Using Decision Trees - Deepstash

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7 Things That Self-Made Billionaires Do Differently

Using Decision Trees

  • Understand the different outcomes that could happen (both positive and negative)
  • Calculate the expected return or loss of each outcome
  • Attach a probability to each outcome
  • Understanding the magnitude of the return or loss
  • Multiply the probability by the magnitude (probability of winning * value of win) — (probability of losing * cost of the loss)
  • Add up and subtract all of the expected returns and losses
  • To get started you don’t need to know the exact probabilities. Just following the process will give you unique insights you wouldn’t have had otherwise.

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IDEA EXTRACTED FROM:

7 Things That Self-Made Billionaires Do Differently

7 Things That Self-Made Billionaires Do Differently

https://medium.com/accelerated-intelligence/8-things-that-self-made-billionaires-do-differently-26399196feb3

medium.com

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Key Ideas

Using Decision Trees

  • Understand the different outcomes that could happen (both positive and negative)
  • Calculate the expected return or loss of each outcome
  • Attach a probability to each outcome
  • Understanding the magnitude of the return or loss
  • Multiply the probability by the magnitude (probability of winning * value of win) — (probability of losing * cost of the loss)
  • Add up and subtract all of the expected returns and losses
  • To get started you don’t need to know the exact probabilities. Just following the process will give you unique insights you wouldn’t have had otherwise.

Checklist To Avoid Stupid Mistakes

  • Brainstorm as much as you can to avoid availability bias (choosing the first solution that comes to mind rather than the best solution).
  • Test as many potential solutions as you can afford to. This avoids the confirmation bias of rationalizing the one solution you chose.
  • Evaluate the criteria for each experiment. 
  • Learn from every experiment, successful or not.