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What is behavioral economics? Why does it matter to you?

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Podcast Episodes

What is behavioral economics? Why does it matter to you?

402. Why Quitters Often Win w/ Annie Duke (Refreshed Episode)

In episode 402 of The Brainy Business podcast, Annie Duke, a former professional poker player and author of the book Quit, joins host Melina Palmer to discuss the psychology of quitting and decision-making under uncertainty. Annie’s transition from an academic to a professional poker player and her subsequent work in decision science provide a unique and valuable perspective on the topic. Throughout the conversation, Annie challenges traditional perceptions of quitting and emphasizes its crucial role in winning and strategic decision-making. 

She introduces concepts such as pre-mortems and the mental model of monkeys and pedestals, offering practical tools and frameworks for making better decisions. The episode provides valuable insights into reframing the mindset around quitting, the importance of understanding when to quit, and the potential impact of decision education in various domains. Annie Duke’s diverse background and expertise in decision science make this episode a must-listen for entrepreneurs and business owners seeking to enhance their strategic decision-making skills and achieve increased business success.

In this episode:

  • Discover the strategic benefits of quitting in business to unlock new opportunities and growth potential.
  • Implement behavioral economics in your business to enhance decision-making and drive better outcomes.
  • Learn how to strategically identify when to quit for long-term business success and resilience.
  • Explore the Monkeys and Pedestals decision-making model for insightful strategies to improve decision-making processes.
  • Overcome analysis paralysis and make decisive, effective decisions to propel your business forward.
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HERE'S A 2 MINUTE TIP.

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SHOW NOTES:

00:00:00 – Introduction
The episode introduces Annie Duke and her book Quit about the psychology of quitting and decision-making.

00:01:15 – The Importance of Quitting
Annie explains how winners often say no and quit things to succeed, emphasizing the need to know what to stick with, what to quit, and when.

00:04:47 – Annie’s Background and Transition
Annie shares her journey from academia to professional poker and behavioral psychology, highlighting how her poker career led her back to her cognitive science roots.

00:08:40 – The Power of Diverse Perspectives
Annie discusses the value of diverse experiences in decision-making and problem-solving, emphasizing the importance of different frames of thinking to bring unique insights to the table.

00:12:05 – The Pre Mortem Skepticism
Annie shares her research on pre-mortems, expressing skepticism about their effectiveness as standalone decision tools and the need to combine them with other strategies for improving decision quality.

00:14:18 – Normalize Dissent and Prospective Hindsight
Daniel Kahneman’s advice on normalizing dissent allows for consideration of both good and bad outcomes. Prospective hindsight can generate 30% more reasons for failure or success.

00:15:19 – Pre Parade and Pre Mortem Tools
Pre-mortem exercises influence confidence and introduce self-serving bias. The pre parade increases overconfidence, while the pre-mortem leads to attributing bad outcomes to external factors.

00:18:43 – Challenges in Behavior Change
Difficulty in getting people to change plans despite pre-mortem insights. Anecdotal observations and studies show resistance to plan modifications across various domains, raising questions about the effectiveness of the exercise.

00:19:55 – Group Dynamics and Real-world Impact
Need for group testing of pre-mortems to understand the impact of group dynamics. Potential for behavior change in high-stakes environments like work projects. Studies underway to explore these aspects in real-world scenarios.

00:22:23 – Thinking in Bets and How to Decide
Annie’s books Thinking in Bets and How to Decide explore decision-making under uncertainty. They provide practical tools and insights, such as pre-mortems, to improve decision accuracy and overcome cognitive biases.

00:27:11 – The Impact of Hindsight Bias
Annie discusses how most of the time, we learn new things after the fact and act like we should have known them beforehand. She highlights the importance of tracking knowledge and listening to independent opinions to avoid biases.

00:27:52 – Overcoming Analysis Paralysis
Annie explains the process of decision-making and the importance of making implicit factors explicit. She emphasizes the need to consider the consequences of decisions and the ability to change your mind later.

00:32:38 – The Value of Quitting
Annie challenges the negative perception of quitting and emphasizes its value in decision-making. She shares insights from experts and individuals, highlighting the benefits of exercising the option to quit.

00:35:32 – Conversations with Experts
Annie shares her conversations with influential figures like Michael Mobison, Daniel Kahneman, Richard Thaler, and others. These discussions inspired her to explore the topic of quitting further, leading to the creation of her book.

00:40:52 – The California Bullet Train
Annie uses the example of the California bullet train project to illustrate the challenges of large-scale decision-making and the importance of considering all factors before committing to a course of action.

00:41:35 – The California Bullet Train Project
Annie discusses the challenges faced by the California bullet train project due to the Diablo and Tehachapi mountain ranges. The budget explosion and the decision to continue building without addressing the engineering challenges are highlighted.

00:43:02 – Re-evaluation of the Project
Gavin Newsom’s decision to reevaluate the California bullet train project in 2018 is discussed. The project’s failure to address the engineering problems of the mountain ranges and the budget increase to $110 billion are emphasized.

00:44:44 – Monkeys and Pedestals Framework
Annie introduces the “Monkeys and Pedestals” framework, which emphasizes tackling the hard problems first before building pedestals. The concept of pre-mortems and setting kill criteria to identify and address project challenges is explained.

00:50:55 – Behavior Change and Future Planning
The importance of behavior change in addressing project challenges and the application of pre-mortems and setting kill criteria to identify crucial information are discussed. The significance of identifying the “monkeys” before building “pedestals” is emphasized.

00:54:06 – Tackling Low Hanging Fruit
The reverse approach to tackling projects, focusing on solving hard problems before addressing easy tasks, is highlighted. The importance of prioritizing crucial information and being smarter about project approach is emphasized.

00:54:54 – The Importance of Solving Hard Problems First
Annie emphasizes the need to focus on solving the hard problem first before building pedestals. She highlights the concept of working on the greatest bike shed instead of the nuclear plant, as well as the law of triviality.

00:55:37 – The Pitfalls of Wasteful Thinking
Annie discusses how people often fail to think ahead and waste time and resources on backward thinking. She emphasizes the importance of evaluating the worth of the next minute and dollar, shifting mindset from past to future.

00:56:24 – The Key to Success and Grit
Annie explains that winners quit a lot, but they do it to focus on the right things. Grit is important, but only when applied to the right endeavors. She also touches on forced quitting and exploring new opportunities.

00:57:25 – The Importance of Flexibility and Agility
Annie highlights the significance of being flexible and open to switching course if the current endeavor is not worthwhile. Winners sample a lot of things and settle on the right course of action, even if they don’t know what they are switching to.

01:00:28 _  Conclusion
What stuck with you while listening to the episode? What are you going to try? Come share it with Melina on social media — you’ll find her as @thebrainybiz everywhere and as Melina Palmer on LinkedIn.

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