Thursday, May 27, 2021

Book Notes: Shape Up: Stop Running in Circles and Ship Work that Matters

 As part of improving our delivery process, I decided to read the book Shape Up: Stop Running in Circles and Ship Work that Matters. This post is a collection of notes from this book. 

Who is this book for?

This book is for product development teams who want to learn new way to think about shipping a product. It teaches you techniques and tools to define focused projects, address unknowns, and increase collaboration and engagement within the team.

Usual Disclaimer

This post is by no means a summary of the book, the notes mentioned here are extracts from the book. If you find these interesting, please pickup a copy of the book and give it a go.

Book Notes


As software teams start to grow, some common struggles appear:
  • Team members feel like projects go on and on, with no end in sight.
  • Product managers can’t find time to think strategically about the product.
  • Founders ask themselves: “Why can’t we get features out the door like we used to in the early days?”

Six-week cycles

Six weeks is long enough to build something meaningful start-to-finish and short enough that everyone can feel the deadline looming from the start, so they use the time wisely. The teams that run the six-week cycles are called the cycle teams.

Shaping the work

A small senior group works in parallel to the cycle teams. They define the key elements of a solution before we consider a project ready to bet on. Projects are defined at the right level of abstraction: concrete enough that the teams know what to do, yet abstract enough that they have room to work out the interesting details themselves.

Instead of asking how much time it will take to do some work, ask: How much time do we want to spend?

Making teams responsible

Give full responsibility to a small integrated team. They define their own tasks, make adjustments to the scope, and work together to build vertical slices of the product one at a time. 

Targeting risk

At every step of the process, target a specific risk: the risk of not shipping on time. You can have the best strategy in the world, but if you can’t act on it, what good does it do?

  • In the shaping process, reduce the risk by solving open questions before committing the project to a time box.
  • In the planning process, reduce the risk by capping the bets to six weeks. If a project runs over, by default it doesn’t get an extension. This “circuit breaker” ensures that we don’t invest multiples of the original appetite on a concept that needs rethinking first.
  • In the building process, reduce the risk by integrating design and programming early. The team sequences the work from the most unknown to the least worrisome pieces and learns what works and what doesn’t by integrating as soon as possible.

Principles of Shaping

We need to Shape the work at the right level of abstraction: not too vague and not too concrete.

When design leaders go straight to wireframes or high-fidelity mockups, they define too much detail too early. This leaves designers no room for creativity.

On the other end of the spectrum, projects that are too vague don’t work either. When a project is defined in a few words, nobody knows what it means.

Properties of shaped work are:
  • It's Rough: Designers and programmers need room to apply their own judgement and expertise when they roll up their sleeves and discover all the real trade-offs that emerge.
  • It's Solved: All the main elements of the solution are there at the macro level and they connect together
  • It's Bounded: Shaped work indicates what not to do. It tells the team where to stop. There’s a specific appetite — the amount of time the team is allowed to spend on the project. Completing the project within that fixed amount of time requires limiting the scope and leaving specific things out.
Shaping is a closed-door, creative process. You might be alone sketching on paper or in front of a whiteboard with a close collaborator. When working with a collaborator, you move fast, speak frankly and jump from one promising position to another.

You can’t really schedule shaping work because, by its very nature, unshaped work is risky and unknown. For that reason we have two separate tracks: one for shaping, one for building. During any six week cycle, the teams are building work that’s been previously shaped and the shapers are working on what the teams might potentially build in a future cycle.

Here are the steps for shaping:
  • Set boundaries: First we figure out how much time the raw idea is worth and how to define the problem. 
  • Rough out the elements: Then comes the creative work of sketching a solution. We do this at a higher level of abstraction than wireframes in order to move fast. 
  • Address risks and rabbit holes: Take a hard look at the solution to find holes or unanswered questions that could trip up the team. Amend the solution, cut things out of it or specify details at certain tricky spots 
  • Write the pitch: Package the whole thing with a formal write-up called a pitch. The pitch summarizes the problem, constraints, solution, rabbit holes, and limitations. 

Set Boundaries

The first step of shaping is setting boundaries on what we’re trying to do. Sometimes an idea gets us excited right away. In that case we need to temper the excitement by checking whether this is really something we’re going to be able to invest time in or not. Other ideas are less exciting and feel more like a challenge we didn’t ask for. 

It helps to explicitly define how much of our time and attention the subject deserves. 
  • Is this something worth a quick fix if we can manage?
  • Is it a big idea worth an entire cycle? 
  • Would we redesign what we already have to accommodate it? 
  • Will we only consider it if we can implement it as a minor tweak?
This is called the appetite. Appetite can be thought of as a time budget for a standard team size.

An appetite is completely different from an estimate. Estimates start with a design and end with a number. Appetites start with a number and end with a design. This principle, called “fixed time, variable scope,” is key to successfully defining and shipping projects. 

It’s too early to say “yes” or “no” on first contact. Even if we’re excited about it, we shouldn’t make a commitment that we don’t yet understand. In addition to setting the appetite, we usually need to narrow down our understanding of the problem.

When it comes to unclear ideas, the worst offenders are “redesigns” or “refactorings” that aren’t driven by a single problem or use case. When someone proposes something like “redesign the Files section,” that’s a grab-bag, not a project. It’s going to be very hard to figure out what it means, where it starts, and where it ends. Another sign of a grab-bag is the “2.0” label.

Find the Elements

Now that we have the constraints of an appetite and the problem we’re solving, it’s time to get from an idea in words to the elements of a software solution. Two things enable us to move at the right speed at this stage:

  • We need to have the right people—or nobody—in the room. Either we’re working alone or with a trusted partner who can keep pace with us
  • We need to avoid the wrong level of detail in the drawings and sketches.

The challenge here is to be concrete enough to make progress on a specific solution without getting dragged down into fine details 


A breadboard is an electrical engineering prototype that has all the components and wiring of a real device but no industrial design. We can sketch and discuss the key components and connections of an interface idea without specifying a particular visual design.
  • Places: These are things you can navigate to, like screens, dialogs, or menus that pop up. 
  • Affordances: These are things the user can act on, like buttons and fields.
  • Connection lines: These show how the affordances take the user from place to place.

Fat marker sketches

Sometimes the idea we have in mind is a visual one. In those cases Fat marker sketches come in handy. A fat marker sketch is a sketch made with such broad strokes that adding detail is difficult or impossible. 

This list of elements is extremely narrow and specific. It is exactly the kind of narrowing we hope to accomplish through the shaping process. 

Working at the right “level of abstraction” not only ensures we move at the right speed, it also leaves this important room for creativity in the later stages. 

What we’ve done is landed on an approach for how to solve the problem. But there may be some significant unknowns or things we need to address before we’d consider this safe to hand off to a team to build successfully. 

Also keep in mind that, at this stage, we could walk away from the project. We haven’t bet on it. We haven’t made any commitments or promises about it. What we’ve done is added value to the raw idea by making it more actionable.

Risks and Rabbit Holes

We’re shaping work for a fixed time window. We may trust from our experience that the elements we fleshed out in the previous chapter are buildable within the appetite (six weeks). But we need to look closer, because all it takes is one hole in the concept to derail that. 

