The 1% House Edge

If you’ve ever hit the tables in Vegas, you’re no stranger to the infamous mathematics surrounding house edge. What is this phenomenon? House edge is a built-in advantage, designed into every game, that guarantees the casinos make their money. This edge can be very small, 1% or less, yet it pays for opulent hotels and endless rows of lobster buffet. As the saying goes, the house always wins.

A Simple Perspective On Decision Making

Thinking in terms of edge—whether you have it or not—provides a helpful perspective when making important decisions . A 1% edge in your favor, sustained over a long period of time, will undoubtedly change your life. Similarly, a prolonged 1% disadvantage will easily ruin you.

Easy Edge

When it comes to securing an edge, some decisions are no-brainers—reading, helping others, taking care of your body. These are cookie-cutter self-improvement habits created out of positive decisions. Consistently reading and doing push-ups over a long period of time can only help you. With a little initiative, this low-hanging edge is waiting for you.

Not-So-Easy Edge—A Personalized System

Choosing to read a book is an easy decision to make. However, evaluating edge when making larger decisions is challenging. Will switching into the software industry be the right move for me in the long-run? Will adopting this new technology really improve my team’s velocity? Is staying longer at this company helping my career?

Privilege Memo:

It is a luxury to only have to think about yourself 
when making decisions. Evaluating a decision purely 
based on personal advantage is reserved for people 
who happen to be only responsible for themselves. 
For many others, this is not the case. When you have 
responsibilities beyond yourself, making important 
decisions solely based on edge can be selfish, 
potentially irresponsible. 

Decision making does not have to be stressful as long as we create a system for ourselves. Your system will be your own, refined and tweaked as you progress through life. For this post, I will outline my personal system which I follow with varying degrees of success. It consists of three parts: establishing a belief, measuring edge, and scheduling themes.

Before Committing—Establishing A Belief

Before you make a commitment in one direction or another, take a moment to establish a belief. Why do you believe this decision will give you an edge? Your process to answer this question should be well-informed, thoughtful, and time-boxed.

Let’s take having children as an example, a topic I’m severely under-qualified to comment on. This is a huge decision and should not be taken lightly. Some people want kids, a big backyard, and a fuzzy dog. Others prefer to explore the world on their own. Everyone else is somewhere in between.

I have no kids. I have no idea what it’s like to raise a child. My data points are my friends, my family, and Hollywood. Despite my naïveté, I have established a belief. I believe that having children will make my life better in the long run. The roots of this belief stem from various sources—how I was raised, how I reflect society, and my social circles. I believe that raising a child will be a net positive in my life. I believe that even if 49/100 days are terrible, there will still be 51/100 days that are wonderful. Therefore, it is worth pursuing.

The process of establishing a belief shouldn’t take long. Avoid analysis paralysis. Perform your due diligence and inform your hypothesis to the best of your ability. Your conclusion might be that you’re not quite ready to make a conclusion. This is fine; the thought of children never crossed my mind when I was 25. It’s natural to revisit important decisions. When it comes time to pull the trigger on an important decision, stand firm with your chosen belief.

“I strongly believe that committing to this will give me an edge.”

After Committing—Measuring The Edge

Just like effective software engineering, everything must be measured. Did your commitment really give you an edge? Is it still paying dividends after two years?

The reason why a casino works so well is that the house edge is designed into the games. In contrast, the edge in your personal life is not statically programmed; it is fluid. Advantages and disadvantages come and go. The only way to steer the edge in the right direction is to measure it.

Let’s take our professional lives as an example. Being employed should be a two-way street. You provide business value to your employer. In return, you get paid, grow your skills, and progress in your career. Some people are lucky and this relationship persists over a long period of time.

Others are not so lucky. A job that once excited you slowly turns into a slog. Stressful days become the majority instead of the minority. Learning and progress feel muted.

With disciplined measurement, there will inevitably be low points when you feel like you’re losing your edge. I’ve felt this way many, many times. When this happens, action is required. In professional life, this may mean updating your technical skills, transferring positions, or switching employers. In personal life, this may mean changing your habits, devoting extra time with your partner, or leaving a relationship. Our edge will never be built-in like it is at the casinos. We must create it from decisions, active adjustments, and growth.

Scheduling Themes

Everyone has themes in their life. Personal. Professional. Spiritual. Financial.

Each of your decisions gravitates around a theme. There will be times when you perceive a decision to give you an edge in one theme, but unfortunately take it away from another. Do you need to put your personal life at a disadvantage while you gain an advantage in your professional life? Will the pursuit of your spiritual goals be a headwind against your financial goals?

Instead of thinking about decision making across themes as a sacrifice, think of it as a balancing act. Each program of your life will be scheduled and get your attention if it’s important enough to you. You don’t hurt your professional life to pursue your personal life, you work on both concurrently.

To progress with a theme, you need to place yourself in a situation which provides an edge for the given theme. For example, if you really want to progress in your software career, you’ll need an environment that facilitates that progression. This may mean moving to Silicon Valley or positioning yourself under a mentor whom you admire. To progress with your spiritual goals, this may mean setting aside time to create space for fresh ideas or pursuing a novel experience.

It’s unlikely for a single decision to give you an edge in all the themes that you value. Make your decisions consciously. Each one should should allow you to make progress in at least one area of your life.

Conclusion

Decision making will never be easy. Throughout our lives, we will constantly be making mistakes and iterating on our decision making framework. Be thoughtful, learn from experience, and focus on giving yourself as much edge as you can.

A small edge, consistently maintained through your efforts, will help you progress through life. There’s no need to be greedy. You don’t find 1 book that increases your skills by 300%. You keep reading books that increase your skills by 3%.

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