatever, but just kind of try to get a sense for the overall kind of biological apparatus. And I think an organization is much more like that. And so I think the things to optimize are the incentive structures and the mindsets and the definitions of the goals and the feedback mechanisms from the outcomes to the inputs and the work and the operations themselves and all of those things, and less the binary decisions.

• 46:05Speaker 03

  And I don't kind of completely dismiss, obviously, the importance of decision-making in that there are times where you decide, well, are we going to launch this product or not? Are we going to start this project or not? Are we going to replace this system or not? And so on. So there are, of course, real decisions, but I think it tends to be much more, well, I guess maybe it doesn't feel like the right unit of analysis to me. I think the right unit of analysis is Is that of the cell? And the question is, well, in an organization, what are the cells? And what are the organs? And how do they interact? What are the feedback mechanisms between them?

• 46:41Shane Parrish?

  Let's geek out a little bit on the the feedback mechanisms here. What sort of feedback mechanisms do you try to make sure are in place? What point in the process do you try to acknowledge what they are?

• 46:54Speaker 03

  I really think that, and this is not to evade the question, but I really think it's too early to answer that. In the sense that, I mean, I can kind of tell you what I think today and the sort of changes we've made over the last year and things like that. But like Stripe has been a thousand person organization for,

• 47:15Speaker 03

  or has been a more than 500 person organization for just over a year. Right? We're beginners at this.

• 47:25Speaker 03

  And, you know, three years ago Stripe was under 100 people.

• 47:32Speaker 03

  And, and I think either to opine as if,

• 47:41Speaker 03

  or to even more problematically believe that we kind of have it figured out, would be, would be real hubris.

• 47:50Speaker 03

  And so kind of in what we've been talking about, I think that's maybe some of where our and my thinking comes from. But, but I don't know what the right answers are yet.

• 48:03Speaker 03

  And, and we spend a lot of our time sort of scrutinizing other organizations, trying to find out and kind of reverse engineer what works for them and why. And I think that part of what's interesting at the tech industry is that it's, it's a kind of pure knowledge work that we're still, I think, quite early in sort of figuring out in terms of how to optimally coordinate it and collaborate on it. In that you can sort of draw a lineage of. HP and Intel and Microsoft and Google and Facebook and so on, WhatsApp.

• 48:43Speaker 03

  And there are all these sort of suggestive examples that I think, at least, again, suggest that we may not have it all figured out. I mean, the fact that WhatsApp was such a miniscule team and Instagram too, of course, despite operating at such a scale, or the fact that

• 49:02Shane Parrish?

  The way of a new paradigm.

• 49:04Speaker 03

  Yeah, yeah. And the way Facebook operates is very different to the way HP operated.

• 49:09Shane Parrish?

  That's Patrick Collison from episode 32, Earning Your Stripes. Check out the show notes for a link to the entire episode. Next up, we'll revisit our conversation with Annie Duke, who not only killed it in poker, but has since become a celebrated author focused on cognitive behavioral decision science and decision education. She's the author of Thinking in Bets, How to Decide and Quit. In this portion of our interview, she's discussing best practices for decision making in business and your everyday life.

• 49:41Speaker 04

  I think there's two pieces to it. Piece number one is that you have to really get people to feel like they shouldn't be afraid of the outcome on any given try. Because on a single try, we don't have enough data to know whether it's any good. You flipped one coin, right? Like, one time. What does that tell you? You don't have 10,000 coin flips. So you have to get people to feel like it's okay if the one try doesn't work out. And I think that that's, as a leader, you just have to culturally, you really have to be good at communicating that. And then you have to live it. You have to act it. So how do you do that? Well, work the decision process through with the group and actually

• 50:20Speaker 04

  memorialize the tree that you create. So how do you do that? You have decisions under consideration.

