Boom! Dr. Gleb. Oh no, I just said it right and then I messed up. Dr. Gleb Sapersky. Welcome. Welcome to the insurance dudes. It is so awesome to have you on. Um you just wrote a fantastic book, Never Go with Your Gut, which I think that title may make a lot of entrepreneurs cringe a little bit because I think that they do go with their gut a lot, right? Moving quick and making quick decisions. But automated to its own.
SPEAKER_00I are agents now by decorated predictable, profitable, agent. I am great. I am deep development. We are agents. We are insurance.
SPEAKER_01I think as we're going to understand and figure out and learn over the course of the next 30 minutes or so that that that can be very costly. You're absolutely right.
SPEAKER_02And thank you for welcoming me, Craig. We do tend to go with our gut much more than we should. And we'll talk about when it's the right thing to do and when it's the wrong thing to do.
SPEAKER_01Yeah. Why don't you give us a little bit of background and please include the fact that you went to Harvard? I think that's very important. Um, but just tell us a little bit about where where you came from, what and and how you got to where you are, then let's let's dive into some other stuff. Sure. I did park my cart, have a yacht.
SPEAKER_02Oh, perfect. Yes. But yes, but before that, yeah, I was always interested in decision making. And this is a topic that should be fascinating to any entrepreneur, whether you're involved in insurance or not. Because decision making is the fundamental thing that entrepreneurs, leaders of all sorts have to do. There's a reason that leader is synonymous with decision maker, right? That's your main job as a leader. We're taught to go with our gut. And you know what? That's what my parents taught me to do when I was a child, to go with my gut. You know, that's kind of a natural thing. You know, we're all told that trust your guard, follow your heart, go with your instincts, all of that. But as I was growing up, I saw that my parents, of course, were following this advice themselves, but they were making some bad decisions in their relationship with each other. So that was a problem. And what I saw, for example, so my mom would go out, you know, she liked to buy nice things, so she'd buy a hundred dollar sweater. My dad was kind of a cheapskate, so she'd come home and he'd start yelling at her, saying no sweater should be worth over $20. And then she'd bring up, you know, stuff that he did wrong, and he'd bring up other stuff, and they go at it, you know, and again, again, and you saw, well, no what? I saw this pattern repeating, you know, every month something would happen like this. And they were doing the same things that their gut was telling them to do every time that they went into it, and it was resulting in the same bad, bad, bad outcome. And that started causing me to think that, you know, maybe my parents giving me this advice does not mean that I should follow this advice, does not mean that it's necessarily the right thing to do. So I was coming of age. I was 18 in 1999, you know, when there was the people were partying, like it's 1999, for those who remember that song, maybe that ages me. I'm right there with you. Oh, there you go. So in that time, 1999, that was a dot-com boom. And all of those business leaders of webend, pets.com, boo.com, they were all booming. But when I was 21, just a couple of years later, they all went bust. And the people who were the heroes in the Wall Street Journal in 1999, there were the zeros in 2002. And you know what? They were the same people. They were making decisions the same way. But you know, one year they were praised, another year they were criticized. And they weren't making decisions any differently. This taught me that it's not only my parents, it's the biggest leaders in society, the true, you know, multi-billion, trillion. I mean, who remembers the AOL time warner merger, right? One of the worst disastrous decisions of all time. How many how many hundreds of billions of dollars did that waste, right? So that is a fundamental example of the kind of bad decision making that happens at the very, very top levels. You know, the titans of industry, the ones who control huge amounts of money, making the worst terrible decisions. Not even to talk about politics, won't go there, but there's some horrible decision making. So, going back to business, I decided that this is something that's worth my attention. And so I decided to study how do we make decisions. So, you know what? There's a science of decision making. I didn't know this, and I started studying it. And so then I got into decision making, I got into the behavioral science, and I went specifically into the history of behavioral science, which is the study of decision-making in historical and contemporary contexts. And yeah, I went to I got my undergrad at New York University, I got a master's at Harvard, I got my PhD at UNC Chapel Hill, and then I got, oh, I worked as a professor for seven years in decision sciences collaborative in the history department at Ohio State University. That's kind of my academic background. But, and that I spent about 15 years in academia doing various sorts of research on decision making and these dangerous judgment errors that we make just because of how our brain is wired, called cognitive biases. We'll dive into that later. And at the same time, already from 1999, I was doing various consulting on the side, consulting, coaching, training for businesses to help them make better decisions. So that's kind of the business side of what I do. And so I've been doing that for 21 years. And all of that experience is summarized in my book, Never Go with Your Gut, How Pioneering Leaders Make the Best Decisions and Avoid Business Disasters. And that is indeed about why your gut and where your gut may lead you in the wrong direction. You know, for talking about entrepreneurs, there is a reason that about half of all startups fail within the first five years, three-quarters fail within the first 15 years, and that's because entrepreneurs really tend to go their gut. And you know, their gut tends to lead them in the very bad direction. There are two big problems with entrepreneur decision making. One type of problem is not a lack of fit of product to market. One of the two big reasons why startups fail. And what happens is that entrepreneurs feel that their product or service should have a market. And therefore, they launch prematurely without sufficiently investigating the market. They have a feeling that it will work. And you know what? They waste a lot of money, their own money, investor money, whatever. That's a big problem. And they burn and crash up. Now, the other type of big problem is that there is a fit of product to market, but there's insufficient runway, so insufficient capital, because entrepreneurs are not focused enough. They're trying to do too many things at once, experiment with too many things at once, as opposed to focusing on the thing that's most likely to work and going deep into it. Entrepreneurs tend to pursue lots of shiny new things. And that lack of discipline causes many, many companies. That's another huge reason, lack of cash, that because of these distractions, that they crash and burn. And so these are two ways that entrepreneurs follow their gut that really get them in hot water. And of course, this applies to all sorts of other situations. Not entrepreneurs, intrapreneurs, all sorts of leaders make some bad decisions. And this is all comes from that gut reaction, these cognitive biases, these dangerous judgment errors that come from how our brains walk.
