A couple of weeks ago I wrote about a great book on making better decisions; Thinking in Bets by Annie Duke. Today, I want to introduce you to Think Twice: Harnessing the Power of Counterintuition by Michael J. Mauboussin.

Think Twice is a book that explores the idea of counterintuition, or using non-obvious thinking strategies to make better decisions. Michael J. Mauboussin, a highly respected expert in the field of decision-making, argues that many people tend to make decisions based on intuition or gut feelings, which can be misleading or incorrect. In the book, he provides a framework for making better decisions by taking into account the complexity of the situation, using data and information to inform decisions, and thinking through the implications of each decision.

One of the key takeaways from the book is that decision-making is complex, and it is essential to understand the context in which the decision is being made. Mauboussin stresses that there is no one-size-fits-all approach to decision-making, and it is crucial to understand the different factors that influence decision-making, such as biases, emotions, and cognitive limitations.

“In a probabilistic environment, you are better served by focusing on the process by which you make a decision than on the outcome” ― Michael J. Mauboussin

5 Strategies for avoiding Cognitive biases

Mauboussin offers 5 strategies for avoiding cognitive biases. By following these strategies, you can reduce the impact of cognitive biases in their decision-making and make better decisions as a result.:

1. Seek diverse perspectives: When making decisions, it’s important to gather as much information and as many different viewpoints as possible. This helps to mitigate the impact of biases that might arise from exposure to a limited set of information.
2. Consider the counterfactual: When evaluating a decision, it’s important to think about what would have happened if a different course of action had been taken. This helps to avoid hindsight bias, which occurs when people believe that events were more predictable than they actually were.
3. Use simple rules of thumb: Simple rules of thumb, or heuristics, can be useful in mitigating the impact of biases by providing a framework for making decisions. For example, using a decision matrix that compares the cost of a decision against its benefits can help to avoid biases related to sunk costs or overconfidence.
4. Seek out ambiguity: Ambiguity can help to reduce the impact of biases, as it forces people to consider multiple possibilities when making decisions. This can help to mitigate the impact of overconfidence, as well as the confirmation bias that can arise from seeking out information that supports one’s existing beliefs.
5. Be aware of the impact of emotions: Emotions can play a big role in shaping decisions, and it’s important to be aware of how emotions can influence thinking. For example, loss aversion, which occurs when people are more motivated to avoid losses than to seek gains, can be mitigated by focusing on the decision-making process rather than the outcomes.

Mauboussin also emphasizes the importance of using data and information to inform decisions. He argues that the most effective decision-makers use a combination of intuition and analysis to make informed decisions. By taking the time to gather information and analyze it, decision-makers can make better decisions and reduce the impact of biases and emotions on their decision-making process.

Another key takeaway from the book is the importance of thinking through the implications of each decision. Mauboussin stresses that decision-makers should not only consider the immediate consequences of their decisions but also think about the long-term implications of their choices. By doing this, decision-makers can make decisions that will have a positive impact on their lives and the lives of those around them.

The main points of the book can be summarized as follows:

1. Counterintuitive thinking: The book highlights the importance of considering counterintuitive or unconventional ideas in decision making.
2. Understanding biases: Mauboussin discusses the various cognitive biases that can impact decision making and provides strategies for avoiding these biases.
3. The power of second-order thinking: The author explains the importance of considering the impact of decisions on second and subsequent events.
4. The role of probabilistic thinking: Mauboussin argues that effective decision making requires an understanding of probability and an ability to think probabilistically.
5. The importance of base rates: The book emphasizes the importance of considering base rates, or the prevalence of an event in a population, in decision making.
6. The limitations of expert judgment: Mauboussin explores the limitations of expert judgment and the importance of avoiding overconfidence in decision making.
7. The impact of incentives: The author discusses the impact of incentives on decision making and the importance of aligning incentives with desired outcomes.

Overall, Think Twice provides a framework for making better decisions by considering counterintuitive ideas, avoiding biases, and using probabilistic thinking.

The framework is based on the idea that the quality of decision making depends on the quality of the information and reasoning used to make the decision. The framework for making better decisions is as follows:

1. Define the problem: Start by defining the problem or decision to be made in a clear and precise manner. This helps to ensure that everyone involved in the decision making process has a shared understanding of what is at stake.
2. Gather information: Gather as much relevant information as possible to inform the decision. This includes facts, data, expert opinions, and other relevant insights.
3. Consider multiple perspectives: Encourage a diversity of perspectives by considering the views of those who have different experiences, expertise, and backgrounds. This helps to reduce the risk of cognitive biases and narrow thinking.
4. Identify trade-offs: Understand the trade-offs involved in different options and prioritize the most important factors. This helps to ensure that the decision is made based on a balanced and well-informed perspective.
5. Apply mental models: Use mental models, such as decision trees, game theory, and probability analysis, to help structure and analyze the information and trade-offs involved in the decision.
6. Make the decision: Make the decision based on the information and analysis. Be prepared to adjust the decision as new information becomes available or as the situation changes.
7. Monitor and evaluate: Monitor the results of the decision and evaluate its effectiveness. Use this information to continuously improve decision making processes and outcomes.

By following these steps, individuals and organizations can make better decisions and achieve better outcomes.

What does Michael J. Mauboussin recommend people do to make better decisions?

Michael J. Mauboussin recommends several key steps for making better decisions:

1. Understand base rates and probability: It is important to understand the base rate or prior probability of an event, as it provides a foundation for decision making.
2. Avoid Overconfidence: Overconfidence can lead to bad decisions, so it is essential to keep it in check and adopt a more probabilistic approach to decision making.
3. Account for the effect of luck: Luck often plays a significant role in outcomes, and it is important to recognize and account for this in decision making.
4. Recognize the limits of prediction: People often rely too heavily on predictions and forecasts, but it is important to recognize that these are often uncertain and subject to error.
5. Embrace uncertainty: Decisions often involve uncertainty, and it is essential to embrace this uncertainty and make decisions based on the best information available.
6. Seek diverse perspectives: Diverse perspectives can lead to better decisions, so it is essential to seek out and incorporate the views of others.
7. Foster a culture of learning: Encouraging continuous learning and improvement can help to improve decision making over time.

By following these steps, individuals and organizations can improve their decision-making processes and achieve better outcomes.

To summarize, here’s how to make better decisions:

1. Raise your awareness;
2. Put yourself in the shoes of others (empathy);
3. Think about the context;
4. Remember that your actions will trigger reactions and you may not anticipate them;
5. Consider what motivates the decisions of others;
6. Recognize the role of skill and luck.

Bottom line: Think Twice is a valuable resource for anyone looking to make better decisions. Mauboussin provides a comprehensive framework for decision-making that takes into account the complexity of decision-making and provides practical tips for reducing the impact of biases, emotions, and cognitive limitations. Whether you are a seasoned decision-maker or just starting out, Think Twice is a must-read for anyone looking to make better decisions and improve their decision-making skills.