• 50:29Speaker 04

  And what you want to do is try to figure out as best as you can, what are the scenarios that you think are going to result from decision A versus decision B versus decision C? And then try to assign probabilities to those scenarios. And don't be afraid of it. Most people are afraid to assign probabilities because they think that there's a right answer. And it's true, there is some objectively right answer. And it's likely that the guess that you give is not going to be, if we could, if we had some mirror into the objective reality, you know, it's probably not going to be perfect. When I said that I was whatever 73% to get my food back correctly, I don't know if I was exactly 73%. But the, but the fact that I was making a try at it is better than not trying at all.

• 51:13Speaker 04

  Because if you don't try at all, you're either saying that, well, you're certain it's going to turn out in a certain way. Or you're saying something like, well, it either will or it won't. I mean, the fact is that it is probabilistic. And you're probably more of an expert than anybody else because you have your own experience in making these kinds of choices. You can certainly go and look at, you know, there's all sorts of business cases and there's data that you can go look at to try to refine that guess. And the desire to make the guess makes you very information hungry. So it actually makes you more open minded. Because now your goal is not like, I have to have the right answer. It's, I want to try to get as close as I possibly can to what the objective probability is. And I can only do that by getting lots of information or listening to people who have different points of view

• 51:57Speaker 04

  so that I can start asking myself like, why might this be wrong? But why might I be off on this? And going back and just constantly trying to refine and get that feedback. So it causes you to be really information hungry. It causes you to view other people's perspectives as incredibly helpful. Again, it's that sort of identity shift around it. And so what, if you can do that, if you can sort of get, okay, well, here's, here's how, what I think the outcomes of this decision might be. Here are the probabilities that I think that those might occur with. And then in that process, make sure that you're really wrapping in the dissenting voices. And this is very important. And you can do that in a variety of ways. One is that you can do, you know, you can create red team, blue team.

• 52:39Speaker 04

  So you just create a team of people who are supposed to argue against, you know, what the prevailing opinion is. If you have people in the room who really disagree on what the probability of a particular outcome is, which will happen, force them to change sides. And we disagree. You're at 30% and I'm at 70%. Wow, we're way off. First of all, cool. We're probably going to learn something through this process. That's actually much more exciting than us agreeing.

• 53:07Shane Parrish?

  If we all agree.

• 53:08Speaker 04

  Right. Now, this is really exciting because you and I are pretty well informed. We're on the same team. We're in the same company. We're kind of working with the same information and yet we really disagree about the probability is. That's exciting and that's good for us.

• 53:19Shane Parrish?

  Somebody has an opportunity to update their view. We might just not know who that person is at this point.

• 53:24Speaker 04

  Or we might all update our view because we might all come now to something that's more in between.

• 53:29Shane Parrish?

  Yeah.

• 53:29Speaker 04

  Right? But now make us switch sides. You now have to argue my side that I'm 70% and I have to argue your side that you're 30% and the people in the room are going to judge who wins the debate. In other words, not who's right, but who's the better arguer of the other side. Notice that makes me construct the best version of your argument. My goal is to be able to argue it better than you could because I want to win.

• 53:56Shane Parrish?

  Right.

• 53:56Speaker 04

  Right? I want the people in the room to judge me. And what's really wonderful then is that now I'm going to start thinking about, well, why, why are we so far apart? Why does he think it's 30%? I'm likely to probably moderate my view. You're likely to probably moderate your view and everybody in the room is now going to learn because they're exposed to what our process is. And that's wonderful. And now, let's say most of the room agreed with me and you were this outlier at 30%. You get a chance to have your voice heard and your voice is now represented in that scenario plan that we've now created. So that's a great way to do it. Another way you can do it in order to really make sure that you're getting those, you know, why might it go wrong? And those dissenting voices is to do what's called a pre-mortem,

• 54:40Speaker 04

  which is examining the patient before it's dead instead of after. So imagine, okay, we have this goal as a company. We want to increase sales by X amount. Let's imagine, and that's say, a goal that we want to have. It's a two-year goal. Let's imagine at the end of two years that there's a newspaper that says we failed. We did not reach our goal. Let's all, everybody in the room now write down five reasons why we failed. And now what happens is that very often in these, these rooms, you end up with this team player problem. Everybody wants to be seen as a team player. Everybody wants to be seen as agreeable. Everybody wants to be seen as sort of like, we're winning the game because we're all so smart and like cheerleaders. When you do a pre-mortem, now you've changed what it means to be a team player, right?

