Decisions, Money & Entrepreneurship
Decide Under Uncertainty
This lesson helps students make decisions when the answer is uncertain. They use probability, possible outcomes, and process to compare choices.
What you will learn
- Understand that the future is genuinely uncertain, that sensible investors think in probabilities rather than certainties, and that confidence is not the same as correctness.
- Use base rates and expected value to compare decisions whose outcomes cannot be known in advance, giving investors a concrete tool for weighing uncertain options.
- Learn to stress test your own decisions by actively seeking out disagreement and running a pre-mortem, to catch mistakes before making expensive commitments.
- Combine the lessons of probability thinking, expected value, and pre-mortem stress testing into a personal Principles Sheet with 3 to 5 written decision rules for recurring investment or money decisions.
What happens in this lesson
Chapter 1: Nobody Knows For Sure
Understand that the future is genuinely uncertain, that sensible investors think in probabilities rather than certainties, and that confidence is not the same as correctness.
What you make: A saved probability note rewriting three confident statements about the future as probability statements with realistic ranges.
Chapter 2: Base Rates And Expected Value
Use base rates and expected value to compare decisions whose outcomes cannot be known in advance, giving investors a concrete tool for weighing uncertain options.
What you make: A saved expected value note calculating the expected value of a simple uncertain decision using rough probabilities and outcomes.
Chapter 3: Stress Test And Pre-Mortem
Learn to stress test your own decisions by actively seeking out disagreement and running a pre-mortem, to catch mistakes before making expensive commitments.
What you make: A saved pre-mortem note listing three specific ways a proposed decision could fail and the warning signs to watch for.
Chapter 4: Your Principles Sheet
Combine the lessons of probability thinking, expected value, and pre-mortem stress testing into a personal Principles Sheet with 3 to 5 written decision rules for recurring investment or money decisions.
What you make: A saved Principles Sheet with 3 to 5 personal decision rules, each with a short rationale and at least one example of when the rule would apply.
Chapter 5: Choose The Better Risk
Apply probability thinking, expected value, and stress testing together to compare two realistic uncertain investments and justify a decision under constraints.
What you make: A saved decision memo comparing two uncertain options with rough probabilities, expected value reasoning, key risks, and a final recommendation.
Key terms in this lesson
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