The Dimensions of a Decision

Late on a Friday night a game of poker is in progress. Three old friends sit around a table, making small banter with each other. Smoke drifts up to the ceiling as the cards are dealt.

Jim receives a seven of clubs and a two of diamonds. Tonight is Jim’s first time playing, and he doesn’t yet know this is the worst hand you can be dealt. He bets two chips, excited to be playing poker with his friends.

Tyler sits across from Jim. He just received a pair of aces and inside his heart skips a beat. Tyler is an old pro and knows well that a pair of aces is the best starting hand. He matches Jim’s two chips, feeling confident in his decision.

Sean sits next to Tyler. He was dealt a seven and a two also. Sean’s a novice as well, but he’s also a math genius. He quickly calculates the odds of winning in his head and determines that playing this hand would be foolish. He folds, confident in his decision.

Three cards are dealt face up in the middle of the table: the two of hearts, the king of spades and the queen of clubs. Jim bets again, excited that he has a pair of twos. Tyler matches his bet and another card is dealt: the seven of spades. One more round of betting and the final card is revealed: the seven of hearts.

Tyler and Jim flip over their cards. Tyler has two pairs, but Jim has a full house and wins the game.

Did Jim make a good decision to play out his cards when he was dealt a seven and a two? Did Sean make a bad decision by folding? It depends on how we define “good” and “bad”.

Roughly, decisions can be broken down into four dimensions:

  • Knowledge:The information known at the time of the decision
  • Process: The steps used to analyze and make a decision
  • Outcome: The result of the decision
  • Correlation: The predictability of the outcome based on the knowledge and process

Describing decisions along these dimensions, we can forgo the use of “good” and “bad” and use more precise words:

“Good” Decision “Bad” Decision
Knowledge well-informed uninformed
Process well-made poorly made
Outcome successful unsuccessful
Correlation relevant irrelevant

Looking at our poker game above, we can clearly see the different dimensions at work.

Jim’s decision, while successful, was uninformed; he didn’t know how bad of a starting hand he had. Tyler, on the other hand, made a well-informed, but unsuccessful decision. While Sean, though uninformed, followed a process and made a decision that was well-made, if ultimately unsuccessful.

A poker pro would call Jim’s decision a bad decision, even though it was successful, and the decisions Tyler and Sean made good decisions, even though they ultimately were unsuccessful. This is because poker is a game where greater knowledge and process are highly correlated with successful outcomes. While Jim won this one hand, over time he would lose if he continued to play without knowledge or process.

Over the next couple months I’ll be delving into these four dimensions of decision-making, as well as potentially others, in an effort to describe a system for evaluating prior decisions and increasing the odds of success on future decisions. Stay tuned.

1 comment

  1. Gunterhoos says:

    The only combination that was not taken into consideration here was the fact that had Jim possessed greater knowledge but chose to gamble, the element of risk (and its acceptance – not mitigation) would change the description of his decision making.
    I do agree that in your scenario while successful he would lose with time. Look forward to more on this subject.

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