SPEAKER_01Huh. And so this is hardwired into our brains. And you've studied neuroscience, so you actually do have a little bit of expertise in this.
SPEAKER_02Right. So here is what's going on. So looking at our brains. Our brains, as you can imagine, are not really evolved, adapted to the modern environment. Now think about the modern environment. The internet really, which mediates so much of current life, has been around since the 1990s, right? You know, I've I'm still remember that E ooh e when you're signing up, you know, getting up on the phone lines. You know, the Gen Z and millennials probably might not remember that.
SPEAKER_01And I think like the internet as we know it is more like a decade old, right? Like with the social media and all the and and having it on you. This is 2007, right? The first version. So it's interesting. Like, we're we're talking about you know what I mean. This is a 13. But um, but like from a you know, 13, 15, it's 15 years old um to the earliest, you know, portable, real internet browser type situation. And I don't even think it was good and caught on until 2010. So it is interesting, right? Like, we're basing so many decisions and and doing so many things as a result of a technology that's less than two decades old.
SPEAKER_02Right. Our life is incredibly mediated by digital information, of course, with the pandemic that has been incredibly exacerbated. But going back to our brain, I mean, our brain has not had time to evolve for it. Our brain's evolution is really based in the ancient savannah. When we lived in small tribes of 50 people to 150 people, so we were hunters, foragers, and gatherers. That means that our brains are very much wired, not for a multicultural, multipolar, global, interconnected, whatever world. They're wired for a small tribal environment where it's 50 to 150 people. And that's why we're so tribal. So we are wired to look for people who like uh, who look like us, who have our values, who have our predispositions, and so on, preferences. If we weren't sufficiently tribal in that tribal environment, you know, several thousand years, thousands, many thousands of years ago, then we would be kicked out of our tribe and we'd die. And that's a problem. And we if we weren't sufficiently hostile to other tribes, then people from that tribe would take our tribe over and we'd die as well. Guess what? We're the descendants of those who didn't die.
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SPEAKER_02So a little bit smarter. Well, a little bit more tribal. So we have a strong predisposition to look for people who are like us and be hostile to those people who don't look like us and who don't share our values and predispositions. So that tribalism causes a great deal of problems, tensions, and conflicts in the modern world. And we can dive into that. There are a whole series of these dangerous judgment errors called cognitive biases related to tribalism, the way we interact with people. Another set of dangerous judgment errors comes from what's known as the fight or flight response. You might have heard of it as the saber-tooth tiger response when we jump at 100 shadows to get away from that one saber-tooth tiger. Well, guess what? You know, the modern world has many, many less saber-tooth tigers. But we still respond in the modern world as though the threats we face are saber-tooth tigers. Now, in the ancient environment, it was good to jump intensely at 100 shadows. That's how we survived. Again, we're the descendants of those who jumped at 100 shadows and were able to get from the one of them away from the one of them that was the saber-tooth tiger. The ones who didn't, you know, got eaten by the saber-tooth tiger. And so we have that instinct to make decisions very quickly, very impulsively, and very confidently, because that's what we need to do in the savannah environment. In the modern environment, we have much, much more time to decide, especially in business settings, and the kind of decisions we should make and the kind of information we should gather, but we tend not to. It doesn't feel right. It doesn't feel good. And so that feeling, that gut intuition, those feelings inside, they lie to us. They tell us that we need to make a quick decision, and it feels good to make a quick decision and move forward. That might have very bad outcomes for us, but it feels good. It similarly feels good to look for people and collaborate with people who have our predispositions, our value sets, and so on. And it feels good, it feels right, but it's a very bad idea in very in entrepreneurial business settings. So that's a huge problem. And there are a number of other problems. The specific way that our brain is miswired, and going back because of that evolutionary heritage, and also just because of the structure and wiring of our brain, the shortcuts the information processing takes, those are called cognitive biases. The specific ways that our brain is miswired. There are over a hundred of them, so you can take a look at the list of cognitive biases on Wikipedia if you're curious. My book, Never Go with Your Gut, How Pioneering Leaders Make the Best Decisions and Avoid Business Disasters, talks about the 30 most dangerous ones in business settings and the steps that you can take to recognize and address each one.
