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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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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.