If you’re anything like me, you’ve looked back and wondered what you could have done during the ’20-’22 timeframe to position yourself even better than you are now. “Why didn’t I buy that energy stock in March ’20?” “Why didn’t I go all in on that non-op working interest in Eddy County?” Or, hopefully you’re asking, “how can I use this unlikely gift of living through COVID to inform my strategic thinking so that next time, I’m ahead of the game.” That one took me a little longer to settle on.
The often-repeated adage goes something along the lines of, in making strategic decisions, ‘you should play chess while others are playing checkers.’ I disagree. No doubt, COVID was an awful time. Yet, it actually provided me the space and time to discover that life is nothing at all like the game of chess, and certainly not checkers. In chess, you (and your opponent) have all possible data in front of you to help you make the next (and best) decision; it’s just up to you to make the right call based on the complete data set.
This is not the game that we are playing in the oil and gas industry. Forget complete data sets, no one can see what even the next 24 hours is going to bring in terms of either obstacles or opportunities. In this regard, life is far more akin to a game of poker.
Unlike chess, in the game of poker, we have incomplete information. We know our cards, but we don’t know our opponent’s hand, we don’t know the next card in the stack, we don’t know how others around us will act in relation to the data that they have or to unfolding circumstances. We don’t know the strength of our position because we don’t know where we are in relation to others; our pair of fours may actually win the hand. Worse yet, some things are completely unknowable. And yet, each of these factors (and more) heavily impact, though not quite control, our outcomes.
Because we don’t have complete information, we must formulate a framework for the making the best strategic or tactical decision that we can based on the limited facts that we do have at the decision point. In other words, we have to place a bet. We can learn from hindsight, sure, but we shouldn’t fall into what Annie Duke refers to as ‘resulting,’ meaning that we vet the decision based on the outcome. When we think in bets, that is, when we make the most principled decision that we can based on incomplete information or even an asymmetry of information, then we are acting within a framework that we can guide us through these times of uncertainty. And then, we still won’t hit on 100% of the opportunities, but we can rely on the fact that our decision-making outcomes will be categorically better.
These ideas are certainly not my own, but rather a synthesis of two wonderful books that I had the opportunity to read over the past couple of years: “Thinking in Bets,” by Annie Duke, and “The Biggest Bluff,” by Maria Konnikova. If you have the opportunity, I highly encourage everyone to pick up a copy. And I’ll take only a slight 1% commission on those future winnings.