In this step, we slow down and look critically at what we came up with.  
  • Did we miss anything? 
  • Are we making technical assumptions that aren’t fair?
  • Does this require new technical work we’ve never done before?
  • Are we making assumptions about how the parts fit together?
  • Are we assuming a design solution exists that we couldn’t come up with ourselves?
  • Is there a hard decision we should settle in advance so it doesn’t trip up the team? 
It is a good idea to call out any cases you specifically aren’t supporting to keep the project well within the appetite. There may be parts of the solution we got excited about during the sketching phase that aren’t really necessary. 

Before you’re ready to write up the idea to share more widely, you might need input on some parts of the concept you aren’t completely sure about. There may be a technical assumption that you need to verify with someone who understands the code better. This is a good time to grab some technical experts and walk them through the idea.  

Beware the simple question: “Is this possible?” In software, everything is possible but nothing is free. We want to find out if it’s possible within the appetite we’re shaping for. Instead of asking “is it possible to do X?” ask “is X possible in 6-weeks?” 

At the end of this stage, we have the elements of the solution, patches for potential rabbit holes, and fences around areas we’ve declared out of bounds. We’ve gone from a roughly formed solution with potential risk in it to a solid idea that we now hope to bet on in the future.

Write the Pitch

The purpose of the pitch is to present a good potential bet. It’s basically a presentation. The ingredients are all the things that we need to both capture the work done so far and present it in a form that will enable the people who schedule projects to make an informed bet. 

A good pitch will have the following 5 ingredients:

  • Problem — The raw idea, a use case, or something we’ve seen that motivates us to work on this
  • Appetite — How much time we want to spend and how that constrains the solution
  • Solution — The core elements we came up with, presented in a form that’s easy for people to immediately understand
  • Rabbit holes — Details about the solution worth calling out to avoid problems
  • No-gos — Anything specifically excluded from the concept: functionality or use cases we intentionally aren’t covering to fit the appetite or make the problem tractable 

Bets, Not Backlogs

Backlogs are a big weight we don’t need to carry. Dozens and eventually hundreds of tasks pile up that we all know we’ll never have time for. Before each six-week cycle, hold a betting table where stakeholders decide what to do in the next cycle. At the betting table, they look at pitches from the last six weeks — or any pitches that somebody purposefully revived and lobbied for again. If it's decided to bet on a pitch, it goes into the next cycle to build. If not, then it's let go. There’s nothing to track or hold on to.

Six-week cycles

We wanted a cycle that would be long enough to finish a whole project, start to end. At the same time, cycles need to be short enough to see the end from the beginning. People need to feel the deadline looming in order to make tradeoffs. If the deadline is too distant and abstract at the start, teams will naturally wander and use time inefficiently until the deadline starts to get closer and feel real. After each six-week cycle, we schedule two weeks for cool-down.

The Betting Table

The betting table is a meeting held during cool-down where stakeholders decide what to do in the next cycle. The output of the call is a cycle plan. Buy-in from the very top is essential to making the cycles turn properly. The meeting is short, the options well-shaped, and the headcount low.  

If we bet six weeks, then we commit to giving the team the entire six weeks to work exclusively on that thing with no interruptions. Teams have to ship the work within the amount of time that we bet. If they don’t finish, by default the project doesn’t get an extension.

The cool-down period between cycles can be used to fix bugs.  If a bug is too big to fix during cool-down, it can compete for resources at the betting table. 

Place Your Bets

When we add features to an existing product, we follow the standard Shape Up process: shape the work, bet on it, and give it to a team to build. 

New products are different. Whereas adding to an existing product is like buying a couch for a room with fixed dimensions, new product development is like figuring out where the walls and the foundation should go so the building will stand

In the R&D Mode, instead of betting on a well-shaped pitch, we mainly bet the time on spiking some key pieces of the new product idea. The shaping is much fuzzier because we expect to learn by building. Rather than delegating to a separate build team, senior people will make up the team. The aim is to spike, not to ship.

Next comes the production mode, where we work in formal cycles with clear-cut shaping, betting, and building phases.

In the final phase before launching the new product, we throw all structure out the window. It's called the clean-up mode. There’s something about putting your finger near the launch button that makes your hair stand up. That’s why we need to reserve some capacity at the end for the unexpected. In cleanup mode.

Some questions that you might hear on the betting table:
  • Does the problem matter? 
  • Is the appetite right? 
  • Is the solution attractive?
  • Is this the right time? 
  • Are the right people available?

After the bets are made, someone from the betting table will write a message that tells everyone which projects we’re betting on for the next cycle and who will be working on them.

Hand Over Responsibility

Don’t start by assigning tasks to anyone. Splitting the project into tasks up front is like putting the pitch through a paper shredder. Everybody just gets disconnected pieces. The team is going to define their own tasks and their own approach to the work. They will have full autonomy and use their judgement to execute the pitch as best as they can 

At the end of the cycle, the team will deploy their work. This constraint keeps us true to our bets and respects the circuit breaker. The project needs to be done within the time we budgeted; otherwise, our appetite and budget don’t mean anything.
Work in the first few days doesn’t look like “work.” No one is checking off tasks. Nothing is getting deployed. There aren’t any deliverables to look at.  Why? Because each person has their head down trying to figure out how the existing system works and which starting point is best 

An important difference between tasks we think we need to do at the start of a project and the tasks we discover we need to do in the course of doing real work. The team naturally starts off with some imagined tasks—the ones they assume they’re going to have to do just by thinking about the problem. Then, as they get their hands dirty, they discover all kinds of other things that we didn’t know in advance

Getting One Piece Done

If the team completes a lot of tasks but there’s no “one thing” to click on and try out, it’s hard to feel progress.  Lots of things are done but nothing is really done. Instead they should aim to make something tangible and demoable early—in the first week or so.

Here are three criteria to think about when choosing what to build first:

  • It should be core.  
  • It should be small 
  • It should be novel 

Map The Scopes

When asked to organize tasks for a project, people often separate work by person or role. This leads to people will completing tasks, but the tasks won’t add up to a finished part of the project early enough. Instead, they should create lists based on the structure of the project. 

In product development, the categories aren’t pre-cut for us. We usually build things we’ve never built before. We break the overall scope (singular) of the project into separate scopes (plural) that can be finished independently of each other.

As the team starts doing real work on the project they learn how the tasks are related and what the structure of the project is really like. Then they become able to factor the project into scopes. This is like dividing the map of the project into separate territories. The scopes reflect the meaningful parts of the problem that can be completed independently and in a short period of time—a few days or less. They are bigger than tasks but much smaller than the overall project.

Well-made scopes show the anatomy of the project. Every project has a natural anatomy that arises from the design you want, the system you’re working within, and the interdependencies of the problems you have to solve. 

New tasks constantly come up as you get deeper into a problem. A good way to deal with all those improvements is to record them as tasks on the scope but mark them with a ~ in front. This allows everyone on the team to constantly sort out the must-haves from the nice-to-haves 

Show Progress

Good-hearted managers don’t like asking for status. Managers would rather be able to see the status themselves when- ever they need to. In our naive notion of a list that’s planned up-front, somebody popu- lates it with items that are gradually checked off. In real life, issues are discovered by getting involved in the problem. That means to-do lists actually grow as the team makes progress.

Estimates don't show uncertainty. To see the status of the project without counting tasks and without numerical estimates we need to shift the focus from what’s done or not done to what’s unknown and what’s solved.

Work is like a hill

Every piece of work has two phases. First there’s the uphill phase of figuring out what our approach is and what we’re going to do. Then, once we can see all the work involved, there’s the downhill phase of execution. 

The scopes give us the language for the project (“Locate,” “Reply”) and the hill describes the status of each scope (“uphill,” “downhill”). To see the status of the scopes, we can plot each one as a different color on the hill.

