Book notes : Dance with Chance

Dance with Chance : Chapter 12

Overall goal of the book : not be fooled by the  illusion of control, and to know where control is possible and available, and where it isn't

- Benjamin Franklin's method of dividing a sheet of paper into two columns, and writing the Pros and Cons
- technique to increase 'batting average' of decisions.
- this chapter will read like a book on 'how to improve your skills in ,say golf of tennis'
- will help you face your dilemmas consistently and methodically

- roadmap
- two types of decisions - repetitive and unique
- m 1 - blinking, or gut level decision making
- m 2 - thinking, dm via articulated deliberate process
- m 3 - `sminking` - use Simple Models or decision rules
- m 4 - opinions of others / experts

example of repetitive decisions
Company  making hire/no hire  decision on a fresh graduate applying . The same question keeps getting asked repeatedly, within the same context.

example of unique decision
graduate receiving a) an offer from company A,  b)while holding an offer from company B ,  c) while company C has given positive feedback but not yet an offer, d) also having  option to en-roll into an Ivy League school in a coveted Journalism major, e) while his girlfriend wants to tour Europe after graduation (separation, or join)
one-off life changing decision

Sminking - aka Simple Model ing
 1. Couples asked to monitor 2 variables alone - #times they made love - #times they argued
 2. Bell Labs had problem with bad debts - they gave 80,000 new customers access without deposit ( out of 12million new every year. (  Hadoop guys must be jizzing their pants)). This was the fore-runner of the credit scoring system.  points for how long they've held their job, lived in their house, whether they owned it, household earning etc. Saved around $137 million.

- in baseball, your batting average is the best bet.

counter argument
  - the human brain can process much more information and can make a better decision than simple rules - god knows what they are leaving out.
 - cuts out chance of  human intuition weighing in
 - cuts out experts who have depth in the area

counter counter argument
 - human brains make different decisions given the same information in different contexts, different times etc. There are also biases( Kahneman, Ariely, Munger, Bevelin, that 'you are not so smart' book.. )

misc :
  - such rules could be discriminatory ( or more like they expose the true state of society ? )
  - simple rules work only a majority of the cases. do not use it for unique decisions

experiment : A, B buttons, Red, Green lights . Green light = small cash prize. Red == 0.
Over time participants glean that both buttons bring up both lights randomly.
a little later, they identify that button A brings up the Green light more often than not.
They press A more, instead of doing only A ,which is the Simple Rule  conclusion.
Conclusion : want to feel in control, greed - want to out-predict the system
 - people are less like to gain control by ceding control to a simple rule.
Corollary - when stakes are increased - more reward, or a punitive, people stick to pressing A. Now fear of losing  is in the mix.

SimpleModel ing has saved billions of dollars
SimpleModel ing is not easy to build, depends on choosing the right variables. to do this, the difficulty is emotional, not cognitive.

SimpleModel ing is limited by inherent uncertainty

Decision making in Unique situations :  ask and answer the 3 basic questions -
1. What is at stake ?
2. What are the uncertainties (AAA approach) ?
3. What is our risk appetite ?

sample question
0 . while there are many offers, each one presents an opportunity cost, so no need to be over-obliging
1. does business experience help with experience and money for a degree in journalism later
2. does any of the cos publish a journal he can write for ?
3. is the relationship strong enough to survive separation ?
 
AAA approach
  - accept there are uncertainties, generate alternatives
  - assessment  - lay out what works what could go wrong how will things typically play out
 - augment  the uncertainty ( or rather, adjust the margin of safety, or in IT terms, add buffer) - eg IT projects suffer from optimism bias.

When uncertainty becomes threatening, there's an unwillingness to consider the consequences

approaches
   - take an outside view, imagine you are a consultant hired to make the decision.
  - consider and use benchmarks
 
(success in journalism is more about flair, networking and pushiness, plus a healthy dose of luck)

setting risk appetite
 -  fear and greed (and biases) kick in differently when decision is represented differently ( people might opt for a surgery  presented as with 60% success rate but not for one presented as with a 40 % failure rate). So consider both perspectives - what if you win what if you lose

Experts
If you consult an expert and the advice doesn't work out, do you say " hey, I did my best and got a good expert" and relax, or do you curse ? (Hint : it's your responsibility, and outcome.)

The Harry Potter Rule : There is no magic in our world. We are all muggles.

use expert advice as one of the  inputs in decision making. ask experts about other options, their personal recommendations ( to family/friends for eg), areas that you might not know of , other experts, sources, conflict of interest .....

Experts, fakes and Blink - Meegeren painted many Vermeer masterpieces what were exhibited in great European galleries until revealed as fake by him.  Experts didn't catch it .
Grand masters can 'blink' only after 10 yrs of extensive practice with  consistent, accurate feedback.
 If time allows, follow the grand masters , follow each Blink with Thinking.

Blink = good for muscular reactions.
Sminking rules can become obsolete .

Philip Tetlock (Haas), massive study , 82000 decisions by polsci experts => simple models are more accurate

Emotion vs Reason
 - the heart has its reasons that reason knoweth not - Blaise Pascal
 - ...reason is subservient to emotion - (paraphrasing) - Hume
-  the most important things are known by the heart (paraphrasing) Antoine St-Exupery - Little Prince
- emotional Bermuda Triangle - greed-fear-hope
 - note your emotion w.r.t the decision, defer decision until you can consider it under different occasions
-

How did I get here ?
via
https://www.stat.berkeley.edu/~aldous/157/Books/popular.html
Review(4 stars)  : https://www.amazon.com/review/R118HK6UBQM6DM/ref=cm_cr_rdp_perm

Next :
Sowell :
Economics = scarcity + decisions on using resources ( aka trade-off-ing)