Tag Archives: decision-making

Risk Taking and Decision Making….Understanding Risk Reward and Return on ROI

“Uncertainty is a good thing” says Britain’s Caspar Berry, Professional Poker Player and Risk Taking & Decision Making expert.  Risk has become a subject very close to all of us. How much risk are we willing to assume?  Berry says that whenever we make a decision in a world of uncertainty, where we do not know the outcome of that decision, we are effectively taking a risk.

Caspar’s frenetic energy is just what the audience needed to kick off Day 2 of the Media Insights & Engagement Conference this morning.  He has an infectious, engaging stage presence and humor to boot.

Berry asks the following:  What is risk?  What causes it?  What do we do about it?   Humans often fear the unknown.  No one knows what the future holds.  Predicting the future is impossible.  So what can we do to reduce risk and increase certainty?  These are just some of the many key concepts Berry shared during his Keynote Speech.

Lets talk poker for a minute…..Caspar loves to talk Poker.  I had a chance to take a poker lesson from Mr. Berry last evening with several other conference attendees. Casper is an amazing teacher and I appreciated his statistical poker metaphors utilizing poker strategy as a way to gauge risk and reward in our day-to-day lives.  Today he fleshed out those critical concepts in greater detail.

Let’s take a look at the following Poker analogy as it relates to risk taking.

How Poker Players Use Data and Analyze Risk

Berry says in poker, your hand could be a Jack and 10 of Hearts (not great cards).  The three cards presented “the flop”, were a 4 and 8 of Hearts and a 3 of Spades.  33% of the time we will make that flush.  But we still need more information before we make a decision on how to proceed next.  According to Berry, here is the probability factor of winning or getting a flush:

Pot=$4,000.  Cost of call + $400 (1000% return=10:1).  There is a 25% chance of success.
25%of the time one will win $4,000=an expectation of $1000.  75% of the time one will lost $400=an expectation of $300.  It’s not as great as 10000 but not terrible either.  Thus creating an expectation of $700, thus offering an ROI of $700/$400=175%.  We are always making decisions based on uncertainty and factors out of our control.  So we look at probability using statistical data?  What is the probability that one will win the poker game or be successful at their new career choice?  Caspar urges careful evaluation of calculated risk and emphasizes following intuition.

The Butterfly Effect

Berry also eluded to the The Butterfly Effect.  The Butterfly Effect is dependence on initial conditions in which a small change in one state, can result in large differences in a later state. The Butterfly Effect is exhibited by very simple systems:  the randomness of the outcomes of throwing dice for example, depends on the characteristics to amplify small differences in initial conditions, into different dice paths and outcomes, which makes it impossible to throw dice exactly the same way twice.  Since we can’t control the dice (or the poker cards for that matter) one needs to realize that we have certain limitations and therefore things can and will be unpredictable.  

Are we prepared to lose and fail along the way in order to have greater gains in the future? This was Barry’s primary ethos of this morning talk.  Everyone would like to have great success in life. Unfortunately many give up after their first or second failure.  According to Berry, repeated failure and learning from our mistakes, is what allows us to grow, flourish and eventually leads to greater opportunities.  Case in point:  Berry sites Abraham Lincoln-he was defeated over 9 times before he became President of the United States.  The movie Moneyball, based on the true story of the Oakland A’s baseball organization using sophisticated algorithims to figure out how to win games.  It worked.  Exploring calculated risks is a good thing.

At the conclusion of Berry’s hour-long discussion, I took away 4 key points:

  1. Let’s work towards becoming less risk averse and accept that risk is part of life
  2. Most of us learn from our mistakes, from our failures, but also from our successes.  
  3. We feel pain from our losses, and therefore often avoid this from happening in the future
  4. Face Fear 
So how do we overcome this Fear of Failure:  WE DON’T.  Fear makes us human and drives us to strive harder and oftentimes leads to our greatest successes.
Casper leaves us with these parting words:  “FAILURE IS NOT AN OPTION….SO SHORT TERM RISK , EXPERIMENT, BRAVERY AND CHANGE ARE NECESSITIES.”

Kerry Inserra is Managing Partner and Co-Founder of Zip2Media, a media planning and buying agency located in the San Francisco Bay Area. Zip2Media focuses on social media, SEO, SEM, traditional media, sports marketing and blogging.  Kerry has worked for CBS Radio/Television, ABC Radio/Television and Disney.  Follow her @kinserra or email her at Kerry@Zip2Media.com.

