93 Superb Quotes from Thinking in Bets By Annie Duke
Thinking in Bets
is a brilliant book. Not only it’s filled with wisdom but it’s also very
interesting. Everyone should read this book. As Annie Duke herself says ‘’The
quality of our life depends on the decisions we make plus luck’’.The author
draws from her rich experience in poker to teach as how to make good decisions
in life.
Our
brains evolved to create certainty and order. We are uncomfortable with the
idea that luck plays a significant role in our lives.We recognize the existence
of luck, but we resist the idea that, despite our best efforts, things might
not work out the way we want.
Our
thinking can be divided into two streams, one that is fast, automatic,and
largely unconscious, and another that is slow, deliberate, and judicious. The
first system, the reflexive system, seems to do its thing rapidly and
automatically, with or without our conscious awareness. The second system, the
deliberative system . . . deliberates, it considers, it chews over the facts.
The
value of poker in understanding decision-making has been recognized in
academics for a long time.
A
poker player makes hundreds of decisions per session, all of which take place
at breakneck speed. The etiquette and rules of the game discourage players from
slowing down the game to deliberate, even when huge financial consequences ride
on the decision. If a player takes extra time, another player can ‘call the
clock’ on them. This gives the deliberating player all of seventy
seconds to now make up their mind. That is an eternity in
poker time.
[In
Poker]Every hand (and therefore every decision) has immediate financial consequences.
In a tournament or a high-stakes game, each decision can be worth more than the
cost of an average three-bedroom house, and players have to make those
decisions more quickly than we decide what to order in a restaurant. Even at
lower stakes, most or all of the money a player has on the table is potentially
at stake in every decision. Poker players, as a result, must become adept at
in-the-moment decision-making or they won’t survive in the profession.
Trouble
follows when we treat life decisions as if they were chess decisions. Chess
contains no hidden information and very little luck. The pieces are all there
for both players to see. Pieces can’t randomly appear or disappear from the
board or get moved from one position to another by chance. No one rolls dice
after which, if the roll goes against you, your bishop is taken off the board.
If you lose at a game of chess, it must be because there were better moves that
you didn’t make or didn’t see. You can theoretically go back and figure out
exactly where you made mistakes.
Poker,
in contrast,[to chess] 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. Once the game is finished
and you try to learn from the results, separating the quality of your decisions
from the influence of luck is difficult.
Life looks more like poker, where all that
uncertainty gives us the room to deceive ourselves and misinterpret the data.
Poker gives us the leeway to make mistakes that we never spot because we win
the hand anyway and so don’t go looking for them, or the leeway to do
everything right, still lose, and treat the losing result as proof that we made
a mistake. Resulting, assuming that our decision-making is good or bad based on
a small set of outcomes, is a pretty reasonable strategy for learning in chess.
But not in poker—or life.
Making
better decisions starts with understanding this: uncertainty can work a lot of
mischief.
Our lives are too short to
collect enough data from our own experience to make it easy to dig down into
decision quality from the small set of results we experience.
If we buy a house, fix it up a little, and sell it three years later for 50%
more than we paid, does that mean we are smart at buying and selling property,
or at fixing up houses? It could, but it could also mean there was a big upward
trend in the market and buying almost any
piece of property would have made just as much money. Or maybe buying
that same house and not fixing it up at all might have resulted in the
same (or even better) profit.
Admitting
that we don’t know has an undeservedly bad reputation. Of course, we want to
encourage acquiring knowledge, but the first step is understanding what we
don’t know.
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. This is part of the basis of all
bets.
An
expert trial lawyer will be better than a new lawyer at guessing the likelihood
of success of different strategies and picking a strategy on this basis. Negotiating against an adversary whom we
have previously encountered gives us a better guess at what our strategy should
be. An expert in any field will have an advantage over a rookie. But neither
the veteran nor the rookie can be sure what the next flip will look like. The
veteran will just have a better guess.
It
is often the case that our best choice doesn’t even have a particularly high
likelihood of succeeding. A trial lawyer with a tough case could be choosing
among strategies that are all more likely to fail than to succeed. The goal of
a lawyer in that situation is to identify the different possible strategies,
figure out their best guess of the chance of success for each unpromising
alternative, and pick the least awful one to maximize the quality of the
outcome for their client. That’s true in any business.
