#4a1: A vicious cycle of big bets, the virtuous cycle of small bets.

decision-makingbets
Back

The larger the change, the more confidence you need in that change to offset its risk. Even more so if the change is irreversible. Often, you'll seek to gain confidence by collecting more data to support your decision.

Yet collecting and analysing data takes time. More time means more cost, hence requiring greater confidence that you'll make back that cost. And so spirals the vicious cycle of big bets.

The salve to this cycle of big bets begetting bigger, slower, riskier bets is to bet smaller. Make smaller changes, more often.

Small bets carry less risk. Less risk means you need less confidence to make the change, which lowers its cost and allows you to act faster and more frequently. This produces frequent feedback to point you in the direction of your next bet — a virtuous cycle of small bets.


Related: 4a, 17