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Slack, pundits, juries, and betting on yourself

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Hi Annie, do you know what happened to Stuart Butterfields old shareholders that got the money back or did they participate in Slack? Otherwise not so good deal for them -Peter

Butterfield offered to return the capital to his investors and gave them the opportunity to roll their investment over into Slack. I believe most chose the latter.

That being said, even if they didn’t participate in Slack, it was still a good deal for the investors. Butterfield determined that Glitch wasn’t worth it. The return on investment wasn’t there. So any investor who got their money returned to them got a good deal, definitionally, because they were spared keeping their money in a losing venture.

Whether to roll their investment over was a new decision, having nothing to do with the ROI of having the capital returned. If they chose not to invest in Slack, that might have been a good decision or a poor one. We would need to know the facts at the time. What was the valuation? Had they shown product/market fit? etc. in order to assess that decision. Slack becoming such a huge success is not what drives whether it was a good or bad deal for them.

Consider this thought experiment: Imagine investors have their capital returned to them and then are offered the chance to roll it over into the new venture, which ends up failing. I don’t think you would consider it a bad deal for them if they chose not to reinvest in that case. It is the outcome of Slack doing so well that makes it feel like a bad deal.

And that’s resulting.

I’m considering retiring from my current position in a year and a half from now. I’m also looking at developing multiple possible income streams, all of these have potential. That aside, with regards to my current job, I’m finding it difficult to sort out what is fact and what isn’t. Not so much with regards to retirement income and future opportunities, but with how I feel about it all (you’ll be happier, you’ll miss it, you’ll have more time, this is the thing you are an expert at, why quit now when you have so much to offer, etc) - how do you sort that out? - Andrew Chipman

This is a great question! The answer is that you can’t know for sure so embrace that fact that you are making your best educated guess. Embracing the uncertainty will make it less scary to venture into the unknown. That being said, there are decision tools that can increase the chances of a happy outcome.

A few tools that will help you think this through:

1. Do a premortem. Imagine it is a year after you have retired and you are miserable. Write down the main reasons you believe this to be true. This will help you identify why you might end up unhappy. Having done that, you can change your plan to decrease the chances of one of these unhappy futures unfolding. Follow this by asking yourself this question, “Looking back, I realize there were early signals that I was going to be miserable. What were they?” This will help you identify the early signals that things aren’t going as you had hoped and set a plan in place for nipping the bad result in the bud.

2. Do a backcast. This is a mirror image of a premortem where you imagine that it is a year after you have retired and you are really happy. Rinse and repeat the same steps.

3. Get a mentor. Find someone you trust to help you navigate this new stage. It could be a trusted advisor who has already successfully retired. It might be a therapist. Just find someone who you trust to tell you the truth about what lies ahead and the best way to navigate and make sure you give them permission to tell you the truth (or else they will likely just tell you what they think you want to hear).

I made a career change 25 plus years ago to be a consultant from an executive. When you left poker, did you have the same value strategy? The “bet on yourself” mentality we hear in sports… -Sean

When I left poker, I had already been giving talks and doing some consulting for about 10 years so that was more of a known for me. It actually brings up a great strategy for making better decisions: when possible, explore options in parallel. My poker career allowed me the flexibility to do other things at the same time. I could test out what worked and didn’t work, what I liked and didn’t like, and whether the market was interest in what I had to offer. That really helped me when it came time to decide whether to commit to this new career.

When it came to my writing, that was more of an “it can’t hurt to try” mentality. I had been successfully giving talks on decision making for a while but that didn’t mean that anyone wanted to read what an ex poker player had to say on the subject! I worked on a proposal and was able to find an agent and sell the book that became Thinking in Bets. I think there was a lot of luck in that. Right time and (as it turned out) right author for the ideas in the book.

The thing about that bet was that my speaking and consulting career was already in good shape so it was practically a freeroll to go for it. I was going to learn from the writing process regardless and the worst thing that could happen was that no publisher wanted the book. I am very big on going for things that don’t have a lot of downside and, in this case, it really worked out!

