Update your beliefs to improve your decisions

Evidence and changing beliefs

Bayesian inference uses aspects of the scientific method, which involves collecting evidence that is meant to be consistent or inconsistent with a given hypothesis. As evidence accumulates, the degree of belief in a hypothesis ought to change. With enough evidence, it should become very high or very low. Thus, proponents of Bayesian inference say that it can be used to discriminate between conflicting hypotheses: hypotheses with very high support should be accepted as true and those with very low support should be rejected as false.

Source: http://en.wikipedia.org/wiki/Bayesian_inference

The above excerpt from Wikipedia seems like knowledge that would interest only math nerds, yet let me assure you that if you master Bayesian inferencing, you can make very precise and very powerful decisions that will affect, positively, your entire life.

Bayesian inference is the missing ingredient in Anthony Robbins' Awaken the Giant Within, where he talks about "distinctions" that enable elite people to make elite-caliber decisions.

Bayesian inference is what rich people use to make superior business decisions. Of course, it requires a sophisticated intelligence-gathering system which will update their beliefs and, hence, their decisions.

If you want to build such a system for yourself, read George Friedman's book The Intelligence Edge. Friedman is founder and chairman of Stratfor.com, also known as the "shadow CIA" because many people in the intelligence community want Friedman's take on issues.

My point is that in life, we make decisions all the time. If you want to get rich, every decision you make must be "commercially or capitalistically optimal."

Remember, you CAN make a decision every hour. Or even every 10 minutes.

Most people are "stuck" in a lifestyle, minute by minute, that was decided a while ago -- often, several years ago.

In other words, even though new information has come to them every day, they have NOT changed their decisions. They are, in fact, not making decisions. They are living on "automatic."

A smart entrepreneur is always making decisions, is always gathering feedback on his decisions in order to improve his decision-making, and is always searching for information that will update his beliefs so he can improve his odds of success.

I know this is quite a mouthful, so let me give you a visual metaphor that illustrates how decision-making impacts wealth creation (assuming you want wealth!).

Imagine that you're in the cockpit of a plane, and your intention is to fly that plane toward a mountain called Everest. Everest represents $10,000,000.

Here are possible scenarios:

1. You see Mount Everest in front of you, but you're not heading straight toward it. So you constantly try to steer the plane so you DO head toward it.

2. You do NOT see Mount Everest in front of you, but you know it exists. You rely on someone else with a GPS system to guide you. That person might say something like "You're off course! Turn 80 degrees West."

3. When you took off from the airport, you were heading toward Mount Everest, but two hours later, for some reason, somebody started a party in that plane and you're so drunk you're no longer flying the plane (which is now flying on automatic).

Most people are stuck in Scenario #3: they might be having some fun on week-ends, but they are not heading toward Mount Everest -- or financial freedom. They're too busy working to be able to make a fortune.

From a Bayesian perspective, one could say that unlike the people in Scenarios 1 and 2, they are not gathering relevant information that would help them to steer their plane toward financial freedom.

So if you're in Scenario #3, what do you have to do to "correct your course" and head toward financial freedom?

First, you have to pull out your credit card and pay me $500 so I can properly coach you. I'm just kidding.

You have to create a dashboard that gives you relevant information so you can make better and better decisions.

For example, if you're running a business, you need a dashboard that gives you information on how many leads you generate per week, how many sales you closed per week, and how many products or services you delivered per week.

If you're currently holding a job, there's still hope, but keep in mind what Jim Rohn said: "Profits are better than wages."

I say that with a job, you make a living. With your imagination, you make a fortune.

But like I said, even with a job, you can have a dashboard which gives you information on how your market value is increasing. Your market value depends on the number of skills you have, the quality of those skills, the extent to which companies need those skills, etc.

(to be continued)