5.12 Be cautious about trusting AI without having deep understanding.
I worry about the dangers of AI in cases where users accept—or, worse, act upon—the cause-effect relationships presumed in algorithm produced by machine learning without understanding them deeply.
Before I explain why, I want to clarify my terms. “Artificial intelligence” and “machine learning” are words that are thrown around casually and often used as synonyms, even though they are quite different. I categorize what is going on in the world of computer-aided decision making under three broad types: expert systems, mimicking, and data mining (these categories are mine and not the ones in common use in the technology world).
Expert systems are what we use at Bridgewater, where designers specify criteria based on their logical understandings of a set of cause-effect relationships, and then see how different scenarios would emerge under different circumstances.
But computers can also observe patterns and apply them in their decision making without having any understanding of the logic behind them. I call such an approach “mimicking.” This can be effective when the same things happen reliably over and over again and are not subject to change, such as in a game bounded by hard-to-fast rules. But in the real world things do change, so a system can easily fall out of sync with reality.
5.11 Convert your principles into algorithms and have the computer make decisions alongside you.
If you can do that, you will take the power of your decision making to a whole other level. In many cases, you will be able to test how that principle would have worked in the past or in various situations that will help you refine it, and in all cases, it will allow you to compound your understanding to a degree that would otherwise be impossible. It will also take emotion out of the equation. Algorithms work just like words in describing what you would like to have done, but they are written in a language that the computer can understand. If you don’t know how to speak this language, you should either learn it or have someone close to you who can translate for you. Your children and their peers must learn to speak this language because it will soon be as important or more important than any other language.
By developing a partnership with your computer alter ego in which you teach each other and each do what you do best, you will be much more powerful than if you went about your decision making alone. The computer will also be your link to great collective decision making, which is far more powerful than individual decision making, and will almost certainly advance the evolution of our species.
I have found triangulating with highly believable people who are willing to have thoughtful disagreements has never failed to enhance my learning and sharpen the quality of my decision making. It typically leads me to make better decisions than I could have otherwise and it typically provides me with thrilling learning. I urge you to do it.
To do it well, be sure to avoid the common perils of: 1) valuing your own believability more than is logical and 2) not distinguishing between who is more or less credible.
In case of a disagreement with others, start by seeing if you can agree on the principles that should be used to make that decision. This discussion should include exploring the merits of the reasoning behind the different principles. If you agree on them, apply them to the case at hand and you’ll arrive at a conclusion everyone agrees on. If you disagree on the principles, try to work through your disagreement based on your respective believabilities. I will explain how we do this in more detail in Work Principles.
Using principles is a way of both simplifying and improving your decision making. While it might seem obvious to you by now, it’s worth repeating that realizing that almost all “cases at hand” are just “another one of those,” identifying which is “one of those” it is, and then applying well-thought-out principles for dealing with it. This will allow you to massively reduce the number of decisions you have to make (I estimate by a factor of something like 100,000) and will lead you to make much better ones. The key to doing this well is to:
Slow down your thinking so you can note the criteria you are using to make your decision.
Write the criteria down as a principle.
Think about those criteria when you have an outcome to assess, and refine them before the next “one of those” comes along.
Identifying which “one of those” each thing is is like identifying which species an animal is. Doing that for each thing and then matching it up with the appropriate principles will become like playing a game, so it will be fun as well as helpful. Of course it can also be challenging. Many “cases at hand,” as I call them, are hybrids. When a case at hand contains a few “another ones of those,” one must weigh different principles against each other, using mental maps of how the different types of things I encounter should be handled.
Get rid of irrelevant details so that the essential things and the relationships between them stand out. As the saying goes, “Any damn fool can make it complex. It takes a genius to make it simple.” Think of Picasso. He could paint beautiful representational paintings from an early age, but he continually pared down and simplified as his career progressed. Not everyone has a mind that works that way, but just because you can’t do something naturally doesn’t mean you can’t do it—you just have to have creativity and determination. If necessary, you can seek the help of others.
5.7 Prioritize by weighing the value of additional information against the cost of not deciding.
Some decisions are best made after acquiring more information; some are best made immediately. Just as you need to constantly sort the big from the small when you are synthesizing what’s going on, you need to constantly evaluate the marginal benefit of gathering more information against the marginal cost of waiting to decide. People who prioritize well understand the following:
a. All of your “must-dos” must be above the bar before you do your “like-to-dos.”
Separate your “must-dos” from your “like-to-dos” and don’t mistakenly slip any “like-to-dos” onto the first list.
b. Chances are you won’t have time to deal with the unimportant things, which is better than not having time to deal with the important things.
I often hear people say, “Wouldn’t it be good to do this or that?” It’s likely they are being distracted from far more important things that need to be done well.
5.6 Make your decisions as expected value calculations.
Think of every decision as a bet with a probability and a reward for being right and a probability and a penalty for being wrong. Normally a winning decision is one with a positive expected value, meaning that the reward times its probability of occurring is greater than the penalty times its probability of occurring, with the best decision being the one with the highest expected value.
Let’s say the reward for being right is $100 and its probability is 60 percent, while the penalty for being wrong is also $100. If you multiply the reward by the probability of being right you get $60 and if you multiply the penalty by the probability of being wrong (40 percent) you get $40. If you subtract the penalty from the reward, the difference is the expected value, which in this case is positive (+$20). Once you understand expected value, you also understand that it’s not always best to bet on what’s most probable. For example, suppose something that has only a one-in-five chance (20 percent) of succeeding will return ten times (e.g., $1,000) the amount that it will cost you if it fails ($100). Its expected value is positive ($120), so it’s probably a smart decision, even though the odds are against you, as long as you can also cover the loss. Play these probabilities over and over again and they will surely give you winning results over time.
5.5 Logic, reason, and common sense are your best tools for synthesizing reality and understanding what to do about it.
Be wary of relying on anything else. Unfortunately, numerous tests by psychologists show that the majority of people follow the lower-level path most of the time, which leads to inferior decisions without their realizing it. As Carl Jung put it, “Until you make the unconscious conscious, it will direct your life and you will call it fate.” It’s even more important that decision making be evidence-based and logical when groups of people are working together. If it’s not, the process will inevitably be dominated by the most powerful rather than the most insightful participants, which is not only unfair but suboptimal. Successful organizations have cultures in which evidence-based decision making is the norm rather than the exception.