There are many reasons why
wrapping our arms around uncertainty and giving it a big hug will help us
become better decision-makers. Here are two of them. First, ‘I’m not sure’ is
simply a more accurate representation of the world. Second, and related, when
we accept that we can’t be sure, we are less likely to fall into the trap of
black-and-white thinking.
If
we misrepresent the world at the extremes of right and wrong, with no shades
of grey in between, our ability to make good choices—choices about how we are
supposed to be allocating our resources, what kind of decisions we are supposed
to be making, and what kind of actions we are supposed to be taking—will suffer.
The secret is to make peace with walking around in a world where we recognize
that we are not sure and that’s okay. As we learn more about how our brains
operate, we recognize that we don’t perceive the world objectively. But our
goal should be to try.
When
we think probabilistically, we are less likely to use adverse results alone as
proof that we made a decision error, because we recognize the possibility that
the decision might have been good but luck and/or incomplete information (and a
sample size of one) intervened.
There
are a lot more choices other than the extremes of obesity or anorexia. For most
of our decisions, there will be a lot of space between unequivocal ‘right’ and
‘wrong.’
The world is a pretty random
place. The influence of luck makes it impossible to predict exactly how things
will turn out, and all the hidden information makes it even worse.
The
most successful investors in start-up companies have a majority of bad results.
If you applied to NASA’s astronaut program or the NBC page program, both of
which have drawn thousands of applicants for a handful of positions, things
will go your way a minority of the time, but you didn’t necessarily do anything
wrong. Don’t fall in love or even date anybody if you want only positive
results. The world is structured to give us lots of opportunities to feel bad
about being wrong if we want to measure ourselves by outcomes. Don’t fall for
it!
By
treating decisions as bets, poker players explicitly recognize that they are
deciding on alternative futures, each with benefits and risks.They also
recognize there are no simple answers. Some things are unknown or unknowable.
The promise of this book is that if we follow the example of poker players by
making explicit that our decisions are bets, we can make better decisions and
anticipate (and take protective measures) when irrationality is likely to keep
us from acting in our best interest.
No
matter how far we get from the familiarity of betting at a poker table or in a
casino, our decisions are always bets. We routinely decide among alternatives,
put resources at risk, assess the likelihood of different outcomes, and
consider what it is that we value. Every decision commits us to some course of
action that, by definition, eliminates acting on other alternatives. Not
placing a bet on something is, itself, a bet.
The
betting elements of decisions—choice, probability, risk, etc.—are more obvious
in some situations than others. Investments are clearly bets. A decision about
a stock (buy, don’t buy, sell, hold, not to mention esoteric investment
options) involves a choice about the best use of financial resources.
Incomplete information and factors outside of our control make all our
investment choices uncertain. We evaluate what we can, figure out what we think
will maximize our investment money, and execute. Deciding not to invest or not
to sell a stock, likewise, is a bet.
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. At stake in a
decision is that the return to us (measured in money, time,happiness, health,
or whatever we value in that circumstance) will be greater than what we are
giving up by betting against the other alternative future versions of us.
How can we be sure that we are choosing the
alternative that is best for us? What if another alternative would bring us
more happiness, satisfaction, or money? The answer, of course, is we can’t be
sure. Things outside our control (luck) can influence the result.
The futures we imagine are merely possible.
They haven’t happened yet. We can only make our
best guess, given what we know and don’t know, at what the future will look
like. If we’ve never lived in Des Moines, how can we possibly be sure how we
will like it?
Ignoring the risk and uncertainty
in every decision might make us feel better in the short run,
but the cost to the quality of our decision-making can be immense. If we can
find ways to become more comfortable with uncertainty, we can see the world
more accurately and be better for it.
People
are credulous creatures who find it very easy to believe and very difficult to
doubt. In fact, believing is so easy, and perhaps so inevitable,that
it may be more like involuntary comprehension than it is like rational
assessment.
Our default is to believe that
what we hear and read is true. Even when that information is clearly presented
as being false, we are still likely to process it as true.