• 55:23Speaker 04

  Like, the people who are going to get pats on the back are the ones who come up with the most creative reasons for failure.

• 55:27Shane Parrish?

  Right.

• 55:28Speaker 04

  And that's going to allow you to now anticipate sort of where things might go wrong. It's going to allow you to wrap that into the scenarios that you think might occur. It's going to allow you to adjust the probabilities of success or failure. Okay, so you go through those kinds of exercises. You create now, okay, we're going to go with decision A. Here are the scenarios we think might occur. Here are our stabs at the probabilities. And you memorialize it. So now, when the thing happens, that's right up there on the whiteboard. You took a picture of it that didn't work out. And it's got that percentage by it, you know? Okay, well, we thought 33% of the time, this was going to happen. It was going to be bad. It makes it very hard to result.

• 56:12Speaker 04

  Because you, how do you go back and say, our process was really bad? It's like, well, here it was.

• 56:16Shane Parrish?

  Right.

• 56:17Speaker 04

  We kind of knew it was going to happen. So I think that that really allows you to now focus much more on what's the process for getting us to understand what the decision is. And obviously, as the future unfolds as it does, you can go back in and examine and say, you know, did we miss something in that process? Or was it just, it was the 27%? You know, where are probabilities, right? Like, you can ask that, but you've done it all together.

• 56:42Shane Parrish?

  Right, I like that a lot. One of the differences that I see between poker and maybe organizations is in poker, you're making very individual decisions. You're the person making the decision. You're responsible and accountable for those outcomes. Those lines in organizations tend to blur in the sense of sometimes you're responsible for implementing somebody else's decision. Sometimes they're responsible for implementing yours. And sometimes you come to decisions as a group instead of an individual. How does that affect how you think about this?

• 57:14Speaker 04

  Well, first of all, I think that the process for coming to what the right decision is can be similar regardless, because what I was doing was certainly in the moment I was making my own decisions, but it was my responsibility to go talk to the people who were my peers that I was trying to learn with and work through and deconstruct those decisions and talk about strategically what I might be doing in the future. So in some sense, that's a similar problem, right? I have to go execute on my own, but I'm interacting with a group in order to try to figure out what my best strategic plan is. And I think that that's actually, in a large sense, very similar. That being said, obviously, it would be really nice if I could go through a group decision-making exercise at the table, but that would be bad because it's one player to a hand and you

• 57:58Speaker 04

  need to play on your own. But I actually don't think that it's that dissimilar, and I think that you can sort of view as a leader the same thing, that yes, the person has to go execute on their own, but it's my job as a leader to have worked through what the process is and what the strategy is with that person before they go off and execute, so that we're all bought in. And I understand what their reasoning is, they know that I've bought into the process, they understand that I know that there's some probability that it doesn't work out, but we've agreed that as they go and execute, that they're going to execute on this plan and then they're going to come back and we're going to discuss later to see how we might refine in the future, but they're not going to be held responsible for the bad outcome.

• 58:40Speaker 04

  They're going to be held responsible for having worked through the process together. And that's actually very similar, actually, to poker. So I'm executing on my own, but then I'm going off to my group and saying, hey, can we deconstruct this session that I played, so that I can start thinking about what are different lines of play? And if I make these kinds of decisions in particular situations, what are the different ways that I think that could turn out? And let's start thinking about strategically what I should be doing, so that when I go back and execute on my own, I'm sort of executing what I've learned and what I'm sort of bought into in terms of process.

• 59:14Shane Parrish?

