4 Ps

Question 1

What 4 Ps are integral part of good decision making process ?

Answer 1

1. Possibilities
2. Preference
3. Payoff
4. Probabilities

Question 2

What is Preference ?

Answer 2

Preference is “individual” to you, ‘dependent’ on your goals and values.

Question 3

What is Payoff ?

Answer 3

The payoff is how an outcome affects your progress toward or away from a goal.

Payoffs can be measured in anything you value (money, time, happiness, health, the happiness or health or wealth of others, social currency, etc.).

Question 4

What are different kind of payoffs ?

Answer 4

Some possibilities will have payoffs where you gain something you value. These comprise the upside potential of a decision.

Some possibilities will have payoffs where you lose something you value. These comprise the downside potential of a decision. Risk is your exposure to the downside.

Question 5

How do you figure out whether decision is good or bad ?

Answer 5

you’re comparing the upside to the downside.

Does the upside potential compensate for the risk of the downside potential?

Question 6

What is probability ?

Answer 6

Probabilities express how likely something is to occur

Question 7

How does combining probabilities with preferences , payoffs and possibilities help ?

Answer 7

1) helps you to better “resolve the paradox of experience”, allowing you to get out from under the shadow of the ‘particular result’ that you are dealt.
2) helps you more clearly evaluate and compare options.

Question 8

Why is Pro & Con is a low-quality decision tool for evaluating options and comparing them to one another ?

Answer 8

It is flat as it lacks information about both

a) the size of the payoffs and
b) the probability of any pro or con occurring

Question 9

Why is willingness to guess is essential to improving decisions ?

Answer 9

1) Most people are reluctant to estimate the likelihood of something happening in the future. (“That’s speculative.” “I don’t know enough.” “I’d just be guessing.”)
2) Even though your information is usually “imperfect”, you know something about most things, enough to make an educated guess.
3) Willingness to guess will make you think/ask : “What do I know?” and “What don’t I know?”

Question 10

How can you can start expressing probabilities ?

Answer 10

by using common terms.

That gets you thinking about

a) how often outcomes will occur,
b) presents a view of relative likelihood, and
c) gives you a snapshot of the overall likelihood of the best and worst outcomes.