Nobody wants to raise their hand to management and say “I don’t know how to solve this problem.” This causes teams to hide uncertainty and accumulate risk. The hill chart allows everybody to see that somebody might be stuck without them actually saying it. A dot that doesn’t move is effectively a raised hand: “Something might be wrong here.”

It’s good to think of the uphill to be divided into three parts: 
  • I’ve thought about this
  • I’ve validated my approach
  • I’m far enough with what I’ve built that I don’t believe there are other unknowns.

Some scopes are riskier than others. It’s better to get a few critical scopes over the top early in the project and leave the screw-tightening for later.

Decide When To Stop

Shipping on time means shipping something imperfect. There’s always some queasiness in the stomach as you look at your work and ask yourself: Is it good enough? Is this ready to release? 

Instead of comparing up against the ideal, compare down to baseline—the current reality for customers. How do customers solve this problem today, without this feature? What’s the frustrating workaround that this feature eliminates? How much longer should customers put up with something that doesn’t work or wait for a solution because we aren’t sure if design A might be better than design B? 

Seeing that our work so far is better than the current alternatives makes us feel better about the progress we’ve made. This motivates us to make calls on the things that are slowing us down.

Scope grows naturally. Scope creep isn’t the fault of bad clients, bad managers, or bad programmers. Rather than trying to stop scope from growing, give teams the tools, authority, and responsibility to constantly cut it down.

As we come up with things to fix, add, improve, or redesign during a project, we ask ourselves:
  • Is this a “must-have” for the new feature?
  • Could we ship without this?
  • What happens if we don’t do this?
  • Is this a new problem or a pre-existing one that customers already live with?
  • How likely is this case or condition to occur?
  • When this case occurs, which customers see it? Is it core—used by everyone—or more of an edge case?
  • What’s the actual impact of this case or condition in the event it does happen?
  • When something doesn’t work well for a particular use case, how aligned is that use case with our intended audience? 

Move On

It’s important to stay cool and avoid knee-jerk reactions. Give it a few days and allow it to die down. Be firm and remember why you made the change in the first place and who the change is helping. Remember, the thing you just shipped was a six-week bet. If this part of the product needs more time, then it requires a new bet. 


I loved reading this book. It gives a different way of thinking about how to build and ship things. I am going to try to implement learnings from this book to actual projects. It's a must read for people who want to improve their building and shipping processes.

Wednesday, March 31, 2021

Book Notes: Traction Get A Grip On Your Business

My partner recommend reading the book "Traction Get A Grip On Your Business" by Gino Wickman. It offers practical advice on how to run a small business ($2M-$20M in revenue) smoothly and with a lot of structure around it. 

Who is this book for?

This book is good read for any business owner and their management teams. It gives practical and simple advice for running and taking the business to the next level. 

Usual Disclaimer

This post is by no means a summary of the book, the notes mentioned here are extracts from the book. If you find these interesting, please pickup a copy of the book and give it a go.

Book Notes

The Entrepreneurial Operating System (EOS)

Every great system is made up of a core group of basic components. The Entrepreneurial Operating System (EOS) identifies six key components of any organisation. 
  • Vision 
    • Successful business owners not only have compelling visions for their organisations, but also know how to communicate those visions to the people around them. 
  • People
    • Successful leaders surround themselves with great people. 
  • Data
    • The best leaders rely on a handful of metrics to help manage their business. 
  • Issues
    • Issues are the obstacles that must be faced to execute your vision. 
  • Process
    • Your processes are your way of doing business. Successful organisations see their way clearly and constantly refine it.
  • Traction
    • Most successful business leaders are the ones with traction. They execute well, and they know how to bring focus, accountability and discipline into their organisation.

Letting Go Of The Vine

Most business owners are unable to reach the next level because they are simply not ready to let go of the vine. You want to see your business grow, but at the same time, you're frustrated, tired and unwilling to take on any more risk. The truth is that before you can grow, you'll need to take a leap of faith. 

With right vision structure and people in place, your company can evolve an realise its full potential. You must be willing to embrace the following four fundamental beliefs:
  • Build and maintain a true leadership team
  • Hitting the ceiling is inevitable
  • Run your business on one operating system
  • Be open-minded, growth-oriented and vulnerable.
The philosophy of this book advocates a healthy leadership team. This team of people define the company's vision with you. These leaders all have clearly accountabilities and must be able to take initiative over their respective departments. 

Each of your departmental heads should be better than you in his or her respective position. You will need to give them clear expectations and instill a system of effective communication and accountability. 

Reaching the natural limits of your existing resources is a by-product of growth, and a company continually needs to adjust its existing state if it hopes to expand through the next ceiling. If you're not growing, be it internally or externally, you're dying. Most companies strive for external growth, but internal growth also leads to future greatness. Most companies need to start with a focus on internal growth before they can even think about external growth. 

Your leaders need to be able to simplify, delegate, predict, systemise and structure. 


You will need to learn how to delegate and elevate. As you figure out how to build and extension of yourself, your team can also extend the company by building teams under them.


Long-term predicting is the forecast of everything 90 days and beyond. To do so, your leadership team has to know where the organisation is going and how you expect to get there. You do this by starting with the far future and working your way back. 

Short-term prediction focuses on the immediate future. These are the issue that will arise on a daily of weekly basis, and your ability to solve them will affect the long term greater good of the organisation.


There are really only a handful of core processes that make any organisation function. Systemising involves clearly identifying what those core processes are and integrating them into a fully functioning machine. The processes must all work together in harmony, and the methods you use should be crystal clear to everyone at all levels of the organisation.


Your company needs to be organised in a way that reduces complexity and creates accountability. In addition, this structure should also be designed to boost you to the next level. 

You must have one binding vision, one voice, one culture, and one operating system. This includes a uniform approach to how you meet, how you set priorities, how you plan and set your vision, the terminology you use and the way you communicate with employees. This is called the operating system of the business and this is what puts everyone on the same page. 

You have to be willing to be open to new and different ideas. If you don't know something, you have to admit that you don't know. You have to be willing to ask for and receive help. Most of all, you have to know your strengths and weaknesses and let other people who are more skilled than you in certain areas take charge. 

The Vision

Clarify your vision and you will make better decisions about people, processes, finances, strategies and customers. 

Entrepreneurs must get their vision out of their heads and down onto paper. From there, they must share it with their organisation so that everyone can see where the company is going and determine if they want to go there with you. 

If you could get all people in an organisation rowing in the same direction, you could dominate any industry, in any market, against any competition, at any time.

To create a strong vision, answer eight important questions.

  • What are your core values?
  • What is your core focus?
  • What is your 10-year target?
  • What is your marketing strategy?
  • What is your three year picture
  • What is your one year plan
  • What are your quarterly Rocks?
  • What are your issues?

What are your core values?

Core values are small set of vital and timeless guiding principles for your company. Once they are defined, you must hire, fire, review reward and recognise people based on these core values. This is how to build a thriving culture around them. 

What is your core focus?

Business can easily become distracted by opportunities that are wolves in sheep's clothing. Your job as a leadership team is to establish your organisation's core focus and not to let anything distract you from that. 

What is your 10-year target?

This target is one larger-thank-life goal that everyone is working toward, the thing that gives everyone in the organisation a long range direction. Once your 10 year target is clear, you and your leadership team will start doing things differently in the here and now so as to get you there.

What is your marketing strategy?