  Do you keep a decision journal?

• 59:17Speaker 04

  Um, I actually don't, I'm not a journaler and I, I wish that I were because I think it would be way better. I'm much more of a-

• 59:24Shane Parrish?

  Yeah, I would love to go back and read your journals as you were like meteoric rise and- Right?

• 59:31Speaker 04

  Yeah.

• 59:31Shane Parrish?

  The highs and lows associated with them.

• 59:33Speaker 04

  So I think, I think that people learn in different ways. And for me, the way that I really learned was through conversation with others. The way that I found that I was best held accountable to my own ideas was to expose those ideas to other people.

• 59:52Shane Parrish?

  And have them challenged.

• 59:53Speaker 04

  And have them challenged. And that's just my learning style. When I imagine a decision journal, the kind of decision journal that I imagine would be, you know, go talk to people about what you've changed your mind about today, right? It would all involve, I think, go talk to other people, go find other people to speak to, go, you know? And then I also,

• 1:00:18Speaker 04

  because I had that group, when I was on my own and I was kind of thinking about those things on my own, I was always imagining it as if I were talking to somebody else. You know, so for me, that internalized conversation of the group became my own journal.

• 1:00:35Speaker 04

  You know, as opposed to physically writing it down. It, it's interesting though, because this, that, you know, even in the writing process of writing the book, I don't write a whole lot of drafts because most of my drafting is in my head. I'm like, you know, I'm like, you know, in yoga, and I guess this is bad because you're supposed to only be on your mat, but in yoga, I might be, you know, working through some ideas or, you know, walking around or I'm driving or whatever it might be, I'm actually composing in my head and I'm working through the structure and the arguments. And then I'm sort of imagining, talking about those with other people and trying to refine them. And then I do talk, well, here's what I'm thinking about. This is what I'm thinking about writing in this section.

• 1:01:15Speaker 04

  And I'm bouncing it off other people and trying to hear what they have to say and how it's playing with them. And that's actually a lot of what, I do a lot of keynoting. And that's a lot of what that is, is you're, you're putting these ideas out to the audience and then sort of seeing how they respond back and getting that feedback. And that's allowing you to figure out your narratives and the way that you're expressing it and whether you think the ideas have fidelity. What, how are you being challenged when the people come up to you afterwards? So by the time I ever get it down on paper, it's been really well journaled. It's just been journaled in this way that I have, my mind happens to work really well.

• 1:01:50Shane Parrish?

  What information would you require from somebody else to, or would you want from somebody else to judge the quality of their decision, not knowing the outcome?

• 1:02:02Speaker 04

  Well, I think it depends on what the decision is. What I think is really important that you bring up is that there is, that there are details that I need to have. And I think that you have to think for yourself in whatever you're doing. And you can work this through with a group of people who are also experts in whatever you're doing, or trying to become experts in what you're doing, or what are the details that you always need in order to construct a good decision? Cause you know that for yourself better than I do. I can tell you from poker, for example, there's all sorts of details that I need.

• 1:02:35Shane Parrish?

  What would they be in poker?

• 1:02:36Speaker 04

  Sure. I need to know how many people were at the table. Were you in a cash game or a tournament? If you are in a tournament, what point in the tournament are you? How close are you to the money? For example, have you already made the money? These kinds of things. In a cash game, have you been winning or losing recently? What does your stack size look like? Is, you know, what's the form of poker that you're playing? Are you in early position, middle position, late position? In other words, where exactly are you sitting at the table? What was the action prior to the hand? Prior to the point that you have a question for me? Were you the pre-flop raiser? Were you, so this is all jargon.

• 1:03:11Shane Parrish?

  No, keep going. This is awesome.

