Thinking Probabilistically; Thinking Pragmatically

Review of: Robert Rubin: "The Yellow Pad: Making Better Decisions in an Uncertain World"

Review of: Robert Rubin: The Yellow Pad: Making Better Decisions in an Uncertain World…

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Decision-making in the face of uncertainty. Robert Rubin is a master at it. In The Yellow Pad: Making Better Decisions in an Uncertain World, he tries to give a flavor of how he does it, and guide people in a direction in which they will be able to do it too.

In my career, I have been able to take five things from Rubin that have been very, very useful indeed:

• At the end of every meeting, make sure you think—and ask—what a week from now, a month from now, a year from now, two years from now, ten years from now, will we wish we had just decided to do?

• Every time things have gone well, make sure to ask and think hard about: were we smart, or were we just lucky—and how could we have been even smarter?

• Every time things have gone badly, make sure to ask and think hard about: were we dumb, or were we just unlucky—and how could we have arranged things so that being unlucky would not have mattered?

• The real boss move is to say: I don’t know enough about this to have the best perspective and opinion, but I know that X does know enough, and I trust them, and they think Y. I don’t need to take credit and would rather give it is the best way to go through life.

• Without compelling need, deciding to do X or not-X is usually not the best move: the best move is to wait for more information to arrive, and to meanwhile take time and energy to get better information.

• Plus always remember—not from Rubin but from along the same lines—this from science-fiction author Lois McMaster Bujold’s novel The Vor Game: “the key of strategy, little Vor,” she explained kindly, “is not to choose a path to victory, but to choose that all paths lead to a victory…”

Rubin’s themes are: luck, risk, and learning not just from your mistakes but your successes.

Rubin's approach throughout his career has been pragmatic, probabilistic, and introspective. What is actually likely to happen and how can we possibly affect it? What are the odds, really? And what biases are we bringing to the table that are likely to cloud and block our vision of the situation, our ability to affect it, and the real odds? This is especially important when one is reacting, because then one’s immediate judgment is likely to be bad. Good decisions are made by delaying response until more information is in, which gives an opportunity for “thinking slow” in Danny Kahneman’s terms.

The book is a very intelligent prescription for analyzing smarter. It contains plenty of suggestions for things to do to make your benefit-cost decisions better. intellectual heft and plenty of actionable items, this is a smart prescription for better thinking. I like it very much. Even though I have never found yellow legal pads terribly useful, and in fact have not written on one for years.

The call for pragmatism and probabilities is, I think, especially welcome here and now. Right now, far too much of American politics in particular and public life in general is simply stupid—devoted to rallying troops via emotional appeals without thinking whether these are the troops to be rallies and whether these are really the hills to take and to die on. This, in Rubin’s view, has massively undermined our ability to make good collective decisions, as learning and analysis are submerged under “rushing toward absolutes and simplistic answers”. These habits are poison for curiosity, receptiveness, recognizing the real trade-offs, plus the “what, really are the odds?’ question—“probabilistic thinking”, “thinking probabilistically”, and very similar phrases show up on more than one-tenth of the pages of the book.

Another key, in Rubin’s view, is that a group can be—can be, not will be—smarter than any of the individuals in it. But it also can be dumber than any individual.

And there is the recognition of luck, both in the large and the small—growing up in a lower upper-class home with two college-degree parents at a time when discrimination against Jews had ebbed; jumping in 1966 to investment banking at exactly the right moment; reflecting that the very favorable outcome “doesn’t mean the way I went about making my decision was wise… I just dove in.”

Plus there is pulling back the curtain on how, at the Clinton NEC, Rubin managed his deputy the immensely talented but unmanageable Gene Sperling, who also happened to have a much closer, tighter, and affectionate relationship with President Clinton than Rubin did:

I have found that if leaders give credit to others, that also redounds to the leader’s benefit over time. For example, when I served as the director of the National Economic Council, one of my two deputies was Gene Sperling, who was deeply knowledgeable about policy and politics, highly savvy politically, and totally trustworthy. When I left for the Treasury Department, he served as the NEC director for the remainder of President Clinton’s presidency, and later he reprised that role for President Obama and served as a senior adviser to President Biden.

Still, back when he was serving as deputy director, I remember on more than one occasion coming upstairs to our offices, asking, “Where’s Gene?” and hearing in reply, “Oh, Gene’s briefing the president.” What was happening was that the president was calling for Gene, and Gene was going straight downstairs to the Oval Office from our second-floor offices in the West Wing without informing me, which would have given me the chance to join him if I chose to. I would guess that with some people, this kind of thing might have ruptured our relationship, or at least greatly strained it. But Gene is someone for whom I have always had a great deal of personal respect and trust. I could always be confident that he was focused on furthering the goals of the NEC and the administration, and that he was extremely well equipped to brief the president.

I also recognized that the president’s reliance on Gene was a good thing, both for the standing of the NEC within the administration and for my position as head of the NEC. I decided not to bring it up with Gene at the time, and I’m glad I didn’t. The best managers, in my experience, seek to get the strongest people that they can find around them, rather than feeling threatened.

In calling Gene directly, President Clinton was demonstrating an aspect of his own approach to management: rather than follow the exact structure of an organizational chart, he relied on whichever individual he felt could be most helpful in a given moment. In my experience, this can be useful in getting the best results, but leaders must do it in ways that avoid creating organizational chaos or undermining the most senior members of their teams.

Indeed, looking at things through the Procrustean Bed of the organizational chart can be a big mistake:

When I think about the value of looking past the organizational chart, I remember an instance from June 1970… Penn Central… bankrupt… a real threat to the continued viability of [the Goldman Sachs] firm…. Sullivan & Cromwell, Goldman’s long-standing, well-regarded, and highly capable law firm…. I was just a senior associate in the arbitrage department, and I had nothing to do with managing this litigation. Nevertheless, I went to Gus Levy and said I had views…. In retrospect, this was a presumptuous thing to do. Gus, whose roughness and toughness were legendary, could easily have said “Who the hell are you? Get the hell out of here. And don’t bother me again.” But instead, he listened….

Sometimes, particularly in large organizations, relying on the organizational chart may be unavoidable. Organizations have to function in an orderly fashion. But there can be great value in doing, when possible, what Gus did when faced with a potentially fatal lawsuit and what President Clinton did when he called Gene: focus on the quality of the advice and ideas and not who offered them…

Call it a Talmudic rather than a hierarchical-orthodox decision-making and meeting-running culture. It can be very valuable:

Disregarding the organizational chart can also be helpful when running meetings. Before I started at the National Economic Council, I asked people who knew President Clinton what he was like. I was told, “As long as you make sense and you’re thoughtful, and you seem substantive and serious, he’ll respect you when you disagree with him, even if he might ultimately decide you’re wrong.” This turned out to be exactly correct….

[At] the Treasury Department… during a meeting on our proposed Mexican support program, Larry [Summers] stated his opinion… other senior officials at the table either said nothing or agreed…. A more junior figure raised his hand… explained why he thought Larry was wrong…. As I subsequently saw Larry do in many similar situations, Larry asked him to expand on his point…. There was merit to the objections, and we made a better decision because of them…. It encouraged others to speak up when they had views at odds with more senior people…

Plus there are lots of other very good stories about Rubin's life, professional and personal, from being a slow student in New York City and moving to Miami Beach before fourth grade all the way up to finding himself in charge at Citigroup just when things go completely pear-shaped late in the decade of the 2000s.

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References:

• Rubin, Robert E. 2023. The Yellow Pad: Making Better Decisions in an Uncertain World. Penguin Press. 2023. ISBN: 9780593491393.