Live from #TMRE14: Why Marketing May Not Matter Much

Itamar Simonson

Stanford University Graduate School of Business Professor of
Marketing Itamar Simonson explained how the rise of
today’s informed and empowered consumer is subverting marketing convention.

Simonson, co-author of ‘Absolute Value: What Really Influences Customers in the Age of (Nearly) Perfect Information,’ reviewed the ways in which
brands in many categories’moreover, branding, conceptually’and traditional
constructs like loyalty, positioning and targeting are losing relevance and
effectiveness.
Consumers have unprecedented, immediate access to information and
their preferences are increasingly transient, malleable and subject to the
influence of other consumers, he noted.
What matters is current experience, not prior performance, Simonson emphasized. 

Accordingly, brands as value proxies and loyalty as a purchase driver are
waning.

The implications for market research may be significant.
Simonson argued that to try to predict future behavior by
measuring consumer preferences today will prove increasingly difficult. 

He said he expects loyalty metrics like NPS and lifetime value measures to lose utility and
that market research will focus less on tracking and more on conducting quick
experiments (A/B testing, etc.).

ABOUT THE AUTHOR
Marc Dresner is IIR USA’s sr. editor and special communication project lead. He is the former executive editor of Research Business Report, a confidential newsletter for the marketing research and consumer insights industry. He may be reached at mdresner@iirusa.com. Follow him @mdrezz.

Live from FOCI 2013: The Journey from Data to Information to Decision Making

Camille P. Schuster, Ph.D., of the California State University of San Marcos,  took us on the Journey from Data to Information to Decision Making today.

Data is not a decision, data gives you reference points for influence. Take a look at website, in-store, social media, and mobile, treat it like a forensic case, business scenario investigations.

Identify the problem, choose your tools, solve the problem.

About the Author


Valerie M. Russo, Social Innovation Lead, Senior Strategist at IIR USA, has a background in technology, anthropology, marketing and publishing.  Russo has worked in a variety of digital media roles at Hachette Book Group, Aol, and Thomson Reuters. She is a published poet and maintains a literary blog. She may be reached at vrusso@iirusa.com. Follow her @Literanista.  

Do Emotions Help or Hurt Decision Making?

Last Friday, we profiled The Market Research Event keynote speaker Dr. Kathleen Vohs. Now we have the opportunity to bring you an excerpt from her book Do Emotions Help or Hurt Decision Making? A Hedgefoxian Perspective. Here is Part One of the excerpt from her book. Look for part two later this week. In a perhaps overused metaphor, academics are sometimes classified as hedgehogs and foxes. Playing on a famous, albeit somewhat mysterious, statement by 7th century B.C. philosopher Archilochus that “the fox knows many things, but the hedgehog knows one big thing,” the prototypical hedgehog is a “system addict” on a quest for a unified theory of everything. Foxes, in contrast, have an appreciation of the complexities of reality that prevents them from even entertaining the possibility of any grand unifying scheme. Belying their physical image, hedgehogs are the life of the party. They take outrageous positions and push their arguments to the limit, generating heated debate. Foxes, despite their slyness, are party duds; they stand on the sidelines shaking their heads and rolling their eyes at the naivety of the hedgehogs’ wild speculations. One more strike against foxes. As the party extends into the waning hours, however, the frantic repartee of the hedgehogs can wear thin, even to the hedgehogs themselves. That’s when the host begins to long for the arrival of a third species of party animal: the hedgefox. Hedgefoxes combine the best properties of their two mammalian relatives. Like the hedgehog, the hedgefox is a synthesizer, but like the fox the hedgefox cares about, and advances theories that take account of, and make sense of, the complexities of reality. If research on emotions is a party (and the explosive growth of the topic over the past few decades has lent the topic something of a party atmosphere), the time is ripe for the entry of the hedgefox. Research on emotions has made enormous strides, stimulated by debates between researchers who have taking extreme stands on a variety of central issues. There are hedgehog emotion researchers who argue for the primacy of emotions over cognition, and others who argue, instead, that all emotions are derivative of cognition. There are advocates of the idea that moral judgments are the product of emotion, perhaps justified ex post by reasons, and those who argue that morality is a matter of logic. And, most central to the basic theme of this book, there are hedgehogs whose research focuses almost exclusively on the destructive effects of emotions and others who focus as selectively as the first group on the vitally beneficial functions that emotions serve.