• 1:03:13Speaker 04

  Were you the pre-flop raiser? Did you call? How many people were in between you when you called? All of, you know, so, because I can't, the problem is that if I don't know some very simple facts, like were you first to bet or second to bet? Or were you the raiser or not the raiser? Or how had the people been playing around you? Like was the person that you were playing against, did they tend to be looser or tighter? Any of those questions, what did the board look like? Then there's literally no point in me giving you any advice because I'm not going to give you an advice of any fidelity. I was actually talking to a friend of mine, Liv Boorey, who very early on in her career, I mentored her and was working with her in terms of, she's a very, very good player now,

• 1:03:56Speaker 04

  but way back when, when she was first learning, I was working with her. And she, I was talking to her about it the other day. I said, you remember when you first started playing with me and you come and describe a hand to me? And I was a little bit Eric Seidel-ish here. And I was like, well, there's no point. Because you're not, I have no idea, like where were you in the action? Like you can't tell me all three cards that came down on the flop. I don't know who raised or who didn't. Like you just described a hand where you were the pre-flop raiser and somebody called and then somehow they checked in front of you, but they weren't in a blind. It doesn't even make any sense. So why should I give you advice? It won't help you.

• 1:04:32Shane Parrish?

  It was vague and lacking information or context.

• 1:04:35Speaker 04

  Right. So that I, if I gave them advice, her advice in this particular case, it wouldn't have helped her. Because I would have just been like making things up because I didn't have the details. So you can think, like you can imagine fitting this to whatever you're doing. Figure out what the details you are. If you're in sales, figure out what you need to know. Like, I mean, I can imagine that there are certain things you need to know, like where in the sales cycle are you? Where in the fiscal year are you? And, you know, what was your relationship with the person in the other company? Did you have other relationships with people in the other company? Or was it just you just had one point person? And how had things gone in the past?

• 1:05:15Speaker 04

  You know, what kind of, during the conversations, what were they telling you about where they were? Like what, how were they describing how they wanted to continue to have interactions with you? Was it vague? Was it, we're going to set a date to be able to do this? What are the strategies that you were using? How did you figure out how to, figure out when you were interacting with them and when weren't you? You know, I mean, I'm making this up, but I assume that these are, maybe salespeople can write you and tell me that was the most ridiculous thing that anybody ever said. But the point is, like, you should try to do that for yourself.

• 1:05:50Shane Parrish?

  I think like, understanding the situation is great. Knowing what information that the person had at the time making a decision is super important. Are there anything else that comes to mind for you in terms of how you might structure, what you would want to know from people that may be less situation dependent? More like, what range of outcomes did you think was possible? Or?

• 1:06:10Speaker 04

  So, when you're actually working through a decision with someone, you want context, for one thing. So, I would want to know how things had gone in the past for them with other decisions. So, in other words, what was... First of all, I want to know how things have been working out for them, sort of over the long run. So, like, I'll give you a really simple example. If someone's coming to me and complaining about a problem that they're having in a relationship, it's good if I know how things went in all other relationships.

• 1:06:37Shane Parrish?

  Right.

• 1:06:37Speaker 04

  So, if they're telling me, "This person I've been dating is such a jerk," and I know that the last 10 people-

• 1:06:45Shane Parrish?

  Have all been jerks.

• 1:06:46Speaker 04

  -that they dated have all been jerks, that changes the way that I'm thinking about the... What, you know, what kind of advice I might be giving them, or how we might work together, more importantly, through the decision than if the last nine people that they dated were all amazing, and now they happen to be with a jerk. You can see how that really matters, that context. Yes, I want to know, when you were working through the decision, what information was informing the decision that you were making? What were the possibilities that you thought could happen? Because maybe I disagree with you. Maybe you say to me, "I was 70% that this was going to work out really well." And I'm like, "Ugh, that seems high." So, now I can quiz you on it. Well, why did you think it was 70%? Because, gosh, it really feels lower to me?

