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#119 Todd Simkin: Making Better Decisions

Sep 7, 2021 1h 13m 31 insights
Todd Simkin calls on experiences from his lengthy career in financial services and educating traders to help Shane understand how to make better decisions. Simkin breaks down all the influences that go into how and why we make decisions, why financial decisions are different than inter-personal ones, the strategies involved with teaching other people to make better decisions, what he looks for when he’s hiring, the value of asking the right questions, and so much more. Simkin is Associate Director at Susquehanna International Group, a privately held trading and technology firm. During his 25 years with the company he has held a variety of roles, including responsibility for SIG’s firm-wide education and trader development, where he taught the company’s new traders what questions to ask and what criteria to weigh before making hugely impactful decisions for the firm. -- Go Premium: Members get early access, ad-free episodes, hand-edited transcripts, searchable transcripts, member-only episodes, and more. Sign up at: https://fs.blog/membership/ Every Sunday our newsletter shares timeless insights and ideas that you can use at work and home. Add it to your inbox: https://fs.blog/newsletter/ Follow Shane on Twitter at: https://twitter.com/ShaneAParrish
Actionable Insights

1. Embrace Probabilistic Thinking

Recognize that the world is not binary (will/won’t happen) but probabilistic, and think in terms of probabilities rather than certainties. This allows for a more nuanced understanding of reality and better decision-making in uncertain environments.

2. Talk Through Decisions Constructively

Regularly discuss your decision-making process and rationale with peers, fostering a culture that rewards truth-finding over individual action. This allows others to identify your biases (e.g., anchoring) and improves collective decision processes without personal attack.

3. Actively Seek Disconfirming Information

Cultivate an openness to being wrong and actively search for information that challenges your existing beliefs or decision processes, even if uncomfortable. This prevents ‘falling in love with your decision process’ and enables more accurate updates to your views.

4. Update Opinions Bayesian-style

Be willing to update your initial opinions and probabilities based on new information, using approaches that are inclusive of all available data. This is crucial for navigating information asymmetry and making better decisions as new data emerges.

5. Seek Feedback on Process, Not Results

When asking for feedback, describe the information available and your decision process at the time, without revealing the outcome. This avoids hindsight bias (‘resulting’) and focuses feedback on the quality of the decision-making process itself, which is vital for learning.

6. Model Decision Process, Not Just Outcomes

When teaching or guiding, explain the ‘how’ and ‘why’ behind your decisions, detailing your thought process and information considered, rather than just stating the correct action. This equips others with the tools to make better independent decisions and fosters constructive conversations.

7. Treat Life as Experiments

Approach situations as experiments, running them, getting feedback, updating your approach, and running new experiments. Experiments fail, but finding ways they fail is how they eventually succeed, leading to continuous learning and improvement.

8. Create Personal Rules for Cognitive Ease

Establish clear personal rules for recurring decisions (e.g., ‘I don’t eat dessert,’ ‘I exercise daily’) to lighten your cognitive load. This reduces the mental effort of repeatedly evaluating similar choices, making consistent positive behavior easier.

9. Apply the Principle of Charity

Assume others are sincere, well-intentioned, and knowledgeable, giving them the benefit of the doubt in conversations and interactions. This protects you from being exploited by those with better information (in competitive contexts) and fosters alignment and collaboration in interpersonal situations.

10. Practice Reflective Listening

When someone shares a problem, simply reflect back what you heard them say without immediately problem-solving or reframing. This makes the person feel heard and seen, allowing them space to clarify their own thoughts and gain understanding.

11. Start with ‘How do you feel?’

When someone comes to you with an issue, begin by asking ‘How do you feel about that?’ This helps you understand their emotional state and perspective before offering advice, fostering empathy and preventing misinterpretations.

12. Deliberately Plan for Time Freed

Before quitting a significant commitment, clearly articulate your reasons beyond frustration and develop a concrete plan for how you will productively use the freed time and resources. This ensures the decision is well-thought-out, prevents rash choices, and leads to a genuinely better outcome.

13. Consider Waiting as Low-Cost Option

When faced with a decision to quit, evaluate ‘waiting’ as a real option, acknowledging its daily costs but also its potential long-term benefits and the opportunity for a more informed decision. This allows for a more deliberate decision-making process, avoiding irreversible choices and potentially revealing unforeseen upsides.