Instead
of altering our beliefs to fit new information, we do the opposite, altering
our interpretation of that information to fit our beliefs.
Whether it is a football game, a
protest, or just about anything else, our pre-existing beliefs influence the
way we experience the world. That those beliefs aren’t formed in a particularly
orderly way leads to all sorts of mischief in our decision-making.
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.
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.
We are wired to protect our
beliefs even when our goal is to truthseek.
We
bet on our beliefs. We don’t vet those beliefs well before we form them. We
stubbornly refuse to update our beliefs.
The more objective we are, the
more accurate our beliefs become. And the person who wins bets over the long
run is the one with the more accurate beliefs.
Forcing
ourselves to express how sure we are of our beliefs brings to plain sight the
probabilistic nature of those beliefs, that what we believe is almost never
100% or 0% accurate but, rather, somewhere in between.
Acknowledging uncertainty is the
first step in measuring and narrowing it. Incorporating uncertainty in
the way we think about what we believe creates open-mindedness, moving
us closer to a more objective stance toward information that disagrees
with us.
Declaring
our uncertainty in our beliefs to others makes us more credible communicators.
We assume that if we don’t come off as 100% confident, others will value our
opinions less. The opposite is usually true.
Our
default is to believe what we hear, without vetting the information too
carefully.
Experience can be an effective
teacher. But, clearly, only some students listen to their teachers. The people
who learn from experience improve, advance, and (with a little bit of luck)
become experts and leaders in their fields.
When
the future coughs on us, it is hard to tell why.
The way our lives turn out is the
result of two things: the influence of skill and the influence of luck. .. An
outcome like losing weight could be the direct result of a change in diet or
increased exercise (skill), or a sudden change in our metabolism or a famine
(luck). We could get in a car crash because we didn’t stop at a red light
(skill) or because another driver ran a red light (luck). A student could do
poorly on a test because they didn’t study (skill) or because the teacher is
mean (luck).
If making the same decision again would predictably result in the
same outcome, or if changing the decision would predictably result in a
different outcome, then the outcome following that decision was due to skill.
If, however, an outcome occurs because of things that we can’t control (like
the actions of others, the weather, or our genes), the result would be due to
luck. If our decisions didn’t have much impact on the way things turned out,
then luck would be the main influence.
Outcomes don’t tell us what’s our
fault and what isn’t, what we should take credit for and what
we shouldn’t…we can’t simply work backward from the quality of the outcome to
determine the quality of our beliefs or decisions…
A negative outcome could be a
signal to go in and examine our decision-making. That outcome could also be due
to bad luck, unrelated to our decision, in which case treating that outcome as
a signal to change future decisions would be a mistake. A good outcome could
signal that we made a good decision. It could also mean that we got lucky, in
which case we would be making a mistake to use that outcome as a signal to
repeat that decision in the future.
The
way things turn out could be the result of our decisions, luck, or some
combination of the two. Just as we are almost never 100% wrong or right,
outcomes are almost never 100% due to luck or skill.
Taking
credit for the good stuff means we will often reinforce decisions that
shouldn’t be reinforced and miss opportunities to see where we could have done
better. To be sure, some of the bad stuff that happens is mainly due to luck.
And some of the good stuff that happens is mainly due to skill. I just know
that’s not true all the time. 100% of our bad outcomes aren’t because we got
unlucky and 100% of our good outcomes aren’t because we are so awesome. Yet
that is how we process the future as it unfolds.
There
are elements of luck and skill in virtually any outcome.
we blame our own bad outcomes on
bad luck, when it comes to our peers, bad outcomes are clearly their fault.
While our own good outcomes are due to our awesome decision-making, when it
comes to other people, good outcomes are because they got lucky.
When someone else at work gets a
promotion instead of us, do we admit they worked harder than and deserved it
more than we did? No, it was because they schmoozed the boss. If someone does
better on a test at school, it was because the teacher likes them more. If
someone explains the circumstances of a car accident and how it wasn’t their
fault, we roll our eyes. We assume the cause was their bad driving…. The
systematic errors in the way we field the outcomes of our peers comes at a real
cost. It doesn’t just come at the cost of reaching our goals but also at the
cost of compassion for others.