• 1:07:29Speaker 04

  So, let's explore that together and see why that is. I want to know the... You know, particularly, I want to know the information that you were pulling, mainly in order to drive the decision. Why did you make this prediction in this particular way? Because maybe I have information that you missed, that I can now provide to you. Maybe I can start quizzing you. Well, do you think that there... Can you think of any information that you could have brought into it that maybe would have made you make a different decision? What is it that you... Do you think you could have found other information? In retrospect, you know, did you go... You wanted to go toward a certain conclusion, and so you drew this particular information that you had, or this detail, or whatever it might be?

• 1:08:13Speaker 04

  Well, what about all this other stuff that existed out in the world? Like, why weren't you considering that? Did you ask yourself why it might not be true? Did you seek out the advice of other people? Did they tend to be people who agreed with you? Were you asking people who disagreed with you? Did you ask anybody why they thought you might be wrong? Like, you, you know, these are all the kinds of questions that you're always asking yourself if you really want to be a good decision maker. And hopefully, if we're in a decision pod, part of what I'm doing is asking you those questions. Because I know that because of the way that your mind works, you're just less likely to ask them of yourself. So am I. I'm less likely to ask them of myself.

• 1:08:46Shane Parrish?

  But it's easier to ask other people when you're part of that group or tribe.

• 1:08:49Speaker 04

  Because we have an agreement to it. And I think that what's really cool about that kind of agreement is that, going back to the idea of how do you disagree without being disagreeable? Again, it, I think it depends on how you view the disagreement. Because if we'd agree, if we, if we have an agreement that you're going to help, help me with my decision making, you're going to help me construct an accurate view of the world. If you withhold information from me, now that's hurting me. You're violating our agreement by not giving me a perspective that disagrees with me, if you have one. You're violating our agreement by not sharing information that you have that might moderate my opinion downward.

• 1:09:37Shane Parrish?

  That's Annie Duke from episode 37, Getting Better by Being Wrong. Check out the show notes for a link to the entire episode.

• 1:09:46Shane Parrish?

  Last, we look back at a conversation with my friend Toby Luque, the co-founder and CEO of the e-commerce giant Shopify. Toby is back on the show again in a few weeks with a brand new three-hour sit-down conversation with me in episode 152, but the clip you're about to hear is from episode 41. Toby is one of the most thoughtful and intentional business leaders I've ever had on the show. And his thoughtful process when it comes to decision making and how he learns from some of the mistakes he's made is a fitting way to end this themed episode. Here's Toby discussing one of those times he made a mistake in decision making and how he learned from the process, taken from episode 41, The Trust Battery.

• 1:10:32Speaker 05

  I don't know what the hardest decision is that I ever made. I can tell you the one I did the worst on. It was the most important decision which I took too long to make, which was. So again Shopify's story is a little bit different from most venture backed and then public companies. In the way that, you know, it started with snowboard selling.

• 1:10:56Speaker 05

  So it was actually profitable there. And then I stopped selling snowboards to focus completely on building Shopify. And then through a lot of work, you know, and many years.

• 1:11:07Speaker 05

  Eventually Shopify became a profitable company itself. But it was a, my goal was I wanted to build the world's best 20 people lifestyle business. That was really my goal with Shopify. You know, the way like I just didn't love the idea of venture capital. I'm, I'm European, so I tend to think that companies exist to make money at some point. You know, like this seems like so.

• 1:11:35Speaker 05

  Using other people's money to, you know, just try to grow over everything is like, it just, it just seemed wrong to me. But I had lots of evidence that Shopify really was a growth company. Like it's like venture capital model is for a certain kind of business. And it's a really good fit for that kind of business. And I, I think I knew that Shopify was one of those companies. And then I kind of artificially constrained it. So the decision I didn't make was can I and should I transition Shopify from being a lifestyle business to a growth business? And the reason, like the reason why I ended up like, so, so I feel now that.