Marketing strategy creates a laser sharp focus for your sales and marketing efforts. A focused effort will enable you to sell and close more of the right businesses. It will become the foundation upon which you create all future materials, plans, messages and advertising. It's made up of four elements:

  • Your Target Market
  • Your Three Uniques
  • Your Proven Process
  • Your Guarantee 

Your Target Market

Identifying your target market involves defining your ideal customers. Who are they? Where are they? What are they?

Your Three Uniques

These are what makes you different, what make you stand out and what you're competing with. 

Your Proven Process

There is a proven way you provide your service or product to your customers. You do it every time, and it produces the same result.

Your Guarantee

A guarantee is your opportunity to pinpoint an industry-wide problem and solve it. This is typically a service or quality problem. you must determine what your customers can count on from you. 

What is your three year picture?

This illustrates what your business will look like three short years from now. This will accomplish two vital objectives. First your people will be able to "see" what you're saying. Second, it greatly improves the one year planning process. 

What is your one-year plan?

This essentially means deciding what must get done this year. Most companies make the mistake of trying to accomplish too many objectives per year. By trying to get everything done all at once, they end up accomplishing very little and feeling frustrated. 

What are your quarterly rocks?

This section determines what the most important priorities are for the coming quarter. Those priorities are called rocks. Quarterly Rocks create a 90-Day world of your organisation, a powerful concept that enables you to gain tremendous traction. 

What are your issues?

This identifies all the obstacles that could prevent you from reaching your targets. The sooner you accept that you have issues, the better off you're going to be. Everyone has them; your success if in direct proportion to your ability to solve them. 

The People 

The right people are the ones who share your company's core values. They fit and thrive in your culture. They are people you enjoy being around and who make your organisation a better place to be. 

The right seat means that each of your employees is operating within his or her area of greatest skill and passion inside your organisation and that the roles and responsibilities expected of each employee fit with his or her unique ability. 

The Accountability Chart

This forces its users to view their organisation in a different way and to address people issues that have been holding them back for years. 


The integrator is the person who harmoniously integrates the major function of the business. When those major functions are strong and you have strong people accountable for each, great health friction and tension will occur between them. The integrator blends that friction into greater energy for the company as a whole. 


This person typically has 10 new ideas a week, Nine of them might not be great, but one usually is, and it's that one idea each week that keep the organisation growing. 


GWC stands for get it, want it, and capacity to do it

Get it simply means that they truly understand their role, the culture, the systems, the pace, and how the job comes together. 

Want It means they genuinely like the job. They understand the role, and they want to do it based on fair compensation and the responsibility. 

Capacity To Do It means having the time as well as the mental, physical and emotional capacity to do a job well. 

The Data

To gain the power of being able to manage your business though a chosen handful of numbers. These numbers will allow you to monitor your business on a weekly basis, quickly showing which activities are on track or off track. 


It is handful of numbers that can tell you at a glance how your business is doing. 


What gets measured gets done. Everyone has a number, from the founder and chairman to the receptionist. 

  • Numbers cut through murky subjective communication between manager and direct reports. 
  • Numbers create accountability 
  • Accountable people appreciate numbers.
  • Numbers create clarity and commitment
  • Numbers create competition
  • Numbers produce results
  • Numbers create teamwork.
  • Numbers help you solve problems faster.

The Issues Component

The forth essential component of gaining traction is having the discipline to face and solve your organisation's issues as they arise. Successful companies solve their issues. They don't let the linger for weeks, months and years at a time. 

To solve the issues first you need to list them. The three steps to solving the issues are 
  • Identify
  • Discuss
  • Solve


Clearly identify the real issue, because the stated problem is rarely the real one. The underlying issue is always a few layers down. Most of the time, the stated problem is a symptom of the real issue, so you must find the root of the matter. 


In its simplest form, the discussion step is everyone's opportunity to say everything they have to say about the issue. You get everything on the table in an open environment where nothing is sacred. 


This step is a conclusion or solution that usually becomes an action item for someone to do. The item ends up on the ToDo list, and when the action item is completed, the issue goes away forever. Solving issues takes time. By solving issues now, you'll save time exponentially across departments by eliminating all future symptomatic issues. 

The 10 commandments of Solving Issues

  • Thou Shalt Not Rule by Consensus
  • Thou Shalt Not Be a Weenie
  • Thou Shalt Be Decisive
  • Thou Shalt Not Rely on Secondhand Information
  • Thou Shalt Fight for the Greater Good
  • Thou Shalt Not Try to Solve Them All
  • Thou Shalt Live with It, End It or Change It
  • Thou Shalt Choose Short-Term Pain and Suffering
  • Thou Shalt Enter the Danger
  • Thou Shalt Take a Shot 

The Process

Nothing can be fine-tuned until it's first consistent. The process component is strengthened through your understanding of handful of core processes that make up your unique business model. 

First step in fine-tuning the process is to document it. The steps that need to be followed are:

  • Identify your core processes
  • Document each of the core processes
  • Package It
Once the processes are documented, everyone needs to start following the processes. The clear lines of process enable you to let go and gain more control. 

The Traction

Gaining traction means making your vision a reality. At this moment, your vision is crystal clear, you have the right people in the right seats, you're managing data, you're solving your issues, and you've defined your Way of doing business and everyone is following it. 


With a clear long-term vision in place, you're ready to establish short-term priorities that contribute to achieving your vision. These 3-7 most important priorities for the company myst be done in the next 90 days. These priorities are called Rocks. 

A rock must be clear so that at the end of the quarter, there is no ambiguity whether it was done or not. 

Meeting Pulse

It's possible to hold extremely productive meetings that actually save time. The Meeting Pulse is your organisation's heartbeat. Rather than long, meandering meetings, a Meeting Pulse with a specific agenda throughout your departments will keep your organisation healthy. 

The 90-Day World

As a part of your vision, you created a three year picture. After that came a one-year plan and now a 90-Day world.

The Weekly Meeting Pulse

Once the quarterly priorities are set, you must meet on a weekly basis to stay focused, solve issues, and communicate. Weekly meeting pulse is your opportunity to make sure that everything is on track. 

Always A Level 10 Meeting

Most meetings in business are weak and. not very productive. A Weekly Level 10 Meeting keeps you focused on what's important, helps you spot developing problems, and then drives you to solve them. What makes for great meetings is solving problems. 

Pulling It All Together

The combination of strengthening the Vision, People, Data, Issues, Process and Traction components is what makes the real magic occur. 

Everything has its place. Anything that must be accomplished this year becomes a goal. If it needs to get done this quarter and will take weeks or months to accomplish, it becomes a Rock. Any issues that arise during the quarter and must be solved now go onto your weekly level 10 meeting. 

It's crucial for greater good of the company, its culture, and people that the leadership is 100% on the same page. 

Most leaders spend most of the time overwhelmed, tired and buried in the day-to-day routine, unable to see beyond tomorrow. As a result, they don't solve problems as well as they could, they don't lead their people as well as they could. Great leaders have a habit of taking quite thinking time.


This book provides a practical guide to putting a structure in place for small sized companies. It a small book and a good read for any person in the leadership position. 

Thursday, February 25, 2021

Book Notes: Thinking, Fast and Slow

Continuing my journey to make better decisions, I decided to read the book Thinking, Fast and Slow by Daniel Kahneman. The author takes us on a groundbreaking tour of the mind and explains the two systems that drive the way we think. System 1 is fast, intuitive, and emotional; System 2 is slower, more deliberative, and more logical.  