SPEAKER_01Wow. So what I'm hearing, oh, we're gonna break it down into uh agent speak. What I'm hearing is the the brain is the brain has adapted over the course of, or normally adapts over the course of, you know, from when it started, which is a couple hundred thousand years ago, right? This this brain that we currently have. However, the industrial revolution is what 150 years or 170 years ago, something like that. So we've we've accelerated technologically in a very small amount of time, but the brain hasn't had the 200,000 years yet to get to where it needs to be.
SPEAKER_02You're absolutely right. And you know what? If our brain did, we wouldn't need insurance or people insurance.
SPEAKER_01There wouldn't be the guys on the sorry, I'm sorry, go ahead.
SPEAKER_02No, no, no. We would be all rational and we would all be buying the right insurance for us, right? We wouldn't need insurance people, we'd be carefully calibrating the kind of insurance needs we have, and we go out and we get it, right? Right. So you uh you know, your whole business insurance experts is predicated, sell people who sell insurance is predicated on people being rational and not getting the right insurance that they need for themselves, and then needing advice and expert guidance on what kind of insurance they need and needing to be convinced. Because people greatly underestimate the kind of risks that they face. And insurance experts, salespeople, when they recognize that that's what's going on, they can sell much better to their customers if they understand the kind of cognitive biases that their clients have and how to address these cognitive biases effectively. And that's just one example of where the knowledge of cognitive biases is very helpful for people in insurance.
SPEAKER_01Wow. It is interesting because it you can identify where this buyer is in um with their biases, and then uh you can make the right decision on how to proceed and and and help them get right insurance. The other thing that we obviously, especially men, have not evolved far enough is you see the guys with the ladder on top of the ladder, on top of the ladder, changing the, you know, washing the window or whatever. And so as long as those guys are around, there will be the need for insurance as well.
SPEAKER_02So that's really funny. I was just uh making the hard decision to not do some DIY work on my house because you know I feel good about myself and my, you know, I do some DIY work on my house on the roof, right? But there was a situation on the roof where I would have had to place not only a roof to the ladder, but a ladder on the roof itself to get to the next part. And I looked at that and I'm like, no, that's kind of like a more intermediate advanced skill, and I'm not going to place myself in that situation. I'd rather pay you know someone a few thousand bucks to do that than you know take the chance of breaking a leg. But I did that and I had to work through my own desire to be the macho man and work on the roof and go on the roof. Now, one of the biggest cognitive biases for entrepreneurs is something nice of, I mean, I'm an entrepreneur. I run a six people consulting company called Disaster Avoidance Experts. That's a future-proofing consultancy which addresses these dangerous threats and missed opportunities through cognitive bias risk management. And so it's very tempting. I'm an optimist. Now that's one of the biggest cognitive biases, as I mentioned, that entrepreneurs have. They perceive the world as full of opportunities, full of not danger, but full of chances, full of rewards. And so it's something that they are unfortunately tend to be risk blind about, and I do too. So I tend to see the world as kind of a mostly friendly place. I tend to be too risk blind. So I know that, hey, I'm very likely to be making mistakes where I underestimate risks and am too optimistic. And I had to calibrate my own personal life decision making, not simply business decision making, to say, okay, I am underestimating the risk of going on the roof and placing the ladder on the ladder, placing the ladder on the roof itself. And that's not, that may not end well. You know, maybe I have an 80% chance of success, but do I want the 20% chance of breaking my leg? No, that's that's not worth it. You know, the the paying someone a few thousand dollars is worth avoiding the 20% chance of breaking my leg. So, right, that's but that's not a very human, intuitive, natural natural thing to do, right? To make those probabilistic calculations and trade off that money against 20% chance of breaking a leg, right? Right. So, how much is your breaking a leg worth to you, right? Right. That is a difficult thing to do. And you have to work