• 1:12:17Speaker 05

  I was the limit, I was the bottleneck on potential for Shopify for like a good year and a half period. In which I just dragged my feet making this call. And I, I'm so traumatized from that. I never want to be a bottleneck of a company again. And this was another one of those things that just pushed me into like, I need to look after my own personal growth. I need to be ahead. Of where the company needs me to be at and so on. And you know, eventually I made the decision in a very sort of data driven way. I I I saved up some money instead of investing it immediately into hiring someone new. And once I had like fifty thousand dollars saved, I took five ideas we had that,

• 1:13:00Speaker 05

  you know, like of marketing ideas or ideas to how to grow Shopify. And just funded all of them at the same time and said, if two of them work, we are really a growth company that's being being held back by resources. And they're all five worked. So I became super bloody obvious. Yes. It became very, very, very obvious.

• 1:13:21Shane Parrish?

  You you mentioned you took too long to make the decision. How do you think about speed when it comes to decision making internally?

• 1:13:28Speaker 05

  Yeah, the most important thing, I I tend to talk with people about this a lot. I think the most important thing that people have to understand is how undoable is a decision. I give if an idea is fully undoable, I want people to almost, you know, make it as quickly as they can. So the problem is that the, you know, you can never un VC fund yourself.

• 1:13:50Shane Parrish?

  Yes.

• 1:13:51Speaker 05

  So when a decision is something that you can't take back, then it's worth really, really understanding. So in terms of like decision making, I don't think I I can teach terribly new things like it's the most important thing is get all the context and then make a decision. If you just do that, you're already doing a better job than the vast majority of people in business because almost everyone makes a decision and then gets data to support that decision. So so you already are ahead if you do that. And then your skill in decision making is directly proportional to your quality of information acquisition. So how good are you at making decisions? Like, like, how good are you at acquiring information? How far can you go?

• 1:14:37Speaker 05

  How many resources do you have? Do you have ability to go directly to a database and ask a question? Now you have ability to call the right people up to to to ask them about their experience. Did you read the books already, which allow you to sort of?

• 1:14:52Speaker 05

  Identify a situation as something that's like something else where you can go and reread it to seek figure out, are you considering the same fact?

• 1:15:00Speaker 05

  So that both things are the things that you need to cultivate as a skill. And then lastly, one thing I started really early, which has been exceptionally useful is when and ever since this decision of turning shop into a growth company occurred, I tend to take, when I have to do a major decision, I have a small log file where I just put one paragraph in about the decision I made and what information I consider to be the most important one, which pushed me into the direction. And then I just sort of revisit that every half year and just say, was I right about this, given benefit of hindsight?

• 1:15:45Speaker 05

  Because eventually you know if your decision was right. And so it's actually, if your job is to make decisions, it's worth treating it like any other kind of thing to get better at. And so this allows you to do it.

• 1:15:59Shane Parrish?

  What have you learned from going back and reading that? Not about outcomes of decisions, but maybe more about the process by which you use to reach a decision?

• 1:16:08Speaker 05

  Yeah, I think Kahneman calls it hindsight bias, right? Like we have a very, very strong bias to underestimate how difficult it was to make a decision and really just treat difficult decisions that were made as if they were obvious all along, because you now have obvious additional information afterwards, right?

• 1:16:35Speaker 05

  So it kills you of that to a degree, which is really, really, really helpful for anyone who leads people. It's also like I've just learned, you know, every single time I got a decision wrong, which is happens.

• 1:16:51Speaker 05

  Like I found that the piece of information I was missing was actually totally available to me. And I just, you know, I just didn't go get it.

• 1:16:58Shane Parrish?

  Is it because you didn't get it or you didn't realize it was going to be a relevant or salient piece of information?

• 1:17:04Speaker 05

  Usually I didn't, I just didn't put it in. It's like.

• 1:17:07Shane Parrish?

  You had thought about it and dismissed it?

• 1:17:08Speaker 05

  Yeah, like you realize, like, hey, this was a thing that would have actually made me change my mind and that person knew it already. And so I didn't, I didn't go to ask that person. So I didn't.

• 1:17:20Shane Parrish?