Who is this book for?

This book is a recommended read for everyone. It helps us understand how we think and how to avoid falling into traps that lead us to making bad decisions. 

Disclaimer: This post is by no means a summary of the book, I would encourage everyone to go ahead and grab the book and give it a go.

Book Notes


When faced with a difficult question, we often answer an easier one instead, usually without noticing the substitution. The spontaneous search for an intuitive solution sometimes fails - neither an expert solution nor an heuristic answer comes to mind. In such cases we often find ourselves switching to a slower, more deliberate and effortful form of thinking. This is the slow thinking. 

Fast thinking includes both variants of intuitive thought - the export and the heuristic - as well as the entirely automatic mental activity of perception and memory, the operations that enable you to know there is a lamp on your desk or retrieve the name of the capital of Russia. The intuitive System 1 is more influential than your experience tells you, and it is the secret author of many of the choices and judgements you make. 

The Characters of the Story

There are two systems in the mind System 1 and System 2. 

  • System 1 operates automatically and quickly, with little or no effort and no sense of voluntary control.
  • System 2 allocates attention to the effortful mental activities that demand it, including complex computations.
System 1 continuously generate suggestions for System 2: impressions, intuitions, intentions and feelings. If endorsed by System 2, impressions and intuitions turn into beliefs, and impulses turn into voluntary actions. When all goes smoothly, which is the most of the time, System 2 adopts the suggestions of System 1 with little or not modification. 

When System 1 runs into difficulty, it calls for System 2 to support more detailed and specific processing that may solve the problem of the moment. System 2 is mobilised when a question arises for which System 1 dos not offer an answer. System 2 takes over when things get difficult, and it normally has the last word. 

The division of labor between System 1 and System 2 is highly efficient: it minimises effort and optimises performance. The arrangement works well most of the time but System 1 has biases, systematic errors that it is prone to make in specified circumstances. Another limitation of System 1 is that it cannot be turned off. 

Conflict between an automatic reaction and an intention to control it is common in our lives. Because System 1 operates automatically and cannot be turned off at will, errors of intuitive thought are often difficult to prevent. Biases cannot always be avoided, because System 2 may have no clue to the error. Even when clues to likely errors are available, errors can be prevented only by the enhanced monitoring and effortful activity of System 2.

Attention and Effort

The response to mental overload is selective and precise: System 2 protects the most important activity, so it receives the attention it needs; "spare capacity" is allocated second by second to other tasks. The sophisticated allocation of attention has been honed by a long evolutionary history. Orienting and responding quickly to the gravest threats or most promising opportunities improved the chances of survival. 

As you become skilled in a task, its demand for energy diminishes. Studies of the brain have shown that the pattern of activity associated with an action changes as skill increases, with fewer brain regions involved. A general "low of least effort" applies to cognitive as well as physical exertion. People will eventually gravitate to the least demanding course of action. In the economy of action, effort is a cost, and the acquisition of skill is driven by the balance of benefits and costs. Laziness is built deep into our nature. 

System 2 is the only one that can follow rules, compare objects on several attributes, and make deliberate choices between options. The automatic System 1 does not have these capabilities. A crucial capability of System 2 is the adoption of "task sets": it can program memory to obey an instruction that overrides habitual responses. 

The Lazy Controller

The maintenance of a coherent train of thought and the occasional engagement in effortful thinking also require self-control. Frequent switching of tasks and speeded-up mental work are not intrinsically pleasurable, and that people avoid them when possible. This is how the law of least effort comes to be a law. A state of effortless concentration so deep that people lose their sense of time is called as flow. Flow neatly separates the two forms of effort: concentration on the task and the deliberate control of attention.  

System 1 has more influence on behaviour when System 2 is busy. People who are cognitively busy are also more likely to make selfish choices, use sexist language, and make superficial judgements in social situations. Self-control requires attention and effort. 

An effort of will or self-control is tiring; if you have had to force yourself to do something, you are less willing or less able to exert self-control when the next challenge comes around. This is called ego depletion. After exerting self-control in one task, you do not feel like making an effort in another, although you could do it if you really had to. Ego depletion is not the same mental state as cognitive busyness.

Those who avoid the sin of intellectual sloth could be called engaged. They are more alert, more intellectually active, less willing to be satisfied with superficially attractive answers, more skeptical about their intuitions. The psychologist would call them more rational. System 1 is impulsive and intuitive; System 2 is capable of reasoning, and it is cautious, but at least for some people it is also lazy

The Associative Machine

System 1 provides the impressions that often turn into your beliefs, and is the source of the impulses that often become your choice and your actions. It offers a tacit interpretation of what happens to you and around you, linking the present with the recent past and with expectations about the near future. It contains the model of the world that instantly evaluates events as normal or surprising. It is the source of your rapid and often precise intuitive judgements. It does most of this without your conscious awareness of its activities. System 1 is also the origin of many of the systematic errors in your intuitions. 

Cognitive Ease

Cognitive Ease has a range between Easy and Strained. Easy is a sign that things are going well. Strained indicates that a problem exists, which will require increased mobilisation of System 2. This is called cognitive strain. Cognitive strain is affected by both the current level of effort and the presence of unmet demands. When you are in the state of cognitive ease, you are probably in a good mood, like what you see, believe what you hear, trust your intuitions, and feel that the current situation is comfortably familiar. You are also likely to be relatively casual and superficial in your thinking. When you feel strained, you are more likely to be vigilant and suspicious, invest more effort in what you are doing, feel less comfortable, and make fewer errors, but you also are less intuitive and less creative than usual. 

The experience of familiarity has a simple but powerful quality of "pastness" that seems to indicate that it is a direct reflection of prior experience. The familiarity of one phrase in the statement sufficed to make the whole statement fell familiar, and therefore true. People can overcome some of the superficial factors that produce illusions of truth when strongly motivated to do so. But on most occasions, the lazy System 2 will adopt the suggestions of System 1 and march on. 

A good mood is a signal that things are generally going well, the environment is safe, and it is all right to let one's guard down. A bad mood indicates that things are not going very well, there may be a thread, and vigilance is required. Cognitive ease is both a cause and a consequence of a pleasant feeling. 

Norms, Surprises, and Causes

A large event is supposed to have consequences, and the consequences need causes to explain them. We have limited information about what happened on a day, and System 1 is adept at finding a coherent causal story and links the fragments of knowledge at its disposal. 

People are prone to apply casual thinking inappropriately, to situations that require statistical reasoning. Statistical thinking derives conclusions about individual cases from properties of categories and ensembles. Unfortunately, System 1 does not have capability for this mode of reasoning; System 2 can learn to think statistically, but few people receive the necessary training. 

A machine for Jumping to Conclusions

When uncertain, System 1 bets on an answer, and the bests are guided by experience. The rules of the betting are intelligent: recent events and the current context have most weight in determining an interpretation. When no recent event comes to mind, more distant memories govern. Jumping to conclusions is efficient if the conclusions are likely to be correct and cost of an occasional mistake acceptable, and if the jump saves much time and effort. Jumping to conclusions is risky when the situation is unfamiliar, the stakes are high, and there is no time to collect more information. These are the circumstances in which intuitive errors are probable, which may be prevented by a deliberate intervention of System 2. 

