Library / Behavioural Finance

Date of review: October 2021
Book author: Annie Duke
Вook published: 2020

How to Decide. Simple Tools for Making Better Choices by Annie Duke (2020)

The book is full of practical advice and exercises aimed at overcoming our biases and improving our decision-making process.
I am not going to list all the exercises and tips but I plan to incorporate them into my regular activities and gradually share some of the most helpful ones on this website. I also think it is worth preparing a checklist solely for identifying any biases before taking the final decision (like overconfidence, hindsight bias, confirmation bias, recency bias and others). The following text is a working summary of the book, highlighting key points that caught my attention and which I would like to remember.

Key points from the book

One practical piece of advice to overcome such biases is to make it a habit of asking yourself: "If I were wrong, why would that be?".

Decisions and outcomes can be very different due to the lack of full information when the decision was made and the role of luck.

It is important to keep track of past decisions and circumstances / reasons for making particular decisions in the past and then follow new incoming information to try to understand what has changed since you made the original decision. Do you need to change your original view in light of the new information?

The author discusses the flaws in our judgement, key biases that make us favour the Inside view rather than the Outside view. We don't have perfect information so not trying to make an estimate (because of that) stops us from seeking areas to investigate further, considering alternative views, looking for new information etc. It is not helpful to think that you are either right or wrong, it is better to think in terms of getting closer to the truth, improving your understanding of the problem (Archer's mindset).

Try to seek people who disagree with you and understand their viewpoint. Do not start with framing or expressing your view when seeking different opinions, better just listen.

Sometimes taking an Outside view can help. Put yourself in a position of your colleague or friend. If you see your friend / colleague (you in real life) facing a particular situation, what advice would you give him? Then describe the situation using the Inside view. See which areas intersect to get a more realistic / better understanding of reality.

Practical advice for making decisions in life (about where to spend your holidays or what furniture to buy, for example, and not about investments) - spend time on learning your preferences. Once you know what you like - decisions can be made faster.

Spend less time on situations that are repeated (like choosing which route to take to the office, even if you are wrong - you can improve tomorrow).

Look for freeroll opportunities, where the downside is relatively low (you cannot lose much taking this option) - in this case, do not waste too much time thinking about your decision. But be aware of negative freerolls - eating just one desert a week (little harm) or watching extra 30 minutes of TV, having one extra drink at a party and so on - soon your life can be cluttered with garbage and you find yourself taken further away from your goals. Create rules to avoid negative freerolls (e.'g. no deserts', 'drinking only on Sundays').

If you cannot decide between two seemingly good options - ask yourself: "If option A were the only option, would I take it?". If the answer is Yes - then do not spend time choosing between the two and take option A.

Two-way-door decisions (borrowed from Amazon's founder Jeff Bezos) - decisions that can be reversed and stopped, good for making experiments and innovating.


One of the rare books that has lots of practical value through various tips, exercises, check lists and advice. It is based on various theoretical concepts around behavioural biases, but unlike many similar books does not just discuss the problem but also offers a solution.

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