Every decision we make is a bet.
How those bets turn out is determined by a wide variety of factors (including luck), but there are specific ways you can tilt the odds in your favor.
The book Thinking in Bets: Making Smarter Decisions When You Don’t Have All The Facts by Annie Duke is a must-read if you want to become better at making decisions in your life or work.
Following are 18 ideas from the book (with quoted excerpts) which I found valuable and hope you will too…
1. Don’t judge a decision by its outcome.
“Pete Carroll was a victim of our tendency to equate the quality of a decision with the quality of its outcome. Poker players have a word for this: “resulting.” When I started playing poker, more experienced players warned me about the dangers of resulting, cautioning me to resist the temptation to change my strategy just because a few hands didn’t turn out well in the short run.” (page 7)
2. Poker is a better metaphor for life decisions than chess.
“Chess, for all its strategic complexity, isn’t a great model for decision-making in life, where most of our decisions involve hidden information and a much greater influence of luck. This creates a challenge that doesn’t exist in chess: identifying the relative contributions of the decisions we make versus luck in how things turn out.
Poker, in contrast, is a game of incomplete information. It is a game of decision-making under conditions of uncertainty over time. (Not coincidentally, that is close to the definition of game theory.) Valuable information remains hidden. There is also an element of luck in any outcome. You could make the best possible decision at every point and still lose the hand, because you don’t know what new cards will be dealt and revealed.” (page 21)
3. Saying “I’m not sure” helps you make better decisions.
“We are discouraged from saying ‘I don’t know’ or ‘I’m not sure.’ We regard those expressions as vague, unhelpful, and even evasive.
But getting comfortable with ‘I’m not sure’ is a vital step to being a better decision-maker. We have to make peace with not knowing.” (page 26)
4. Good decision makers are comfortable with uncertainty.
“What good poker players and good decision-makers have in common is their comfort with the world being an uncertain and unpredictable place.
They understand that they can almost never know exactly how something will turn out. They embrace that uncertainty and, instead of focusing on being sure, they try to figure out how unsure they are, making their best guess at the chances that different outcomes will occur.
The accuracy of those guesses will depend on how much information they have and how experienced they are at making such guesses.” (page 28)
5. Being wrong hurts us more than being right feels good.
“Losses in general feel about two times as bad as wins feel good. SO winning $100 at blackjack feels as good to us as losing $50 feels bad to us. Because being right feels like winning and being wrong feels like losing, that means we need two favorable results for every one unfavorable result just to break even emotionally.” (page 36)
6. Most bets are bets against ourselves.
“In most of our decisions, we are not betting against another person. Rather, we are betting against all the future versions of ourselves that we are not choosing.
We are constantly deciding among alternative futures: one where we go to the movies, one where we go bowling, one where we stay home. Or futures where we take a job in Des Moines, stay at our current job, or take some time away from work. Whenever we make a choice, we are betting on a potential future.
We are betting that the future version of us that results from the decisions we make will be better off.” (page 45)
7. We want to believe what we already believe.
“It doesn’t take much for any of us to believe something. And once we believe it, protecting that belief guides how we treat further information relevant to the belief.
This is perhaps no more evident than in the rise in prominence of ‘fake news’ and disinformation. Fake news works because people who already hold beliefs consistent with the story generally won’t question the evidence.
Disinformation is even more powerful because the confirmable facts in the story make it feel like the information has been vetted, adding to the power of the narrative being pushed.
Fake news isn’t meant to change minds. As we know, beliefs are hard to change. The potency of fake news is that it entrenches beliefs its intended audience already has, and then amplifies them.” (page 60)
8. Being smart makes it easier to be biased.
“Surprisingly, being smart can actually make bias worse. Let me give you a different intuitive frame: the smarter you are, the better you are at constructing a narrative that supports your beliefs, rationalizing and framing the data to fit your argument or point of view.” (page 62)
9. Most things aren’t as certain as you think.
“A species becoming ‘extinct’ is pretty common. Arbesman cites the work of a pair of biologists at the University of Queensland who made a list of all 187 species of mammals declared extinct in the last five hundred years. More than a third of those species have subsequently been rediscovered.” (page 68)
10. The way we feel about ourselves is rooted in how we think we compare to others.
“When you ask people if they would rather earn $70,000 in 1900 or $70,000 now, a significant number choose 1900. True, the average yearly income in 1900 was about $450. So we’d be doing phenomenally well compared to our peers from 1900.