within yourself because it feels like I can do it. You know what? You an 80% chance that I can do it is a reasonable estimate in that sort of situation. But do I want to take that 20% chance that I'll, you know, again, break a leg or something? No. But that's something that's a difficult thing to do for entrepreneurials who are more optimistic, like me. And of course, people in insurance often tend to be optimistic, even though they sell insurance. Because to be a salesperson, you have to be pretty optimistic. It's a difficult thing to do, to sell to people, and you have to be optimistic about your abilities and have that optimism cheeriness to do sales. This is a difficult thing to do, and people have to understand this. And the optimism bias, so that's kind of the you know, the fight or flight response, the quick decision-making aspects of the optimism bias. Let me go to the tribalist part of optimism bias. It's very intuitive and tempting for me to work with other people who are optimists. So talking about tribalists, right? It's definitely a predisposition. Now, imagine it's a six, I have a rather than six people company. Imagine if I was hiring people who are optimists around me. I'm not, I mean, I'm an optimist, I'm the kind of person who wakes up before breakfast and I have 20 ideas and it feels like they're all brilliant. You know, that's how it feels internally. I've learned in my birth experience that they're far from all brilliant. So, what I have learned to do is that even though I would love to work with other optimists, I click with them very well. You know, if I have five other optimists on my team, that means 120 ideas before breakfast. And we all reinforce each other's ideas because it feels like they're all brilliant, and then we're running in 120 different directions, and then my company goes bankrupt because you know we're not focused enough on doing the right things. So I make sure to hire into my company people I really don't like and enjoy working with who are pessimists. These are the opposite of optimists. Not necessarily lawyers. Lawyers are only one subcategory of lawyers. No, seriously, they are a subcategory of pessimists, but also people who are accountants, people who are quality managers, people who are in procurement, people who are in Right, exactly. I see your face, right?
SPEAKER_01All the just the people I can't be around.
SPEAKER_02Yeah, exactly. And it doesn't feel good to me either. But the thing is, I bring my ideas to them, and uh they say, well, you know, these are all have baked potatoes, but maybe these three potatoes are worth finishing baking. And they are terrible at generating ideas. You know, you don't see lawyers generating brilliant ideas or accountants or so on, but they're great at evaluating the flaws in existing ideas and addressing these flaws because they see the flaws and they are great at improving these ideas and implementing them. They have their feet on the ground, they know how to operate and implement very well. I'm much more of the floating up in the air person who's excited to engage, I'm the idea person, and then strategy. And they are much more implementation, improvement, management. And you need both to have a team be effective, you need both to have a business be effective. If you don't have enough people who are either type on your team, now you usually want the entrepreneur to be in charge, unless it's a law firm, right? But you want an entrepreneur to be in charge of the organization, to have that vision, but you want somebody who is second in command to be more in a pessimist camp and kind of holding the person's feet to the ground. And so this is an example where you need that collaboration to work well and you need to deliberately go against your intuitions in order to make good decisions.
SPEAKER_01Yeah. I just it it makes me think, like I'm trying to think of examples to provide an argument against this, just because I'm an optimist, obviously, and an entrepreneur. So if I take Thomas Edison, right, creating the light bulb, which we can all agree, everybody listening as well, that that changed the world, right? And how many, I think it was a thousand or two thousand different attempts at creating the filament that would burn long enough, right? And it came from bamboo or something like that. Um, but had he listened to the negative Nancy's that would have something to say about it along the way, and I'm sure I'm certain that there were plenty of people that told him he's crazy, right? Along the way, then there wouldn't be a light bulb. So at what point do you say, you know what, screw it, I'm gonna keep going, and I don't care about this bias, or is it just help me help me navigate that?
