Annie Duke - winning bets: decision science in venture capital

Decision-making in venture capital is often hindered by cognitive traps, including an over-reliance on gut instinct, poor record-keeping, and the misapplication of long-cycle expectations to short-term scenarios. Annie Duke, a former professional poker player and decision strategist, highlights how endowment bias and mental accounting prevent investors from making rational choices, such as cutting losses or taking profits. Prospect theory explains why individuals irrationally hold onto losing positions while prematurely exiting winning ones. To improve outcomes, investors must distinguish between sensitivity and specificity errors, setting thresholds for "good enough" rather than seeking perfection. Ultimately, effective decision-making involves explicitly defining goals and values before facing a choice, rather than relying on intuition, which often masks underlying biases. Flipping a coin serves as a valid tool for resolving difficult, high-stakes decisions when options are equally viable and the cost of reversal is manageable.