How to Make Some Smart Ass Decisions

We all make awful decisions from time to time. Some people make awful decision more frequently then just “from time to time.” But have you ever thought about why you make the decisions you do and what goes into the decision making process? I was inspired to do this myself after a recent trip to a casino…

I was in Las Vegas for this year’s The Speaking School, and one night we found ourselves sitting at a Three Card Poker table.

I know, Three Card Poker is a sucker’s game with some terrible odds, but it’s fun. Besides, it’s called gambling. If you don’t want to (or can’t afford to) lose, don’t gamble.

I’ve played Three Card Poker before, and using the friendly odds information over at Wizard of Odds I knew that in Three Card Poker your best strategy is to stay in on anything better than a Queen-six-four off-suit (don’t worry if you don’t know what that means. All you need to know is that I had researched the statistically best odds of winning – or “losing less quickly,” as it were…)

While at the table, the dealer notices a few of us staying in on these types of “Queen-high” hands. She says, “You shouldn’t stay in with just a Queen.”

My friend replies, “why not?”

“Because the best you can hope for is a push.” (A “push” is basically a tie – you neither win nor lose money)

Now I chime in. “Oh? I thought statistically it’s best to stay in on anything better than Queen-six-four…”

“In my experience, people usually lose when they stay in with queens,” the dealer answers. “I recommend people stay in only when they have King or better.”

Ah-ha! Therein, my friends, lies the crux of this story. “In my experience.” Three simple, powerful, and often incredibly limiting words.

“In my experience,” is just one type of evidence. To be able to make informed decisions, we must understand and evaluate three types of evidence: intuition, anecdotal, and data.

Intuition

This is simply your “gut” feeling. When you are about to make any decision, you probably have an initial immediate feeling as to which is the best choice. Some people put a lot of stock in their intuition. Others don’t value it at all.

Neither one is right or wrong. Just be aware when you are making a decision based on intuition. Where you might get yourself into trouble is when you have a gut feeling and then simply look for anecdotal evidence and data to support your intuition, rather than being objective about it. This happened everyday, especially in “soft” areas such as relationships. If you like someone, you will ignore stories and examples of them acting like a dumbass and focus on their good qualities. Likewise, if you decide someone is a jerk, you will create a mental catalog of all of their dumbass behavior and ignore or explain away their nice deeds.

This is not to say you should not go with your gut. Some of the greatest innovations of our time have come from people ignoring data and anecdotal evidence to pursue what they felt was right. Just know that this is what you are doing. (By the way, history is also littered with many more examples where people ignored data and evidence and failed miserably. We just don’t talk about them as much. So be careful

Anecdotal

“Anecdotal” is just a fancy-schmancy way of saying “based on personal observations.” (Yes, paraphrased that definition from dictionary.com)

For most of our small decisions, many of our medium sized decisions, and quite a few of our large decisions, we rely on personal observations and stories passed along from other people. We are shaped by our own experiences, and we make gross generalizations based on a few specific examples.

For example, you have a bad first experience at a restaurant, so you assume it sucks and never go back. A friend tells you Lowe’s is targeted to women and you assume it’s true. You always have nice pleasant conversations with your neighbor so you are shocked when he turns out to be a serial killer.

Anecdotal evidence may be the most persuasive and powerful form of evidence. This is why great speakers use stories. I even wrote a post about how to quickly put together a speech and stressed the importance of stories. We want to trust our gut, and we like data, but we trust what our eyes and ears tell us.

This is what the dealer at the Three Card Poker table did. In her personal experience, people who stay in with “Queen high” lose, so it’s better to stay in on “King high” or better. A card game like Three Card Poker is nice because there is straight statistical data to tell us whether she was right or wrong. In this case her her opinion on optimum strategy was wrong, and that is because there are some problems relying on just anecdotal evidence:

• It’s incomplete – Like in the case of the quiet neighbor who turns out to be a psycho, anecdotal evidence rarely tells us the whole story. Was the person you just met rude because he’s a jerk or because he has a tooth ache, his pet died, and he just got served with divorce papers? Who knows. But relying purely on anecdote, you’ll assume he’s a jerk.

  The Three Card Poker dealer’s evidence was incomplete. She wasn’t paying attention to the value of playing for a “push.” While the chances of “winning” are incredibly low, playing for a “push,” helps you lose money less quickly.

