Book Review: Thinking in Bets
Thinking in Bets: Making smart decisions when you don't have all the facts by Annie Duke.
In short, this was an excellent read. Highly, highly recommend.
The gist is it's essential to separate out the quality of decision from the ultimate outcome of the decision. A good way of doing that is using poker and placing bets as an analogy because a bet is a decision about an uncertain future.
You'll have better judgment over time, the more you can embrace that decisions aren't 'right' or 'wrong' based on whether they turn out well on any particular iteration. An unwanted result doesn't make our decision wrong if we thought about the alternatives and probabilities in advance and allocated our resources accordingly.
Two other points from the book I do want to share. Annie Duke on skepticism: YES. Yes. As a skeptical person, this needs saying and sharing:
Skepticism gets a bum rap because it tends to be associated with negative character traits. Someone who disagrees could be considered "disagreeable" someone who dissents may be creating "dissension" Maybe part of it is that "skeptical" sounds like "cynical" yet rue skepticism is consistent with good manners, civil discourse, and friendly communications.
Skepticism is about approaching the world by asking why things might not be true rather than why they are true. It's a recognition that, while there is an objective truth, everything we believe about the world is not true. Thinking in bets embodies skepticism by encouraging us to to examine what we do and don't know and what our level of confidence is in our believes and predictions. This moves us closer to what is objectively true.
From Thinking In Bets:
World-class poker players taught me to understand what a bet really is: a decision about an uncertain future. Treating decisions as bets, helped me avoid common decision traps, learn from results in a more rational way, and keep emotions out of the process as much as possible.
We can get better at separating outcome quality from decision quality, discover the power of saying, “I’m not sure”, learn strategies to map out the future, become less creative decision-makers, build and sustain pods of fellow truth-seekers to improve our decision process, and recruit our past and future selves to make fewer emotional decisions.
Thinking in bets starts with recognizing that there are exactly two things that determine how our lives turn out: the quality of our decisions and luck. Learning to recognize the difference between the two is what thinking in bets is all about.
When I consult with executives, I sometimes start with this exercise. I ask group members to come to our first meeting with a brief description of their best and worst decisions of the previous year. I have yet to come across someone who doesn’t identify their best and worst results rather than their best and worst decisions. I never seem to come across anyone who identifies a bad decision where they got lucky with a result, or a well-reasoned decision that didn’t pan out. We link results with decisions even though it is easy to point out indisputable examples where the relationship between decisions and results isn’t so perfectly correlated.
Hindsight bias is the tendency, after an outcome is known, to see the outcome as having been inevitable.
Our brains evolved to create certainty and order. We are uncomfortable with the idea that luck plays a significant role in our lives.
Life is more like poker. You could make the smartest, most careful decision in firing a company president and still have it blow up in your face.
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 forcing on being sure, they try to figure out how unsure they are, making their best guess at the chances that different outcomes will occur.
First “I’m not sure” is simply a more accurate representation of the world. Second, and related, when we accept that wen’t can’t be sure, we are less likely to fall into the trap of black-and-white thinking.