SPEAKER_02Sure. So it's the situation with Thomas with Thomas Edison is a little bit tricky in terms of that because each of the things he tried, he was experimenting. Right so he could have stopped at an earlier point. It's not like you know, he didn't have things that were pretty good. He was looking to improve on an existing so he Up with one thing, it burned for a certain amount of time, but he wanted to make it better. So it wasn't kind of you know inventing the light bulb was a zero to nothing, it was a process of gradual improvement. So Thomas Edison perhaps is not the best example. Okay. But there are plenty of people who you know, even think of entrepreneurs, right? It's often the case that an entrepreneur is not going to be successful with his or her first company. Right. Right? They often, you know, that's why you talk you hear people about being serial entrepreneurs. Maybe you're going to be successful in your second or your third company. And you'll often see their investors. I mean, I do some advising for VCs. And when I talk to VCs and when we are evaluating, when I'm helping them evaluate a potential investment, I often look at the entrepreneurial team and see have they actually run a startup before? Has it failed? Did it fail for the right reasons? Meaning something like, well, they learned something from it. You know, the idea was almost good, but there was something about the project or the environment. So what was the situation? Did they have experience? Yeah. So if they fail before, if they failed for not incompetence, but external contextual reasons, I like that sort of investment more than someone who has not failed before because they're less experienced. So you want to see if an entrepreneur learned and got out of a failing enterprise in a timely manner. Because if you don't get out and you try to grind on when it's really not something that's taking off, you know, it might become a hobby for you, but it's not going to be a good business. So you don't want to invest uh too much of your efforts into an idea. Even if you're an optimist, you want to be optimistic about failing fast. You've probably heard this phrase, failing fast. Of course. And so this is where you want to apply it effectively. So when you're looking at what happens, kind of the probabilities involved, you see that people are much more likely to keep going longer than they should with an existing project. It's called sunken costs. So we're talking about another cognitive bias. So sunken costs, that's one of the cognitive biases where when we invest resources, money, time, efforts, emotions, social capital into some project or into some relationship, we tend to keep throwing good money after bad. Why is that? Well, we have an emotional attachment, and emotions here are not our friends, unfortunately. In evaluating ideas and projects rationally and effectively, your gut, your intuitions, your emotions, your heart, your instincts, whatever you call it. That's not going to be your friend, unfortunately. So our emotions are often going to lie to us. They're going to tell us that, okay, I'm emotionally attached to this thing. You know, I've invested some money into it. I can't just give it up right now. I'll give you an example. I was just talking to my parents. So they have an apartment they own in Florida. And my dad, uh, you know, they're they're paying for it, whatever, and they live in their house in New York. And my dad says, well, we should go and have a vacation in Florida. The apartment is empty, you know, and we're paying for it. And, you know, my mom really wants to go elsewhere. She wants to go visit Europe, and you know, she's so well, she's still healthy enough. She's in her you know, early 70s, so she wants to see more of the world. My dad's like, but no, this this apartment is nice and it's you know empty and we should go there. And I tell them, like, this is sunken costs. This is a basic sunken cost thing. You have an opportunity. You should not think of it as like your money is being spent and wasted in Florida. You should think of it, okay, do you want to be in Florida or do you want to be in Europe? Would you trade, you know, spending $10,000 on a nice trip to Europe for a couple of weeks for, you know, I don't know, plane tickets like a thousand, two thousand dollars for a trip to Florida. And no, they'd much rather, well, my mom at least, and my dad somewhat, much rather go to Europe and spend that money. But it doesn't feel like it. It feels like they're wasting their money if they don't go to Florida. So that's kind of a personal decision, but happens to entrepreneurs as well. You need to understand that once you invested your resources, you can't treat that as an emotional thing. Right. You have to acknowledge that, okay, I might have to put to you know, let go of those sunken costs. And the very difficult thing is that you might have to admit that you're wrong about your idea, about your project, about your relationship. And that's a hard thing to do. We have to understand that our emotions are going to lie to us and tell us, no, you should never admit you're wrong. There it's a weakness to admit you're wrong. No, it's a strength. You know, the strongest entrepreneurs are the ones who are able to admit they're wrong and cut their costs. Yeah. So you need to be able to admit that you're wrong and treat the situation as a given. Ignore everything that's sunken. You know, so you have some resources. Treat this as something you can either choose to pursue or not based on existing resources, but don't feel that just because those resources are sunken, that you need to pursue and somehow rescue them. That's why people tend to have gambling streaks that keep going downhill. Not a good idea. So yeah, this that's that's just a big problem.
SPEAKER_01Well, not managing the ego or not being aware of the ego is disastrous, right? Because the need to be right, it doesn't matter. A good friend of mine that I've known for a long time says being right is insufficient for being effective. And it's so true, it doesn't, who cares? Who the only reason that you need to be right is ego driven. And if you can, if you can be aware that I need to, oh, I'm in that situation where my ego's telling me that I need to be right, then at least you can work through that and manage that emotion. Because at the end of the day in business, who cares whether you're right or wrong? It's just did the outcome happen? Right? You gotta you have to remove that emotion and move towards the outcome.
SPEAKER_02And that's why my book is called Never Go with Your Gut, How Pioneering Leaders, because decisions and avoid business disasters, right? Ego, but same thing. It's always going to lead you in a certain direction. And you know what? Sometimes they'll be right, sometimes they'll be wrong, but you can never trust it. Never go simply with your gut. You always need to check with your head. Again, you know, it's like a it's gonna be sometimes right, it's gonna be sometimes wrong. But you can never simply trust it because really your gut is going to systematically lead you in the wrong directions. And you need to learn about these cognitive biases. The ones we talked about, they're just free out of the optimism bias, the pessimism bias, sunken costs. There are, like I said, over 100. My book talks about the 30 most dangerous ones for entrepreneurs, for leaders, for professional settings. You need to learn about them. You need to learn about each one of them so you can know about what to avoid, so you can avoid these sunken costs, you can avoid this optimism bias, this pessimism bias, and make sure that they're not leading you into having a really bad business outcome.
