Calculate the expected value of gathering more information
Before researching further, ask whether the additional information is actually worth the cost to obtain.
Why it works
More information is not always worth its cost. The expected value of information (EVOI) is the probability that the new information would change your decision, multiplied by the gain from making the better choice. If the probability you would change your decision is low, or if the decision consequence is small, the information is worth less than the time cost of obtaining it. This prevents the common pathology of endless research to avoid deciding.
How to do it
- Ask: "What is the chance this new information would actually change my decision?"
- Ask: "If it did change my decision, how much better would the new choice be?"
- Multiply those two numbers — that is roughly the value of the research.
- Compare to the cost (time, money) of getting the information. If cost exceeds value, decide now.
Evidence
Expected value of information is a formal concept in decision analysis and Bayesian statistics. Its practical use as a stopping rule for research is established in management science; the formal EVOI calculation was developed in operations research. (mechanistic)
EVOI calculations require probability estimates that are often unavailable; even a rough approximation ("low," "medium," "high") captures most of the insight.
Common mistake
Continuing to research because "there might be something important I don’t know yet," without ever asking whether the odds of that something materially affecting the decision are worth the cost.
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More practices for Expected Value Thinking: Deciding Under Uncertainty
- Enumerate scenarios and their probabilities before deciding
Write down each meaningful outcome, assign a probability, and compute the weighted total.
- Judge decisions by the process, not the result
A good decision that produces a bad outcome is still a good decision.
- Adjust raw expected value for risk aversion on large stakes
A 50% chance of losing everything is not equivalent to a certain 50% loss — adjust for your actual risk tolerance.
- Accept positive-EV decisions even when they feel uncomfortable
If the expected value is clearly positive, take the decision — even if most individual outcomes are losses.
- Look for decisions with asymmetric upside — large potential gain, small defined loss
Seek situations where the worst case is bounded and small while the best case is large and open-ended.
- Keep a decision journal to score your EV estimates
Log your probability estimates and payoff predictions, then compare them to what happened.
Related concepts
- Bayesian Thinking: How to Update Beliefs Rationally
Holding beliefs as probabilities and updating them when evidence arrives
- Thinking, Fast and Slow, Made Usable
Two systems, the biases they create, and when to slow down
- Mental Models: Charlie Munger’s Latticework Approach
Building the multi-disciplinary toolkit that lets you see what single-discipline thinkers miss
- Opportunity Cost Thinking: What You Give Up When You Choose
The hidden price of every choice — and the practices that make it visible