But no amount of money in 1900 could buy Novocain or antibiotics or a refrigerator or air-conditioning or a powerful computer we could hold in one hand. About the only thing $70,000 bought in 1900 that it couldn’t buy today was the opportunity to soar above most everyone else.
We’d rather lap the field in 1900 with an average life expectancy of only 47 years than sit in the middle of the pack now with an average life expectancy of over 76 years (and a computer in our palm).” (page 104)
11. In the long run, the more objective person always wins.
“We don’t win bets by being in love with our own ideas. We win bets by relentlessly striving to calibrate our beliefs and predictions about the future to more accurately represent the world. In the long run, the more objective person will win against the more biased person. In that way, betting is a form of accountability to accuracy.” (page 130)
12. Be a data sharer.
“Be a data sharer. That’s what experts do. In fact, that’s one of the reasons experts become experts. They understand that sharing data is the best way to move toward accuracy because it extracts insights from your listeners of the highest fidelity.” (page 158)
13. The magic is in the depth of detail.
“Hall of Fame football coach John Madden, in a documentary about Vince Lombardi, told a story about how, as a young assistant coach, he attended a coaching clinic where Lombardi spoke about one play: the power sweep, a running play that he made famous with the Green Bay Packers in the 1960s.
Lombardi held the audience spellbound as he described that one play for eight hours. Madden said, ‘I went in there cocky, thinking I knew everything there was to know about football, and he spent eight hours talking about this one play…I realized then that I actually knew nothing about football.’” (page 159)
14. Deconstruct decisions before an outcome is known.
“Attorneys can evaluate trial strategy before the verdict comes in. Sales teams can evaluate strategy before learning whether they’ve closed the sale. Traders can vet process prior to positions being established or prior to options expiring. After the outcome, make it a habit when seeking advice to give the details without revealing the outcome.” (page 167)
15. Thinking about the future is actually remembering the future.
“When we imagine the future, we don’t just make it up out of whole cloth, inventing a future based on nothing that we have ever seen or experienced. Our vision of the future, rather, is rooted in our memories of the past.
The future we imagine is a novel reassembling of our past experiences. Given that, it shouldn’t be surprising that the same neural network is engaged when we imagine the future as when we remember the past. Thinking about the future is remembering the future, putting memories together in a creative way to imagine a possible way things might turn out.” (page 183)
16. The clearer you see your future self, the more it will impact your decisions.
“Subjects entered a virtual-reality environment, after which they were asked to allocate $1,000 among accounts for various purposes, one of which was a hypothetical retirement account.
Subjects seeing a digital representation of their present-self in the mirror allocated on average $73.90 to the retirement account. Other subjects looking in that mirror saw an age-progressed version of themselves. This latter group of subjects, on average, allocated $178.10 to the retirement account. This is a startling example of how future-us can act as an effective decision buddy for present-us.” (page 185)
17. Predictions aren’t about perfection.
“It’s not about approaching our future predictions from a point of perfection. It’s about acknowledging that we’re already making a prediction about the future every time we make a decision, so we’re better off if we make that explicit. If we’re worried about guessing, we’re already guessing.
We are already guessing that the decision we execute will result in the highest likelihood of a good outcome given the options we have available to us. By at least trying to assign probabilities, we will naturally move away from the default of 0% to 100%, away from being sure it will turn out one way and not another.
Anything that moves us off those extremes is going to be a more reasonable assessment than not trying at all.” (page 210)
18. Conduct a premortem as part of the decision-making process.
“Once we frame the exercise as ‘Okay, we failed. Why did we fail?’ that frees everyone to identify potential points of failure they otherwise might not see or might not bring up for fear of being viewed as a naysayer.
People can express their reservations without it sounding like they’re saying the planned course of action is wrong. Because of that, a planning process that includes a premortem creates a much healthier organization because it means that the people who do have dissenting opinions are represented in the planning.” (page 224)