SPEAKER_01Sure. Are there can you think of any recent bit examples in the news or media of this of this type of behavior creating tremendous problems?
SPEAKER_02Oh gosh, I mean, we can just go simply to what's happening with the Delta surge, right? So so many companies greatly underestimated the possibility of the virus coming back, right? Uh, and making itself stronger. Very many companies thought everything is fine, and very many people thought, okay, everyone's gonna have vaccines, everything's gonna be fine, we're gonna go back to the office, and they started investing a lot of money into going back to the office and then going back to, you know, making their plans. And it was pretty obvious based on what was happening in Israel, in the UK, other countries around the world, the Delta was going to be a problem. It was pretty obvious already in May. But the companies were still making their plans, were still trying to get their employees to go to the office, and so many employees started leaving these companies. You know, there's a reason it's called the Great Resignation, right? And so you have companies like Apple. Apple has usually has very, very loyal employees. But employees at Apple started publicly claiming, talking about how there's a huge, huge problem with Apple trying to drive them back to the office, and they're resisting, they're opposing, you know, signing these public claims about, you know, that this making public statements that this is a huge problem, and lots of people at Apple are resigning. And how much is this costing Apple? Many billions of dollars. You have top talent leaving Apple. We know how much they spend on hiring these people, these tech folks. This is, you know, and of course, they have to, it's a huge hit to morale, productivity engagement, which all costs. I mean, I could I consult on productivity, culture, engagement. This is a huge problem for Apple. And so this is a huge problem. That's one example, kind of going back to the office. Another example, of course, big in the news is what's happening with Facebook. So Facebook, the whistleblower, I'm not even gonna be talking talking about the recent outage, right? Yes, I thought you were gonna talk about it the other day. Right. And but the whistleblower who came forward. Yes, this information is something that Facebook had internally. And it was clearly hiding it from us. And despite all this external scrutiny, I mean, did Facebook really think that nobody would go and reveal the information eventually? Did it really think that it would be hidden? I mean, there are so many times when companies keep information secret that they really shouldn't. Right. Right. I mean, how many hacks happened of companies, data leaks, where the data where companies acknowledged it only after the data showed up on the dark web? And that is a terrible, terrible thing. Because how many, how much of a reputation had do you have to your company, to the your credibility, right? So this is a huge pro a huge another series of problems, kind of information. Now, this information from Twitch is coming out also with this huge data leak. So companies are making really bad decisions, and Facebook is a prime example of high of concealing information about in the internal company dynamics that's eventually going to come out. It's much better if you get ahead of the problem and talk about it publicly and transparently and make enough efforts to address it rather than have to do huge damage control down the road. And that's kind of a fundamental principle of what's going on. But you know, companies are really trying to hide this information. So this is a big problem, too.
SPEAKER_01Well, if anything good could come out of the Facebook situation, it it's always fun to watch Mark uh testify at Congress because you could see him drink that water and it's very, very exciting. Um right? What about um so you say never never go with your gut? I mean, are there any times where it is a good idea to go with your gut? Is there ever a situation or is there do we need to follow a framework? How how should we approach this? Sure.
SPEAKER_02So let me ask answer the first question, then we can talk about frameworks separately. So going with your gut. There are some situations where definitely you want to go with your gut. One is situations that are similar to the Savannah environment. So when you have a fight or flight situation, you know, when you have, let's say, a bus barreling down at you, this is not the time to sit up there and think, should I go left or should I go right? Right. You know, this is the time to react. Just go with your gut, go with your intuition. That's the time the fight or flight response is similar to the Savannah environment. So that's kind of one dynamic. Another dynamic is if you know somebody quite well, if they're kind of part of your tribal group, and then you feel something is off with your dynamics, your interactions with this person, then it's a time to kind of be like a little bit suspicious of what's going on, and time to evaluate the situation in a more reflective manner. If they're part of your tribe, but your interaction seems different, that might mean that there's hiding something or something is going on. So you want to check into that. So that's kind of a similarity. Again, those are two similarities to the tribal environment. Because in the tribal environment, we had to read our tribal members pretty well because that was very important for our ability to survive and thrive in that environment. Another dynamic that you want to kind of trust your gut is on expert intuition. Now, what's expert intuition? That's a specific type of intuition that is actually trustworthy. And here is where it's trustworthy. It's trustworthy where you have done a certain limited task many, many, many times. You've probably heard of 10,000 hours of practice. You don't need to do 10,000 hours, but you need to have performed this task very often and have gotten quick feedback on whether it's right or wrong. So whether you've done it correctly or not correctly. For example, I mean, all of us have to deal with email a lot, right? So we can probably take a very quick glance at our email and see whether something is spam or not, right? And you'll be right like 98% of the time. And so that's because you have learned to associate certain characteristics of spam with the email and so on, and you tend to be better at than the computer filter, no matter how genius the algorithms are. And so you have learned that over time of your engagement with email because you're getting quick feedback fast on this sort of activity. And so those are the kinds of things where you've gotten a lot of expertise. And so those are the things that you can trust your quick responses on in sort of business settings. So though that's where you can trust your gut. But again, that's kind of limited to narrow situations where you have a lot of experience. So let's say if you are in a PL real role, profit and loss, you've probably taken a lot of looks at profit and loss statements, and you can trust a brief glance at a P ⁇ L document that will tell you what's going on in that scenario, in that business unit. And that's something that you can trust. But if you haven't, then you don't really you should not really trust your.