How Judgments Happen

System 1 carries out many computations at any one time. Some of these are routine assessments that go on continuously. No intention is needed to trigger this operation. But there are other computations which are undertaken only when needed. The occasional judgements are voluntary. They occur only when you intend them to do so. However, the control over intended computations is far from precise: we often compute much more than we want or need. This excess computation is called the mental shotgun

Answer an Easier Question

If a satisfactory answer to a hard question is not found quickly, System 1 will find a related question that is easier and will answer it. This operation of answering one question in place of another is called substitution. the target question is the assessment you intend to produce. The heuristic question is the simpler question that you answer instead. 

The Law of Small Numbers

The law of small numbers is a manifestation of a general bias that favours certainty over doubt. System 1 runs ahead of the facts in constructing a rich image on the basis of scraps of evidence. A machine for jumping to conclusions will act as if it believed in the law of small numbers. It will produce a representation of reality that makes too much sense. 


Anchoring effect occurs when people consider a particular value for an unknown quantity before estimating that quantity. The estimates stay close to the number that people considered. The effects of random anchors have much to tell us about the relationship between System 1 and System 2. System 2 works on data that is retrieved from memory, in an automatic and involuntary operation of System 1. System 2 is therefore susceptible to the biasing influence of anchors that make some information easier to retrieve. Furthermore, System 2 has no control over the effect and no knowledge of it. 

The Science of Availability

The availability heuristic, like other heuristics of judgement, substitutes one question for another: you wish to estimate the size of a category or the frequency of an event, but you report an impression of the ease with which instances come to mind. Substitution of questions inevitably produces systematic errors. The ease with which instances come to mind is a System 1 heuristic, which is replaced by a focus on content when System 2 is more engaged. 

Availability, Emotion, and Risk

All heuristics are equal, but availability is more equal than the others. An availability cascade is a self-sustaining chain of events, which may start from media reports of a relatively minor event and lead up to public panic and large scale government action. We have a basic limitation in the ability of our mind to deal with small risks: we either ignore them altogether or give them far too much weight - nothing in between. 

Tom W's Speciality

System 1 generate an impression of similarity without intending to do so. We rely on representativeness when we judge the potential leadership of a candidate for office by the shape of his chin or the forcefulness of his speeches. Prediction by representativeness is not statistically optimal. 

There are two ideas to keep in mind about Bayesian reasoning and how we tend to mess it up. The first is that base rates matter. The second is that intuitive impressions of the diagnosticity of evidence are often exaggerated. The combination of WYSIATI - (What You See Is All There Is) and associative coherence tends to make us believe in the stories we spin for ourselves. 

Linda: Less is More

The word fallacy is used, in general, when people fail to apply a logical rule that is obviously relevant. Conjunction fallacy, is what people commit when they judge a conjunction of two events in direct comparison. Representativeness belongs to a cluster of closely related basic assessments that are likely to be generated together. The most representative outcomes combine with the personality description to produce the most coherent stories. The most coherent stories are not necessarily the most probable, but they are plausible, and the notions of coherence, plausibility and probability are easily confused by the unwary. 

In most situations, a direct comparison makes people more careful and more logical. But not always, sometimes intuition beats logic even when the correct answer stares you in the face

Causes Trump Statistics

Statistical base rates are facts about a population to which a case belongs, but they are not relevant to the individual case. Causal base rates change your view of how the individual case came to be. The two types of base rate information are treated differently: 
  • Statistical base rates are generally underweighted, and sometimes neglected altogether. 
  • Casual base rates are treated as information about the individual case and are easily combined with other case specific information. 

Regression to the Mean

Regression to the mean is due to random fluctuations in the quality of performance. Regression effects are ubiquitous, and are so misguided casual stories to explain them. Our mind is strongly biased towards causal explanations and does not deal well with "mere statistics". When our attention is called to an event, associative memory will look for its cause-more precisely, activation will automatically spread to any cause that is already stored in memory. Causal explanations will be evoked when regression is detected, but they will be wrong because the truth is that regression to the mean has an explanation but does not have a cause

Taming Intuitive Predictions

We are capable of rejecting information as irrelevant or false, but adjusting for smaller weaknesses in the evidence is not something that System 1 can do. As a result, intuitive predictions are almost completely insensitive to the actual predictive quality of the evidence. When a link is found, WYSIATI applies: your associative memory quickly and automatically constructs the best possible story from information available. 

Intensity matching yields predictions that are extreme as the evidence on which they are based, leading people to give the same answer to two quite different questions

Correcting your intuitive predictions is a task for System 2. Significant effort is required to find the relevant reference category, estimate the baseline prediction, and evaluate the quality of the evidence. The effort is justified only when the stakes are high and when you are particularly keen not to make mistakes. Furthermore, you should know that correcting your intuitions may complicate your life. A characteristic of unbiased predictions is that they permit the predictions of rare or extreme events only when information is very good. If you expect your predictions to be of modest validity, you will never guess an outcome that is either rare or far from the mean. 

The Illusion of Understanding

A compelling narrative fosters an illusion of inevitability. The core of illusion is that we believe we understand the past, which implies that the future also should be knowable, but the fact we understand the past less than we believe we do. 

Hindsight bias has pernicious effects on the evaluations of decision makers. It leads observers to assess the quality of a decision not by whether the process was sound but by whether its outcome was good or bad

The Illusion of Validity

Subjective confidence in a judgment is not a reasoned evaluation of the probability that the judgment is correct. Confidence is a feeling, which reflects the coherence of the information and the cognitive ease of processing it. It is wise to take admissions of uncertainty seriously, but declarations of high confidence mainly tell you that an individual has constructed a coherent story in his mind, not necessarily that the story is true. 

Intuitions vs. Formulas

To maximise predictive accuracy, final decisions should be left to formulas, especially in low-validity environments. Whenever we can replace human judgment by a formula, we should at least consider it. 

Expert Intuition: When Can We Trust It?

Intuition is nothing more and nothing less than recognition. The mystery of knowing without knowing is not a distinctive feature of intuition; it is the norm of mental life. The confidence that people have in their intuitions is not a reliable guide to their validity. In other words, do not trust anyone-including yourself-to tell you how much you should trust their judgment. Intuition cannot be trusted in the absence of stable regularities in the environment.  

The Outside View

When forecasting the outcomes of risky projects, executives too easily fall victim to the planning fallacy. In its grip, they make decisions based on delusional optimism rather than on a rational weighting of gains, losses and probabilities. They overestimate benefits and underestimate costs. 

The Engine of Capitalism

The people who have greatest influence on the lives of others are likely to be optimistic and overconfident, and to take more risks than they realise. When action is needed, optimism, even of the mildly delusional variety, may be a good thing. The optimistic risk taking of entrepreneurs surely contributes to economic dynamism of a capitalistic society, even if most risk takers end up disappointed. 

The consequence of competition neglect is excess entry: more competitors enter the market than the market can profitably sustain, so their average outcome is a loss. The outcome is disappointing for the typical entrant in the market, but the effect on the economy as a whole could well be positive. 

Premortem has two main advantages: it overcomes the groupthink that effects many teams once a decision appears to have been made, and it unleashes the imagination of knowledgeable individuals in a much-needed direction. The main virtue of the premortem is that it legitimises doubts. It encourages even supporters of the decision to search for possible threats that they had not considered earlier. 

Prospect Theory

In the utility theory, the utility of a gain is assessed by comparing the utilities of two states of wealth. Many of the options we face in life are "mixed": there is a risk of loss and an opportunity for gain, and we must decide whether to accept the gamble or reject it. In the mixed case, the possible loss looms twice as large as the possible gain. In the bad case we become a lot more risk seeking. The prospect theory and utility theory also fail to allow for regret. The two theories share the assumption that available options in a choice are evaluated separately and independently, and that the option with the highest value is selected. This assumption is certainly wrong.