Blaming
others for their bad results and failing to give them credit for their good
ones is under the influence of ego. Taking credit for a win lifts our personal
narrative. So too does knocking down a peer by finding them at fault for a
loss. That’s schadenfreude: deriving pleasure from someone else’s misfortune.
Schadenfreude is basically the opposite of compassion.
We
can learn better and be more open-minded if we work toward a positive narrative
driven by engagement in truth-seeking and striving toward accuracy and
objectivity: giving others credit when it’s due,admitting when our decisions
could have been better, and acknowledging that almost nothing is black and
white.
Be
a better credit-giver than your peers, more willing than others to admit
mistakes, more willing to explore possible reasons for an outcome with an open
mind, even, and especially, if that might cast you in a bad light or shine a good
light on someone else. In this way we can feel that we are doing well by
comparison because we are doing something unusual and hard that most people
don’t do. That makes us feel exceptional.
Thinking
in bets triggers a more open-minded exploration of alternative hypotheses,.. We
are more likely to explore the opposite side of an argument more often and more
seriously—and that will move us closer to the truth of the matter.Thinking in
bets also triggers perspective taking, leveraging the difference between how we
field our own outcomes versus others’ outcomes to get closer to the objective
truth. We know we tend to
discount
the success of our peers and place responsibility firmly on their
shoulders
for their failures. A good strategy for figuring out which way to
bet
would be to imagine if that outcome had happened to us.
When
you look at the outcomes of others from their perspective, you have to ask
yourself, ‘What if that had happened to me?’ You come up with more
compassionate assessments of other people where bad things aren’t always their
fault and good things aren’t always luck. You are more likely to walk in their
shoes.
The cumulative effect of being a
little better at decision-making, like compounding interest, can have huge effects
in the long run on everything that we do.
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.
Accountability
is a willingness or obligation to answer for our actions or
beliefs to others. A bet is a form of accountability. If we’re in love with our
own opinions, it can cost us in a bet.
The
only way in which a human being can make some approach to knowing the whole of
a subject, is by hearing what can be said about it by persons of every variety
of opinion,and studying all modes in which it can be looked at by every
character of mind. No wise man ever acquired his wisdom in any mode but this;
nor is it in the nature of human intellect to become wise in any other manner.”
To
get a more objective view of the world, we need an environment that exposes us
to alternate hypotheses and different perspectives. That doesn’t apply only to
the world around us: to view ourselves in
a more realistic way, we need other people to fill in our blind spots.
we
can’t know the truth of a matter without hearing the other side.
Accuracy,
accountability, and diversity wrapped into a group’s charter all contribute to
better decision-making, especially if the group promotes thinking in bets.
When we have a negative opinion
about the person delivering the message, we close our minds to what they are
saying and miss a lot of learning opportunities because of it. Likewise, when
we have a positive opinion of the messenger, we tend to accept the message
without much vetting. Both are bad.
The
accuracy of the statement should be evaluated independent of its source.
Only way to gain knowledge and
approach truth is by examining every variety of opinion. We learn things we
didn’t know. We calibrate better. Even when the result of that examination
confirms our initial position, we understand that position better if we open
ourselves to every side of the issue. That requires openmindedness to the
messages that come from places we don’t like.
When we make in-the-moment decisions (and don’t ponder the past or
future), we are more likely to be irrational and impulsive.This tendency we all
have to favor our present-self at the expense of our future-self is called
temporal discounting.We are willing to take an irrationally large discount to get
a reward now instead of waiting for a bigger
reward later.
We
are built for temporal discounting, for using the resources that are available
to us now as opposed to saving them for a future version of us that we aren’t
particularly in touch with in the moment of the decision. Time traveling can
get us in touch with that future version of us. It can get future-us to remind
present-us, ‘Hey, don’t discount!’ Or at least, “Don’t discount so much!”
Bringing
our future-self into the decision gets us started thinking about the future
consequences of those in-the-moment decisions. Seeing our aged-self in the
mirror, along with a spreadsheet showing us how future-us has to struggle to
get by, is a persuasive reminder to put aside some discretionary spending money
for retirement. It’s that tap on the shoulder from our future-self. ‘Hey, don’t
forget about me. I’m going to exist and I’d like you to please take that into
account.’
