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Probabilistic Thinking: Considering various outcomes and trying to figure out which one is more — or less — likely to occur
People who are particularly good at making decisions tend to do so because they’re also very good at what’s known as probabilistic thinking. Now we’ve all heard of probabilistic thinking. It sounds like something that gamblers do or when you’re throwing dice or running odds. But what it actually means is thinking about various outcomes and trying to figure out which one is more likely and less likely to occur.
For some people, it’s a little bit unnatural to think of various outcomes, particularly when those outcomes can contradict each other. Because our life trains us that we only have one experience. There’s only one reality. But people who are particularly good at making decisions, what they tend to do is they tend to try and think about the future in contradictory ways. I could get married and maybe that will end up in happiness. Maybe it’ll end up in divorce. Or I could walk away from my fiancé and maybe I’ll end up meeting someone I like more or maybe I’ll end up lonely and dying on my own. It’s hard to think about all these possibilities. It’s hard to hold them all in your brain simultaneously. But the people who are particularly good at making decisions, studies show, are good at engaging in this kind of activity. Because what it does is it trains us to start assigning probabilities to various outcomes. And once you start thinking about: Why? Why am I more likely to be happy if I get married? Why am I less likely to end up alone? That’s when you begin making really informed choices.
Bayesian Psychology: Informing your instincts by forecasting various possibilities from limited amounts of data
So how do we inform our instincts to make great choices? To think through about various possibilities? Psychologists refer to this as Bayesian Psychology: That I want to inform my ability to take a limited amount of data and forecast various possibilities from it. It turns out what’s critical to being able to accurately envision the probabilities and chances of various futures is exposing yourself to both successes and failures. When you think about it most of what we hear about is success. We tend to go to successful restaurants and so most people don’t even realize that two-thirds of restaurants go out of business in their first year. When we read the newspaper we love to read stories about the company that just sold for a billion dollars. And there’s not that many stories about the guys who took ten million dollars in venture funding and then everything blew up. When we hang out with our friends we love to hear about their successes but we never ask them about our failures.
The problem with that is that it biases our sample size that we use to make predictions. We get overexposed to success and as a result, we’re more likely to anticipate that success will occur. Studies of the most successful entrepreneurs show that they spend an inordinate amount of time asking other people about their failures. They spend time asking friends why they went bankrupt. They spend time asking colleagues what ended up leading to their divorce. And the reason why is because those people want to create a mental database that is accurate about life. They want to know what leads to success but also what leads to failure. They want to correct this natural instinct to get exposed to more successes than the alternative. The most successful people – the people who make the best decisions, the people who are able to make decisions productively – they are people who seek out information on failure as actively as they seek out information on success. Because once your mental database accurately represents real life that’s when you can draw on that information to make better-informed choices.