I would be interested in hearing your take on predictions, particularly in the media. Most are trivial (who is going to win the World Series), but some are consequential (what is the Fed going to do?). It strikes me that there are no consequences for making wrong predictions, however they can be a useful input for decision making. How do you look at them - do you have trusted sources that you might trust enough to use as an input? Ignore them all? When I was predicting TV ratings for a living, we used to say we were trying to make the "least wrong" estimate. Thanks! -Greg G

You have hit on just the right issue with predictions in the media: There really isn’t any downside to getting it wrong! There are lots of jokes floating around about Jim Cramer and the inverse Jim Cramer ETF. Basically, people love to float examples of how if Cramer recommends something you should do the opposite. If true, I guess that would make him great signal, just not in the way he is selling himself! I don’t know if he is or isn’t terrible at forecasting because I don’t think anyone ever checks so he keeps his job whether he is right or wrong.

Think about weather forecasters. They are actually held to account because they are predicting things that unfold almost immediately. If they were consistently wrong or if they were random, they would be fired because no one would stand for it when the quality of the forecasts is so immediately obvious.

But for most things pundits predict they are forecasting things that are much longer cycle, where the feedback takes a while to unfold. Separately, unlike weather forecasters, pundits don’t give precise probabilistic forecasts (there is a 30% chance of rain in the coverage area). Instead they use terms with super broad meanings like, “It is a likely that the Fed will raise rates in Q3.” What exactly does “likely” mean in this context. Is it a 50% chance? 75%? 92%? It is hard to say and without knowing exactly you can see how the pundit gets to be right whether the Fed raises rates or not. “As I said, it was likely the Fed was going to raise rates.” Or, “As I said, it was likely but not definite that the Fed was going to raise rates.”

The vagueness of the verbiage means you win if it unfolds and you win if it doesn’t.

Here is one of my favorite examples of vague verbiage from about two weeks before Russia invaded Ukraine:

I don’t know what “distinct possibility” means here. It sounds really precise but it isn’t precise at all because the meaning is so broad. Of course, in retrospect, it feels like Sullivan must have meant close to 100%. But that is only because we know what happened. At the time, there was still lots of argument about whether Russia was actually going to invade in this verbiage didn’t really help us to understand the likelihood of that happening.

Phil Tetlock, who wrote Superforcasting: The Art and Science of Prediction (with Dan Gardner), has devoted much of his career to this issue, arguing that without measurement and accountability predictions become meaningless noise. For more on this issue, this piece by Andrew and Michael Mauboussin in HBR is well worth the read.

That being said, there is signal to be had. Look for predictions that are explicit and scored so that you can understand the track record of the pundit. It is rare but you can find them (Nate Silver and Nate Cohn are examples that come to mind).

Second, look for consilience. When lots of different pundits are making the same prediction, that usually signals you should pay attention, particularly if the pundits are coming from different disciplines.

Boy, you have to wonder about juries. Making *such* high stakes decisions, and yet in a way that would seem to highlight every single bias / break every single protocol for making good decisions (except for maybe an initial anonymous vote?). I sort of shudder to think of it, now that I think of it! Any thoughts on this, or research that you would point to? -Karen Gerringer

This is definitely a huge issue! Jury deliberation basically breaks every best practice for high quality decision making; Independent elicitation of opinion, trying to not deliberate in group settings, etc. This paper by Devine, et. al., lays out a lot of the issues with jury deliberation.

In particular, one of the issues with group decision making is that the most confident person in the group tends to sway the opinion of the rest, as Ike Silver and Barbara Mellers have demonstrated. This is fine if the most confident person is right. But it is really bad if they aren’t. Devine, et. al. point out that this issue extends to the jury foreperson, who has outsized sway over the group.

All in all, this would be a ripe are for study. We would be better off if juries applied some simple decision hygiene techniques!