SPEAKER_01I gotcha. So so let's talk about the uh the framework that you've created, the eight-step decision-making model. I think that that is fascinating and I I love it. Excellent.
SPEAKER_02So let's talk about the eight-step decision-making model. What you need to do in order to make a good decision. And this is a process that you need to make a good decision, solid decision on something major where you really don't want to screw up. So this is, you know, you're making a major bid for something, you're hiring for a key role, you're trying to, you're deciding to move your office or something like that. So something quite important where you want to take sufficient time to make sure to that you make the best decision possible. So the eight-step decision making is first you want to identify the need for a decision to be made. So one, the first of eight steps. We often don't identify the need to make a decision in a timely enough manner. For example, we're just talking about Facebook, where they really should have identified the need to reveal some of this information earlier, or with companies that needed to move on the delta surge quite a bit earlier than they did. Then you want to gather relevant information from a variety of perspectives. Look for people who disagree with, look for people who think who that's the second step. Next, the third steps, decide on your goal and paint a clear vision of the outcome that you want to achieve. So you want that ideal outcome. What would your best outcome be? So write that out, draw it out, so have a clear vision of what you want to accomplish. Then develop clear decision-making criteria to evaluate options. So you don't select the options first. This is critical. You want to select the criteria you'll use to select the options. That's the next step. And because otherwise your options will weigh you too much and you'll go for an option that's not the best. Then you generate viable options. So after you create the criteria, so that's the step five. You generate viable options for whatever you will choose. Then you want to weigh the options, picking the best of the bunch. So when you're weighing the options, you're looking at criteria, which you generated earlier, rating each option based on each criteria, and then adding the sum of the criteria and the option and evaluating the total numerical value of each option. So that's step six. Then you want to implement the option that you chose. And you that's you know the obvious thing, but you want to make sure that when you evaluate it, you think about ways that it can go wrong, that it can fail, and try to address those ways in advance. Finally, evaluate the implementation process. You don't want to simply implement it, but you want to decide what will tell you that you're going in the right direction, what will tell you that you're going in the wrong direction, and that you need to revise it. And then you want to make sure that you measure the implementation of the decision. So that's the eight-step model. And it's really highly effective. I've implemented this with a lot of clients, and they have found that this is a great, great improvement to their business processes.
SPEAKER_01I have a question, a couple questions on this. So all right, so you come up with the options, and now you're gonna weigh those options. When you talk about, I'll go back to number four, which is develop the clear decision-making criteria. Is that like deciding? All right, I'm going to make my decision based on the probability or the you know perceived probability of the outcome if I choose this option? Because there could be five options, and let's say three to make it safe. Maybe number three, there's a 90% chance of success, but it's not going to be as big of a win versus number one.
SPEAKER_02Yeah, so so it's a little bit differently. You want to select criteria that evaluate how you will decide. So, for example, if you're hiring someone, okay, you can look at criteria like salary demands, okay, uh, experience, fit, cultural, you know, dynamics, maybe diversity, all of these criteria. What will you use to decide? And then you want to weigh how important the criteria are as part of this. And of course, the book goes into much more deeper in-depth into this. So let's say that uh you just got a major investment and that you know salary is not that important, so you're gonna wait at a five. But you know, fit into the company is super important to you, so you're gonna wait at a nine. Experience is moderately important, you'll wait at a seven. So you want criteria to be weighted. And then you rank the option. So you know, Sally is not asking for that much money, so on a scale of one to ten, you know, her salary demands would be so lower is uh lower is worse, higher is better, so her salary demands would be a nine. Then uh you know, Molly wants a really high salary, so her salary demands would be a two, uh, and so on, culture and fit. And then you multiply the weighing of the ranking, so salary is going to be five for you, and you multiply it by Sally who has a nine, so her ranking on the salary is going to be 45, and Molly's ranking is going to be a two, so that's going to be five times two is a ten. And then you do that for each of the other criteria, and you get a clear numerical outcome for each of them.
SPEAKER_01I love it. So you're making a database decision instead of like you, okay. This is the last person I looked at. I now I'm tired. Maybe I decide I don't like them because now I'm tired or whatever. It's instead of actually putting real numbers and assigning real values that then make you that I love it. That's that's really good. Take take the emotion out of it. That's the key, right?
