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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## 7 Things That Self-Made Billionaires Do Differently

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.