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Improving Decision Quality in Negotiation with Annie Duke, Ep #68

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In this episode of Negotiations Ninja, Annie Duke—a World Series of Poker champion turned business consultant—talks about increasing decision quality in your negotiation. How? By embracing uncertainty. When you shift your thinking from a need for certainty to a goal of accurately assessing what you know—and what you don’t—you’ll be less vulnerable to reactive emotions, biases, and destructive habits in your decision-making process. Listen to this special episode with Annie to learn how to make better decisions.


Outline of This Episode

  • [3:04] Learn more about Annie Duke
  • [10:52] Understanding the concept of “resulting”
  • [23:08] Reduce the factor of luck with these strategies
  • [32:45] How to drive the discipline of uncovering the truth
  • [41:56] Why is “motivating reasoning” dangerous?
  • [54:43] Three ways to improve your decision quality
  • [1:02:45] Where to learn more from Annie Duke

Understanding the concept of “resulting”

Just because you get a good result doesn’t mean the behaviors, habits, and decisions leading to that result were good.

Annie points out that humans are “overfitters.” They look at the data and try to fit it into a story, i.e., the age-old problem of correlation equals causation. Humans tend to see patterns where they don’t exist. “Resulting” is taking things that shouldn’t be linked and linking them together to create certainty in a relationship that doesn’t exist.

When you don’t know if a decision is good or bad, and you can’t see the probabilities of different futures, how do you figure out if the decision was good or bad? In poker, the shortcut you use is whether or not you won the hand. We use the outcome to work backward to determine if the original decision was good or bad.

What’s the problem with this? Does it actually improve your decision quality? Think about a game like chess. In chess, you know all of the possible moves. Everything is visible to you. But Poker, football games, and negotiations contain unknowns that may or may not come to light. Making a decision is easier when you know the potential outcomes of each decision.

Even if you have all the information you need to make a good decision, the influence of luck is still at play. You see this often in poker. In poker, the cards are hidden, and you don’t know what the other person has. The better you are at the game, the better you are at narrowing down what they could have—but you’ll never know exactly what they have.

A key piece of information that would help you decide your next step is hidden from view. But when you go into a negotiation, there’s stuff that the people across from the table know that you don’t. Even if you knew what they knew and negotiated a great contract, you still don’t know how the future will turn out. If you negotiate the perfect sales contract, a competitor might spring up and overtake the market. You can’t control the outcome.

Part of your job is to figure out why something didn’t turn out well. What was the influence of hidden information? What was the influence of luck? What was a good or poor decision based on the information you had?

So how do you do that?

Reduce the factor of luck with pre-mortems and post-mortems

After the fact, a piece of information reveals itself to you. Then you have to ask: Could I have known this beforehand? If the answer is “yes,” how do you add it into your process moving forward?

In B2B negotiations, when either side feels like there’s a good result, neither side does a good job of reviewing the negotiation to see what led to the outcome. What are you doing to ensure you have the clearest view of the landscape ahead, given any decision you might make? How are you at scenario planning and determining the probability of those things occurring? Michael Wheeler’s concept of a pre-mortem is an excellent concept to begin to apply.

If something turns out poorly, how do you think it happened? You can also backcast—if something turned out better than you imagined, why did that happen?

Look along the way. If something goes sideways, how do the decisions you’re making influence the probability of things going sideways? What will your reactions be? How do you think of this in advance, so you’re not reacting but nimble?

By imagining the bad outcomes, you reduce the probability of a bad outcome. You’ve anticipated where things might go wrong, which helps you create a more strategic plan.

When things go poorly, negotiators often ask:

  • How could you have avoided it?
  • Could you have lost less?
  • Could you have won?
  • Is there a way things could have gone better?

No one is saying, “Maybe we could have lost more.” Maybe something unlucky happened, and the slimmest probability happened. But if you think through the process, perhaps you could have lost more and made the best possible choice under the circumstances.

Improving decision quality by understanding “motivating reasoning”

One could assume that the more information you uncover, the more it would form your beliefs. Annie emphasizes that it doesn’t work like that. Your beliefs have a huge influence on information processing. When information comes in, you don’t evaluate it objectively. You evaluate it to affirm the things you already believe.

If you think that gun control measures will lower crime, the information that will confirm that belief is what you’re more likely to notice versus information that doesn’t support your opinion. It’s confirmation bias, and humans do this all the time.

If someone is shown a study that gun control doesn’t affect crime, what do they do? They work hard to disprove the evidence. Maybe they find a counter-study or write a dissertation about why the study isn’t strong. People do this all the time. You will always find a way to discredit the evidence. Motivating reasoning is circularity. You believe x, which changes the way you process information.

Why does this happen? What can you do about it? Listen to this episode to hear Annie share three things you can do to combat your biases and improve your decision quality.

Resources & People Mentioned

Connect with Annie Duke

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