DON’T JUST KNOW THE ODDS – TIP THE ODDS IN YOUR FAVOR

Probabilities is the odds-driven part of the decision-making process. Every decision is based on choosing the option that provides you the best odds of getting what you want. The third of our four factors of decision making, Probabilities can be examined at any time in the process after Timing. While the concept is simple, there are some keys to getting it right. Let’s dig a little deeper.

Step 1: Get Specific

“If you don’t know where you are going, any road will get you there.” - Lewis Carroll

To use Probabilities effectively, you must have laser focus on your actual goal. Define the outcome you want and be as specific as possible. Generalities won’t work.

The desire to be happier, healthier or wealthier are fine concepts, but they aren’t quantifiable end goals.

If your goal is to be wealthier and someone gives you $5, have you achieved your goal? You will have more money, but this probably won’t fulfill your idea of being “wealthier.” If your goal is to have or make more money, you must identify a specific amount as your goal.

Likewise, if you want to be healthier, does this mean lowering your blood pressure or cholesterol to a certain number or achieving a certain weight? Figure out the measurable objective and define it in as many details as you can. Then, you will have a goal and be ready to let Probabilities help you achieve it.

The GPS system in your car or on your phone is useless unless you input a specific destination. Likewise, if your objective isn’t specific, you won’t know to how to get there.

Step 2: Look To The Future and Work Backward

Measurable goals allow for clear benchmarks that let you track your progress and know whether you are on the path to achieving your goal. Let’s say being healthier is an overarching objective, but losing 20 pounds in the next year is your specific goal.

Once you have set your measurable goal, work backward to plan how you will accomplish it. This is what I call “backwardization.”

What do you have to do over the course of the next 12 months in order to hit your goal? Certainly, you shouldn’t plan to do nothing for 11 months and hope to lose all 20 pounds in the last few weeks. Instead, if you set a reasonable goal of losing 2 pounds per month and do it, you will achieve your goal two months early.

If you have a 5-year plan to make $200,000 a year, the concept is the same. The longer your timeframe, the more important it is to have periodic milestones. You wouldn’t take a long car trip without periodically looking for signs to make sure you’re on the right course.

By looking to the future and planning backward, you can set a clear roadmap to your goal.

Step 3: Know Your Expected Outcomes

What do we do if no single choice gives us a more than 50% chance of success at the start? This happens in personal, business, sports, gambling and investment decisions (think Wall Street). Even without one obvious option, you shouldn’t postpone an important decision because of this lack of certainty.

A classic example is the weather forecast. A meteorologist on television gives the three-day forecast. The first day, there is a 30% chance of rain, the second day has a 60% chance, and the third day there is a 90% chance of rain.

For all three days there are only two possible outcomes: it will rain or it won’t. How do we react to that? The first day we may not carry an umbrella. The second day we probably will and on the third day almost everyone would want to have an umbrella on hand.

If you have ever watched a baseball game, you’ve witnessed expected outcomes. Let’s say a team desperately needs a base hit. The manager has two players to select from: one with a .200 batting average, the other with a .300 batting average. Based those averages, the odds that either player will get a hit are substantially less than 50%. Still, the manager must put someone in and would likely pick the .300 hitter because he has the better chance of getting the hit.

The most important area where we use the concept of expected outcomes are decisions regarding our health. You don’t smoke cigarettes because it can greatly increase your chances of getting lung cancer. You will either get lung cancer or you won’t, but if you don’t smoke, you greatly increase your desired outcome of not getting lung cancer.

The point is that Probabilities are still important, even when no single option has a better than 50% chance of leading you to your goal.

Recap

The use of Probabilities in decision making helps us predict and increase the odds of achieving our goals by choosing and planning the best course of action. In working with Probabilities, first clearly define your goal as specifically as possible and make sure it is measurable. Second, look to the future to plan backward, creating benchmarks and allowing for course corrections that will keep you on track. Last, if no single choice gives you more than a 50% chance of getting you what you want, go with the one with the best odds, in other words, the highest expected outcome.

If you missed my earlier blogs on the four-step formula for successful decision making, read them here. To get free advice and tips on how to make the best decisions every time like my page on Facebook, follow me on Instagram and Twitter, and subscribe to my newsletter.