• It’s selective – You can’t observe everything. You may observe hundreds of cases every week of BMW drivers driving nice and cautiously. But when one cuts you off, you suddenly have anecdotal evidence that “all BMW drivers are jerks.”

  The dealer probably dealt many hands where a “Queen high” pushed, and even a few where it won. But when it came to decision time, she forgot or ignored all of these.

• It’s biased – As mentioned above in the section on intuition, if you already have an idea in mind, your brain may start looking for stories to support your point while ignoring all evidence to the contrary.

  Through the course of the rest of the night, the Three Card Poker dealer was quick to point out the cases where staying in on “Queen-high” lost. I don’t think she noticed or cared when it pushed.

Be very wary of making decisions based purely on anecdotal evidence. These are often the ones that bite you in the ass.

Data

Data is simply information. In card games, data comes down to straight statistics. Looking at data is easy if you are talking about card games (and are a statistician. Frankly, number crunching like that eludes me. I took four semesters of calculus in college and I still can’t wrap my head around probability and statistics!)

For non-statistical stuff, data comes down to research: surveys, focus groups, sales numbers, etc.

Data is wonderful, but not infallible. Here are some limitations of data:

1. It’s limited to the sample set – Data may seem like a great way to figure out what people want, but in reality you are often only getting data on the people surveyed! What that means is that you may think you are getting a cross section of the market when in reality you are not.

   If your customer feedback forms say, “service was great!” well, your service may be great. Or it could be that the few people who took the time to fill out a feedback form liked the service, whereas the vast majority who hated the service left without saying or doing anything.

2. It relies heavy on the questions asked – The way a question is asked can heavily influence the answer you get. There’s a frequently cited study (I read about it in both Predictably Irrational and Super Freakonomics) that demonstrates this:

   A large group of people were given $300 and then told that they could a) get an extra $100 or b) flip a coin, and if they won they would get an additional $200, but if they lost they would get nothing. About 65% chose option a.

   Then, in a similar situation, a large group of people were given $500 and then told that they could a) have $100 taken away from them or b) flip a coin, and if they won they would keep their money, but if they lost they would lose $200. In this case, about 65% of the people chose option b.

   Interesting, no? The two outcomes are exactly the same. Pick option “a” and you get $400. Pick option “b” and you have a 50% chance of getting $300, and a 50% chance of getting $500. The only difference is in how they options were setup, and it resulted in very different responses.

   I won’t go into the psychological ramifications of this study. But when it comes to data, it shows how biased “objective” data can be based on word choice.

3. It keeps us in the world of what we know – Data is great, but only lets us measure what we know. It’s hard to gather data on innovative ideas, because they don’t yet exist. After Apple’s flop with the Newton PDA, data may have indicated that there was no interest in a portable device that served as your phone, email system, music player, video player, game system, and total life manager all in one. And yet, now we have the iPhone (which is awesome!
4. It may not tell the whole story – Gathering data is one thing. Understanding and analyzing it is quite another. You launch a promotional campaign and see sales numbers go up. The campaign must have worked, right? Maybe, maybe not. Maybe a tour bus happened to stop in front of your establishment one day which jacked up your numbers. Maybe word of mouth hit the tipping point. Maybe you got lucky. It can be hard to tell, which is why very deliberate tracking of activities is so vital.

   Smart people understand that there is a difference between causation and correlation. Dumb people make assumptions.

So which one of these forms of evidence is best? None. Or all.

Unless you are engaging in a purely statistical activity (like Three Card Poker) you need to weigh all three forms of evidence in your decision making process.

Buying a home? Listen to your gut, but also talk to people in the area and look up some data on crime rates, school ratings, etc.

Want to start a business? Do some market research, talk to both people in the industry and to potential customers, and then listen to your intuition.

Gambling at a casino? Ignore the dealer and trust The Wizard of Odds. Sorry, had to be said – besides, those games are straight stats!

Whichever decision making route you take just be aware of which strategy you are employing and why. Doing that one simple thing alone may help you make better, less disastrous, more “Smart Ass” choices!

Attribution: I want to give credit where credit is due. I first came across the “intuition-anecdotal-data” idea on decision making while at a National Speakers Association event. Stephen Tweed was the nice and smart gentleman who taught me this process. Thanks Steve!