The Endowment Effect

Tastes are not fixed' they vary with reference point. Second, the disadvantages of a change loom larger than its advantages, inducing a bias that favours the status quo.

Bad Events

Loss aversion refers to the relative strength of two motives: we are driven more strongly to avoid losses than to achieve gains. A reference point is sometimes the status quo, but it can also be a goal in the future: not achieving a goal is a loss, exceeding the goal is a gain. the aversion of the failure of to reaching the goal is much stronger than the desire to exceed it. 

The Fourfold Pattern

The decision weights that people assign to outcomes are not identical to the probabilities of these outcomes, contrary to the expectation principle. Improbable outcomes are overweighted-this is the possibility effect. Outcomes that are almost certain are underweighted relative to actual certainty. The expectation principle, by which values are weighted by their probability, is poor psychology. 

People attach values to gains and losses rather than to wealth, and the decision weights that they assign to outcomes are different from probabilities. This is called the fourfold pattern. 

Rare Events

The emotional arousal is associative, automatic, and uncontrolled, and it produces an impulse for protective action. System 2 may know that the probability is low, but this knowledge does not eliminate the self-generated discomfort and the wish to avoid id. System 1 cannot be turned off. The emotion is not only disproportionate to the probability, it is also insensitive to the exact level of probability. The hypothesis suggest that the focal attention and salience contribute to both the overestimation of unlikely events and the overweighting of unlikely outcomes.

Risk Policies

It is costly to be risk averse for gains and risk seeking for losses. The attitudes make you willing to pay a premium to obtain a sure gain rather than face a gamble, and also willing to pay a premium to avoid a sure loss. Both payments come out of the same pocket, and when you face both kinds of problems at once, the discrepant attitude are unlikely to be optimal. 

Decision makers who are prone to narrow framing construct a preference every time they face a risky choice. They would do better by having a risk policy that they routinely apply whenever a relevant problem arises. A risk policy is a broad frame that embeds a particular risky choice in a set of similar choices. The outside view and the risk policy are remedies against two distinct biases that affect many decisions: the exaggerated optimism of the planning fallacy and the exaggerated caution induced by loss aversion. The two biases oppose each other. Exaggerated optimism protects individuals and organisations from paralysing effects of loss aversion;  loss aversion protects them from the follies of overconfident optimism. 

Keeping Score

The disposition effect is an instance of narrow framing. The decision to invest additional resources in a losing account, when better investments are available, is known as the sunk-cost fallacy, a costly mistake that is observed in decisions large and small. 

Decision makers know that they are prone to regret, and the anticipation of that painful emotion plays a part in many decisions. Intuitions about regret are remarkably uniform and compelling. The key is not the difference between commission and omission but the distinction between default options and actions that deviate from the default. When you deviate from the default, you can easily imagine the norm-and if the default is associated with bad consequences, the discrepancy between the two can be the source of painful emotions. 


The emotional reactions of System 1 are much more likely to determine single evaluation; the comparison that occurs in join evaluation always involves a more careful and effortful assessment, which calls for System 2. Rationality is generally served by broader and more comprehensive frames, and joint evaluation is obviously broader than single evaluation. Of course, you should be wary of join evaluation when someone who controls what you see has a vested interest in what you choose. 

Frames and Reality

Tendencies to approach or avoid are evoked by the words, and we expect System 1 to be biased in favour of the sure option when it is designed as KEEP and against that same option when it's designated as LOSE. Reframing is effortful and System 2 is normally lazy. Unless there is an obvious reason to do otherwise, most of us passively accept decision problems as they are framed and therefore rarely have any opportunity to discover the extent to which our preference are frame-bound rather than reality-bound.

Two Selves

System represents sets by averages, norms, and prototypes, not by sums. We want pain to be brief and pleasure to last. But our memory, a function of System 1, has evolved to represent the most intense moments of an episode of pain or pleasure (the peak) and the feelings when the episode was at its end. A memory that neglects duration will not serve our preference for long pleasure and short pains. 

Life as a Story

Caring for people often takes the form of concern for the quality of their stories, not their feelings. Indeed, we can be deeply moved even by events that change the stories of people who are already dead.

Experienced Well-Being

The percentage of time that an individual spends in an unpleasant state is called the U-index. An individual's mood at any moment depends on her temperament and overall happiness, but emotional well-being also fluctuates considerably over the day and the week. The mood of the moment depends primarily on the current situation. 

Thinking About Life

The graph shows the level of satisfaction reported by people around the time they got married. 

This graph reliably evokes nervous laughter from people, the nervousness is easy to understand: after all, people who decide to get married do so either because they expect it will make them happier or because they hope that making a tie permanent will maintain the resent state of bliss. On their wedding day, the bride and the groom know that the rate of divorce is high and that they incidence of marital disappointment is even higher, but they do not believe that these statistics apply to them. This is called affective forecasting. 

Any aspect of life to which attention is directed will loom large in a global evaluation. This is the essence of focus illusion. The word mis-wanting describes bad choices that arise from errors of affective forecasting. The focus illusion is a rich source of mis-wanting. In particular, it makes us prone to exaggerate the effect of significant purchases or changed circumstances on our future well-being. The focusing illusion creates a bias in favour of goods and experiences that are initially exciting, even if they will eventually lose their appeal. 


I feel this book needs to be read multiple times to fully grasp all the learnings from it. It might feel like a big book, but stick to it and finish it, its totally worth your time!

Friday, January 29, 2021

Book Notes: Thinking in Bets: Making Smarter Decisions When You Don't Have All the Facts

Our mentor suggested that we should read "Thinking in Bets: Making Smarter Decisions When You Don't Have All the Facts" from Annie Duke. The book would help us make smarter decisions. 

Who is this book for?

This book is for everyone absolutely everyone! Each individual makes numerous decisions during the day and if we can improve the process of making the decisions even slightly the final outcome can be vastly improved. 

Disclaimer: This post is by no means a summary of the book, I would encourage everyone to go ahead and grab the book and give it a go.

Book Notes

Life Is Poker, Not Chess

Humans have a tendency to equate the quality of decisions with the quality of its outcome. Poker players have a word for this: "resulting". 

  • Why are we so bad at separating luck and skill? 
  • Why are we so uncomfortable knowing that the results can be beyond our control? 
  • Why do we create such a strong connection between results and the quality of decisions preceding them? 
If we are asked to list down our best and the worst decision in the previous year, most of us would remember the best and the worst results rather than the best and the worst decisions.

Hindsight bias is the tendency, after an outcome is known, to see the outcome as having been inevitable. We say this all the time "I should have known this would happen", or "I should have seen it coming", while doing so we are succumbing to hindsight bias. Those beliefs develop from an overly tight connection between outcomes and decisions. This is typical of how we evaluate our past decisions.

When we work backwards from results to figure out why those things happened, we are susceptible to a variety of cognitive traps, like assuming causation when there is only a correlation or cherry-picking data to confirm the narrative we prefer. 

Many decision-making missteps originate from the pressure on the reflexive system to do its job fast and automatically. Most of what we do daily exists in automatic processing. The challenge is not to change the way our brains operate but to figure out how to work within the limitations of the brains we have.