14. Respond Inquisitively, Not Emotionally

When someone shares a difficult decision or problem, respond with inquisitive, non-emotional questions like ‘Help me understand better’ or ‘Tell me more,’ framed with an underlying message of love and support. This encourages open communication, helps you understand their perspective, and allows you to provide more effective support without judgment.

15. Lead with Acknowledged Shortcomings

When seeking feedback, especially from those in subordinate positions, start by honestly acknowledging your own shortcomings or areas for improvement, then ask open-ended questions like ‘what else?’ This creates a constructive, open environment that challenges behaviors, not the person, and invites genuine feedback.

16. Act on Feedback to Encourage More

When you receive feedback, make a conscious effort to act on it and demonstrate that you’ve incorporated it into your behavior or thinking. Failing to act on feedback is not just unhelpful; it’s hurtful and will cause people to stop providing valuable input in the future.

17. Prioritize Mental Health Hygiene

Regularly check in with a mental health professional (e.g., therapist) as a proactive measure for mental health hygiene, similar to annual dental cleanings or physical check-ups. This helps catch potential issues early, ensures things stay on track, and normalizes mental health care as a preventative practice.

18. Cultivate Good Habits Through Small Choices

Recognize that your character in crucial moments is built by a multitude of small, seemingly unimportant choices made daily over time, and focus on developing habits of discipline, self-sacrifice, duty, honor, and integrity. These consistent small choices determine your character and behavior in significant situations.

19. Scrutinize Tribal Information

When evaluating information, especially that which aligns with or challenges your group’s beliefs, actively dig into the quality of the source and the information itself. This helps avoid tribalism’s pitfalls, where people uncritically accept agreeable information and dismiss disagreeable information, regardless of its quality.

20. Guard Against Ego-Driven Discounting

Be aware of how personal stake or ego can lead you to discount new, disconfirming information. This helps counteract biases like confirmation bias and hindsight bias, which prevent accurate updates to your beliefs.

21. Identify Mutually Exclusive Information

Look for information or signals that cannot coexist in the same universe to identify inconsistencies in your understanding or assumptions. This helps in recognizing when your understanding or assumptions are flawed, prompting a re-evaluation.

22. Embrace ‘It Depends’ Nuance

Recognize that in complex situations with imperfect information, the answer often ‘depends’ on various factors. Engage in discussions that explore these dependencies to foster nuanced understanding and prepare for real-world uncertainty.

23. Calibrate Predictions with Feedback

To improve the accuracy of your probabilistic predictions, make many predictions, especially on uncorrelated events, to get frequent feedback. This allows you to calibrate your probability assessments over time and learn from a wide range of outcomes.

24. Approach Negotiations as Collaborations

Recognize that every negotiation is inherently a collaborative effort because the other party has alternatives and will only engage if they expect a better outcome. This mindset encourages finding mutually favorable outcomes, ensuring continued engagement and positive future interactions.

25. Challenge Interviewees to ZPD

In interviews, aim to challenge candidates to the edge of their current competence (their Zone of Proximal Development) by providing minimal support. This reveals their potential for growth with support and their openness to feedback, which are key indicators of future success.

26. Seek Eager Feedback Users

When evaluating people (e.g., for hiring), identify those who are hungry and eager to use feedback and available tools to do the work themselves. These individuals are more likely to be successful and adaptable in challenging environments.

27. Value Hard Work and Dedication

Dedicate yourself to a purpose and be willing to work incredibly hard, recognizing that sustained effort often leads to long-term benefits and opportunities. Hard work provides payment in the long run and helps achieve important life goals.

28. Prioritize Quality Education

Make significant sacrifices, if necessary, to secure a high-quality education for yourself or your children. Education is highly valued and provides greater opportunity and a better foundation for life.

29. End Conversations with Genuine Affection

Make it a habit to end conversations with loved ones by genuinely expressing ‘I love you,’ ensuring it’s a real and purposeful closing. This reinforces a baseline understanding of unconditional love and support, regardless of disagreements or daily interactions.

30. Master the Rules of the Game

When engaging in any activity where outcomes depend on strategic decisions (like betting or investing), deeply understand and master the underlying rules and mechanics. This ensures you’re thinking clearly about risk allocation and decision-making within the specific context, preventing fundamental errors.

31. Cultivate Broad Knowledge

Actively engage in activities that broaden your general knowledge across various subjects, such as brushing up on history or literature. This allows you to quickly recall information and make connections, as demonstrated by the ability to answer diverse questions.