SPEAKER_02Yep, exactly. So your emotion, I mean, that's as a structured, that's a sample structured interview. This is a more complex form of a structured interview. So structured interview just assigns points, this assigns weights and points, which is much more effective.
SPEAKER_01And all of that could be uh devised and implemented from reading the book. Yeah, that's all I'm perfect. Um how about we how about we wrap up with a quick um with just talking about okay, so we're in a really fast-paced environment. A lot of agents uh have to make do have to make quick decisions. Are there any quick decision-making strategies that they could uh that they could implement to overcome the the desire to go towards that gut decision?
SPEAKER_02Sure. So that the process that we just talked through is for a serious major decision. Right. And that's where you want to get the best uh answer possible. If you just don't want to screw up, if you want to have a good enough answer, one that just gets you a pretty good answer, you don't screw up. Here's a very quick technique where you ask yourself five questions, very quick questions. First question: what important information didn't I get fully considered about the situation, this person, whatever's happening? We tend to not consider information that goes against our beliefs, our intuitions, our preferences. So you want to look heavily at information that goes against your beliefs, your intuitions, your preferences. You know, again, if you're an optimist, look at information from pessimists and so on. So that's the first question. Second, what dangerous judgment errors didn't I yet address? We talked about three dangerous judgment errors. Once you take a look at my book, you will learn about the 30 most dangerous ones, you'll quickly bring them to mind. So that's the second one. Third question, what would a trusted and objective advisor suggest I do in this situation? So think about that angel on your shoulder. What would they tell you to do in this situation? What would you tell a trusted friend to do in this situation? You know, you get about 50% of the benefit of this question the research shows just by asking it. And you get the other 50% of the benefit by calling your trusted advisor, asking, talking to them, right? Fourth, how have I addressed all the ways that this could fail? We did not think about this question nearly well enough. We tend to think that our plans are going to succeed. We feel that, hey, we make a decision that's going to be successful. That's bad. You want to be thinking about risks, you want to be thinking about problems in advance. So think about the ways that it can fail and how you can address these problems in advance. And fifth, what new information caused me to change my mind? It's really hard for us to change our minds, as we talked about before. So it's very helpful if we decide in advance that, okay, if this happens, this is an indication that I should change my mind. I was wrong, then I will need to go in a different direction. So that is the five question step. As I talk through it, it just takes a couple of minutes. And if your decision is right, and if it's wrong, believe me. You want to take the time to make a good decision.
SPEAKER_01Yeah, I I like that. I I think the logic behind it is so sound that it it you know, normally thing happens, jump fix, right? You just go. And this at least stops, it's kind of like ADHD preventative maintenance. So you're just like, wait a minute, I need to, I need to stop here for a second and think about these five things, then go. And and you like you're right, this is five minutes, right? To just run through real quick and go, uh, and if it could save you from one bad decision, we we're all gonna make bad decisions, but if you could prevent one or two, or you know, think over the course of your business lifetime, the impact that could have, right? We don't absolutely.
SPEAKER_02I mean, so many business leaders are just spending half of their time putting out fires. If you can use this to prevent a third of the fires, how much more time will you have to work on your business instead of putting out fire?
SPEAKER_01Yes, uh be of the firefighters, not fun. And I think that that's something that we should all strive to get away from. Well, Dr. Gleb, so great. Um, if you if you had one piece of advice for insurance agents, what would that be besides go out and buy your book right now on Amazon? What was the second thing that it would be? Because I'm gonna go out and get it, unless you're gonna sit me aside one.
SPEAKER_02I think the crucial thing that you want to understand is that your customers are going to be trusting their gut. And you need to learn about the ways that your customers are going to be deviating away from rational decision making. And you want to help them make the most rational decisions. So that is a way that you want to be thinking about the situation. It's not simply about you, it's your responsibility to help your clients not be irrational. And that's why you need to learn about this stuff to help your clients. As an insurance professional, you need to understand the kind of deviations away from rationality, rational assessment of risks and rewards, right? That your clients will be following into. So, in order to understand your clients, you need to understand cognitive biases.
SPEAKER_01Well, fantastic. Dr. Gleb, it has been awesome. You went the distance. We said 30, and we were here almost on an hour. So really good to chat. And uh thank you so much. We'll put the the link to the book and it's on Amazon, right?
SPEAKER_02Yeah, Amazon. Everything's on Amazon. Sure. Amazon Barnes Noble, Audible if you like audiobooks. Yep, it's everywhere.
SPEAKER_01But not Facebook Marketplace. We're not gonna have any credit card information over there. So thank you so much, man. It was a pleasure having you on. Thank you, Craig. It was a great time.