Poker players have to make multiple decisions with significant financial consequences in a compressed time frame, and do it in a way that lassoes their reflexive minds to align with their long-term goals. This makes the poker table a unique laboratory for studying decision-making.

Chess on the other hand, is a well defined form of computation. It contains no hidden information and very little luck. If you lose a game of chess, it must be because there were better moves that you didn't make or didn't see. Chess, for all its strategic complexity, isn't a great model for decision-making in life, where most of our decisions involve hidden information and much greater influence of luck. 

Poker, in contract is a game of incomplete information. It is a game of decision making under conditions of uncertainty over time. Valuable information remains hidden. There is also an element of luck in any outcome. You could make the best possible decision at every point and still lose the hand. 

The quality of our lives is the sum of decision quality plus luck. 

Wanna Bet?

When you are betting, you have to back up your belief by putting a price on it. By treating decisions as bets, we can explicitly recognise that we are deciding on alternative futures, each with benefits and risks. All decisions are bets. In most decisions we are betting against all the future versions of ourselves that we are not choosing. Whenever we make a choice we are betting on a potential future. 

We bet based on what we believe about the world. Part of the skill in life comes from learning to be a better belief calibrator, using experience and information to more objectively update our beliefs to more accurately represent the world. The more accurate our beliefs, the better the foundation of the bests we make. 

We form beliefs in a haphazard way, believing all sort of things based just on what we hear out in the world but haven't researched for ourselves. This is how we form beliefs:
  • We hear something;
  • We believe it to be true;
  • Only sometimes, later, if we have time or the inclination, we think about it and vet it, determining whether it is, in fact, true or false. 
Once a belief is lodged, it becomes difficult to dislodge it. It takes on a life of its own, leading us to notice and seek out evidence confirming our belief, rarely challenge the validity of confirming evidence, and ignore or work hard to actively discredit information contradicting the belief. This irrational, circular information processing pattern is called motivated reasoning

Fake news isn't meant to change minds. As we know, beliefs are hard to change. The potency of fake news is that it entrenches beliefs its intended audience already has and then amplifies them. Internet is a playground for motivated reasoning. Many social media sites tailor our internet experience to show us more of what we already like. 

When someone challenges us to bet on a belief, it triggers us to vet the belief, taking an inventory of the evidence that informed us. "Wanna bet?" question triggers us to engage in the third step of belief formation i.e. validating the belief. 

We would be better served as communicators and decision-makers if we thought less about whether we are confident in our beliefs and more about how confident we are. What if, in addition to expressing what we believe, we also rated our level of confidence about the accuracy of our belief on a scale of 0 to 10? Forcing ourselves to express how sure we are of our beliefs brings to plain sight the probabilistic nature of those beliefs. 

Bet to Learn: Fielding the Unfolding Future

Experience can be an effective teacher. But, clearly, only some students listen to their teachers. People who learn from experience improve and advance. The future we have bet on unfolds as a series of outcomes. As the future unfolds into a set of outcomes, we are faced with another decision: Why did something happen the way it did? 

As outcomes come our way, figuring out whether those outcomes were caused mainly by luck or whether they were predictable result of particular decisions we made is a bet of great consequence. If we determine our decisions drove the outcome, we can feed the data we get following those decisions back into belief formation and creating a learning loop

Actively using outcomes to examine our beliefs and bets closes the feedback loop, reducing uncertainty. The bets we make on when and how to close the feedback loop are part of the execution.

The way our lives turn out is a result of two things: the influence of skill and the influence of luck. Any outcome that is a result of our decision-making is in the skill category. If an outcome occurs because of things that we can't control the result would be due to luck. Chalk up an outcome to skill, and we take credit for the result. Chalk up an outcome to luck, and it won't be in our control. The updated learning loop looks like this

Outcomes don't tell us what's our fault and what isn't, what we should take credit for and what we shouldn't. This makes learning from outcomes a pretty haphazard process. We take credit for the good stuff and blame the bad stuff on luck so it won't be our fault. The result is that we don't learn from experience well. This is called "Self-serving bias". This pattern is a deeply embedded and robust thinking pattern. Understanding why this pattern emerges is the first step to developing practical strategies to improve our ability to learn from experience. 

We blame our own bad outcomes on bad luck, but when it comes to our peers, bad outcomes are clearly their fault. Our own good outcomes are due to our awesome decision-making, but when it comes to other people, good outcomes are because they got lucky. 

Be a better credit-giver than your peers, more willing than others to admit mistakes, more willing to explore possible reasons for an outcome with an open mind, even, and especially, if that might cast you in a bad light or shine a good light on someone else. 

The Buddy System

We need to find only a handful of people willing to do the exploratory thinking necessary for truth seeking. Being in a group can improve our decision quality by exploring alternatives and recognising where our thinking might be biased, but a group can also exacerbate our tendency to confirm what we already believe. Interacting with similarly motivated people improves the ability to combat bias not just during direct interactions but when we are making and analysing decisions on our own. 

Accountability improves our decision-making and information processing when we are away from the group because we know in advance that we will have to answer to the group for our decisions. To get a more objective view of the world, we need an environment that exposes us to alternate hypotheses and different perspectives. To view ourselves in a more realistic way, we need other people to fill in our blind spots. Accuracy, accountability and diversity wrapped into a group's character all contribute to better decision-making, especially if the group promotes thinking in bets. 

Dissent to Win

Be a data sharer. That's what experts do. In fact, that's one of the reasons experts become experts. They understand that sharing data is the best way to move towards accuracy because it extracts insights from your listeners of the highest fidelity. 

When we have a negative opinion about the person delivering the message, we close our minds to what they are saying and miss a lot of learning opportunities. Likewise, when we have a positive opinion of the messenger, we tend to accept the message without much vetting. Both are bad. 

Our brains have built-in conflicts of interest, interpreting the world around us to confirm our beliefs, to avoid having to admit ignorance or error, to take credit for good results following our decisions, to find reasons bad results following our decisions were due to factors outside our control, to compare well with our peers, and to live in a world where the way things turn out makes sense.

Skepticism is about approaching the world by asking why things might not be true rather than why they are true. A productive decision group would do well to organise around skepticism. 

Adventures in Mental Time Travel

When we make in-the-moment decisions (and don't ponder the past or future), we are more likely to be irrational and impulsive. This tendency where we favour our present-self at the expense of our future-self is called temporal discounting. We are willing to take an irrationally large discount to get a reward now instead of waiting for a bigger reward later. When we think about the past and the future, we engage deliberative mind, improve our ability to make more rational decision. 

Moving regret in front of a decision has numerous benefits. First, obviously it can influence us to make a better decision. Second, it helps us treat ourselves more compassionately after the fact. We can anticipate and prepare for negative outcomes. By planning ahead, we can devise a plan to respond to a negative outcome instead of just reacting to it. 

By working backwards from the goal, we plan our decision tree in more depth. The most common form of working backward from our goal to map out the future is known as backcasting. In backcasting, we imagine we've already achieved a positive outcome. Then we think about how we got there. Backcasting makes it possible to identify when there are low-probability events that must occur to reach the goal. 

Premortem is an investigation into something awful, but before it happens. Backcasting and Premortems complement each other. Despite the popular wisdom that we achieve success through positive visualisation, it turns out that incorporating negative visualisation makes us more likely to achieve our goals. Imagining both positive and negative futures helps us build a more realistic vision of the future, allowing us to plan and prepare for a wider variety of challenges. 


Overall it was a good read and I am implementing the learnings from the book to become a better decision maker. 

Have some Fun!