Moving regret in front of a
decision has numerous benefits. First, obviously, it can influence us to make a
better decision. Second, it helps us treat ourselves (regardless of the actual
decision) more compassionately after the fact. We can anticipate and prepare
for negative outcomes. By planning ahead, we can devise
a plan to respond to a negative outcome instead of just reacting to it. We can
also familiarize ourselves with the likelihood of a negative outcome and how it
will feel.Coming to peace with a bad outcome in advance will feel better than refusing
to acknowledge it, facing it only after it has happened.After-the-fact regret
can consume us.
we
are capable of treating things that will have little effect on our long-term
happiness as having significant impact. Our decision-making becomes reactive,
focused on off-loading negative emotions or sustaining positive emotions from
the latest change in the status quo.
The
decisions driven by the emotions of the moment can become a self-fulfilling
prophecy, degrading the quality of the bets we make,increasing the chances of
bad outcomes, and making things worse.
Our in-the-moment emotions affect the quality
of the decisions we make in those moments, and we are very willing to make decisions
when we are not emotionally fit to do so.
Bad
outcomes can have an impact on your emotions that compromise your
decision-making going forward so that you make emotionally charged, irrational
decisions that are likely to result in more bad outcomes that will then
negatively impact your decision-making going forward and so on.
We’ve
all had this experience in our personal and professional lives: blowing out of
proportion a momentary event because of an in-the moment emotional reaction.
When we take the long view, we’re
going to think in a more rational way.
A barrier-reducing contract would be to precommit to
carry healthy snacks in our bag, so we can increase the probability, if we’re
doing any idle eating, that we can make a better choice since we have
drastically reduced the effort it takes to grab a healthier snack.
In all these instances, the precommitment or predecision doesn’t completely
bind our hands to the mast. An emotional, reactive, irrational decision is
still physically possible (though, to various degrees, more difficult).
The
more expert the player, the further into the future they plan.
Being able to respond to the
changing future is a good thing; being surprised by the changing future is not.
Scenario planning makes us nimbler
because we’ve considered and are prepared for a wider variety of possible
futures. And if our reconnaissance has identified situations where we are
susceptible to irrationality, we can try to bind our hands with a Ulysses
contract.
Reconnaissance of the future
dramatically improves decision quality and reduces reactivity to outcomes.
The
most common form of working backward from our goal to map out the future is
known as backcasting. In backcasting, we imagine we’ve already achieved a
positive outcomeThen we think about how we got there. Let’s say an enterprise
wants to develop a three-year strategic plan to double market share, from 5% to
10%. Each person engaged in the planning imagines holding up a newspaper whose
headline reads ‘Company X Has Doubled Its Market Share over the Past Three
Years.’The team leader now asks them to identify the reasons they got
there,what events occurred, what decisions were made, what went their way to get
the enterprise to capture that market share. This enables the company to better
identify strategies, tactics, and actions that need to be implemented to get to
the goal.
Working
backward helps even more when we give ourselves the freedom
to
imagine an unfavorable future.
Despite the popular wisdom that
we achieve success through positive visualization, it turns out that
incorporating negative
visualization makes us more likely to achieve our goals.
we
need to have positive goals, but we are more likely to execute on those goals
if we think about the negative futures. We start a premortem by imagining why
we failed to reach our goal: our company hasn’t increased its market share; we
didn’t lose weight; the jury verdict came back for the other side; we didn’t
hit our sales target. Then we imagine why. All those reasons why we didn’t achieve
our goal help us anticipate potential obstacles and improve our likelihood of
succeeding.
Imagining
both positive and negative futures helps us build a more realistic vision of
the future, allowing us to plan and prepare for a wider variety
of challenges, than backcasting alone. Once we recognize the things that can go
wrong, we can protect against the bad outcomes, prepare plans of action, enable
nimble responses to a wider range of future developments, and assimilate a
negative reaction in advance so we aren’t so surprised by it or reactive to it.
In doing so, we are more likely to achieve our goals.
thankyou
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