There are dozens of studies showing how far humans will go to avoid uncertainty, forgoing far greater potential payoffs in favor of just knowing what they’re getting right now. Is it actually true that there are dozens? I have no idea. But there’s at least one, which means it’s undeniably true and should never be questioned. For real though, most people will take $20 over a 50% chance of $70—even though the latter is “worth” $35—because of the risk involved. Is that true? Again, I have no idea. But just go with it.
In my books, I’ve talked a lot about the benefits of (sometimes) taking on risk and, more specifically, uncertainty. There are risks which are known and whose exact expected value can be calculated—such as the spin of a roulette wheel or the above $20 example—and then there are those whose EV can’t be exactly determined. There’s a small edge in using basic math to take on the first type of risk when smart, but I’m most interested in finding situations in which it’s shrewd to take risks on potential outcomes with high uncertainty and inexact payoffs.
I think accepting and betting on uncertainty is one of the biggest edges in business because so many people are naturally fearful of it. We’ve evolved to go to extreme lengths to avoid uncertainty and we feel more pain from negative outcomes than we do pleasure from positive ones. So few people are put in situations that allow them to learn to deal with uncertainty that it’s just really easy to find EV there; identify and exploit spots in which others are making bad bets because they’re afraid of the unknown.
An example of this in business might be doing something that can’t be immediately tested (I believe accurately testing most things in a way that can actually help shape future decision-making in actionable ways is pretty rare, but that’s for another post). Will this specific idea work? “Well, I have no idea and there’s not good evidence either way, but I know that fact has scared off others and the payoff is clearly high, so I’ll take on the uncertainty.”
Of course, there are limiting factors to accepting uncertainty, such as not being in a position in life to practically make it happen, or perhaps becoming really anxious in the face of uncertainty such that the stress isn’t worth it. I think the latter issue is a real problem for many people, in all forms of life—they constantly avoid uncertainty because it causes so much stress—and so I’ve listed a few ways in which I’ve effectively improved my ability to not only accept and embrace uncertainty, but also feel comfortable in specifically seeking it out.
Think probabilistically.
This is probably the most important component to dealing with risk and uncertainty—and something that is very difficult for many. Even with something that’s clearly probabilistic—such as the odds of rain tomorrow—people are really crappy as a whole at understanding and accepting chance.
But it’s really important. Instead of saying “this shouldn’t have happened, I can’t deal with this shit anymore,” you should be saying “this had a 10% chance of happening (or was at least within the known range of outcomes) and I should better prepare for it in the future.”
To help, play games with luck involved, such as poker, blackjack, Yahtzee, and so on. They’re incredibly useful teachers of probability and work as an aid to help you understand you can do the right thing and still experience negative results (and vice versa).
Accept the worst outcome.
Typically, people seem to be more afraid of how uncertainty makes them feel than the uncertainty itself. I’ve been the victim of this. I still naturally get a little scared when I fly. It makes no sense. I know it’s irrational. And yet when that plane makes the turn onto the runway and fires up the engines to take off, like clockwork, I feel like I have to take a shit the size of a football. That’s usually because I just ate Burrito Elito and got the double meat again—“today is the day you won’t get sick,” he said to himself 30 minutes before yet another episode of explosive guac-fueled diarrhea—but still.
Before any high-uncertainty situation, try to consider what the worst possible outcome might be. Visualize it happening. Really think about how it would affect your life, and accept that as true.
Then change your underwear.
Drop expectations.
I was talking with a friend earlier today about why people feel pressure in their jobs, and I think it really just comes down to expectations. Stress is typically the result of overvaluing the external—such as others’ opinions or what “should” make you happy—and thus can be at least reduced if you find a way to drop expectations.
Practice mindfulness or take mental coaching to better live in the moment and free yourself of the illusion of what “should have been.” Headspace and Primed Mind are two apps I like.
Increase exposure.
There are two reasons I believe you should increase your exposure to uncertainty, in addition to it just being the +EV thing to do. The first is that, in the same way you get less and less nervous each time you’re forced to speak in public, you’ll naturally just improve your effectiveness in dealing with uncertainty when you practice it.
The second is sample size. If you flip a coin once, the result is completely uncertain. If you flip a coin 1,000 times, it’s not; it will be very close to 50% heads and 50% tails. Randomness can be semi-paradoxically extremely predictable—the most predictable thing of all since we know exactly where it will regress toward the mean—and so just maximizing the number of uncertain situations can alleviate stress because your range of outcomes can actually become more consistent.
Try things others aren’t. Market your product in a totally new way, go on an unusual date, or create a unique proposal for your boss while accepting the fear of the unknown of what might happen. Do it again and again until you’re broke, single, and have debilitatingly low self-esteem…but are really good at dealing with uncertainty.
Create conditionals.
In poker, there’s a saying that the best players continue to get the luckiest. That’s true; they expose themselves to as many situations to get “lucky” as they can, and they’re prepared to deal with uncertainty when it arises.
Don’t over-plan, but get in the habit of playing out scenarios in your head and considering how to benefit most when the thing that “should” happen doesn’t happen.
Avoid dissecting short-term variance.
If you’re confident in your long-term approach to business, family, friendship, or whatever, don’t worry about short-term fluctuations. Don’t overanalyze the price of crypto/stocks or misinterpret the “meaning” of individual sports plays.
Accept responsibility.
Worrying about “what if” is useful for future scenarios, but not the past. It only helps to distract from what should be a constant search for improvement. If some donkey beats you in DFS by less than a point or someone sucks out on you on the river in poker or a total fish gets a promotion over you at work, you should be thinking, “Well how can I work to score more points in DFS, put myself in better spots in poker, or provide more value at work?”
Short-term struggles might be mostly the result of bad luck, but I believe you’ll benefit most by taking responsibility and working to make sure you experience as little negative variance as possible in the future.
Work out.
Just fucking exercise man.
Accept that life is meaningless and you’ll die soon.
I mean, who really cares, anyway? If you consider how inconsequential you are within this multiverse, universe, galaxy, solar system, planet, country, city, neighborhood, and even group of friends, it’s pretty easy to stop worrying about why Tina didn’t call you back after what was by all accounts a wonderful time for both of you especially after you got the uni, wagyu, AND toro sashimi even though they weren’t part of the omakase and she seemed to like them but who even knows she’s clearly good at faking it considering how she’s acting now but it doesn’t really matter it’s just a girl and you haven’t been thinking about her at all really maybe once or twice since the date JUST CALL ME BACK TINA PLEASE!!!!