  And do you think subconsciously that's you going like, I know this bit of information might make me change my mind, but I've already made my mind up? And I don't want to have to do the mental labor of going back and then.

• 1:17:32Speaker 05

  And that happens. And then you have to be honest with yourself saying, hey, you know, how would you want to make decisions based on what the best ideas? Or based on being right in a way or getting your way and so on. Again, you need like, this is why it's a good practice. Because it just forces you to recognize when you're making mistakes, right?

• 1:17:49Shane Parrish?

  What's the most common mistake that you see people make over and over again?

• 1:17:55Speaker 05

  It's, it's, it's, people are terrible at deciphering.

• 1:18:02Speaker 05

  Cost and effect or even correlation versus causation, right? Like, again, I said this earlier. Systems thinking is the best cure for this kind of thing, but like there isn't always a cause for things. There are much more often there's a system that just reinforces something like everyone's complaining, why is everyone like, why is all of them? The word of business so short term focused? Well, it's because Wall Street wants quarterly reports, right? So, you know, it's, it's a system reinforces the thing that you want to fix. And then people love putting hacks on easily identifiable problems. And then think the problem goes away, even though the full thing that's reinforcing this is not, is not being addressed.

• 1:18:46Speaker 05

  So that's, that's what I see, see a lot.

• 1:18:50Shane Parrish?

  You keep bringing up systems thinking. What does that mean to you in terms of how you want people to apply it here at Shopify?

• 1:18:58Speaker 05

  Yeah, I mean, systems thinking is teaches you to draw diagrams of a certain kind, right? Like which really are the like, hey, let's zoom out, let's declare the little boundaries of our system, but all the stuff it doesn't matter, but within it, let's really figure out what forces exist and how they like how they balance the loops, how they reinforce the loops. And once you do that, you can then like part of what is so great about just this exercise is it is almost impossible for a room of people to like everyone in a room can talk about the same thing and mean completely different things.

• 1:19:38Speaker 05

  But if you're writing like a systems diagram on a whiteboard afterwards, there is like there's a sync, like people will like if someone has an assumption about that system working differently, that will come up. And so I think this is that's why it's so powerful. So that's the actual way of how I want wanted to.

• 1:19:56Shane Parrish?

  By exposing, it forces people to expose how they're thinking about something in terms of interactions, which allows people to kind of challenge, oh, I don't think it's that way. And then you get to a better, a deeper version of reality or understanding through that.

• 1:20:10Speaker 05

  But there's also this entire other thing that's also acting on this. Is that relevant? And then everyone's like, oh, my God, you're right. And then suddenly you made progress against, you know, coming up with a solution.

• 1:20:31Shane Parrish?

  I think that's a great point to leave this, Toby. This has been a fascinating conversation and maybe we'll continue for part two next year.

• 1:20:38Speaker 05

  Awesome. Let's do it.

• 1:20:39Shane Parrish?

  Take care.

• 1:20:40Speaker 04

  Yeah, well, I'm happy that we made it work out and that you got to be in my hometown.

• 1:20:44Shane Parrish?

  In Philadelphia.

• 1:20:45Speaker 04

  Of Philadelphia, yes.

• 1:20:47Shane Parrish?

  Thanks so much, Venkatesh. This has been great fun. I really appreciate you taking the time. The conversation was amazing.

• 1:20:53Speaker 05

  Yeah, it was a lot of fun to be here. Thanks, Jay.

• 1:20:56Shane Parrish?

  Thank you so much.

• 1:20:57Speaker 05

  Thank you.

• 1:20:58Shane Parrish?

  Maria, this has been a phenomenal conversation. I want to thank you so much for your time.

• 1:21:03Speaker 02

  Thank you. It has been really interesting and thought provoking. You've you've asked questions that nobody has ever asked me.

• 1:21:12Shane Parrish?

  Thanks for listening and learning with us. For a complete list of episodes, show notes, transcripts, and more, go to fs.blog/podcast or just Google The Knowledge Project. Until next time.