Annie Duke, a professional gambler, has written an intriguing book, Thinking in Bets: Making Smarter Decisions When You Don’t Have All The Facts. The text is great; I took a lot of notes and saved many excerpts:
Life choices we make are bets on a specific path, as distinct from a range of potential alternative futures. Job and relocation decisions are bets. Sales negotiations and contracts are bets. Buying a house is a bet. Ordering the chicken instead of the steak is a bet. Everything is a bet.
Ask someone, “Want to bet?” when they claim something to be true. It puts them in a different place than when they simply state what they believed to be true. Thinking in Bets can help us reshape our approach to the world, and improve all aspects of decision-making in our lives.
We humans are disastrously biased in our decision making. We fool ourselves into believing our beliefs whether they are worthy of our trust of not. Our biases systematically impede our decision-making.
Most people don’t actually think through their beliefs. They hear something from a source they hold in high esteem and then maintain that belief. Recognize when you’re in an “echo-chamber” where only viewpoints you’re currently comfortable with are expressed.
We are quick to form beliefs, tend towards absolutes (this is right, that is wrong), and indulge in “motivated reasoning,” seeking out confirmation while ignoring contradictory evidence. Believing is easy; we are wired to believe
Our beliefs impact how we view the world, then how we act, and how we plan for the future. We are loath to update our beliefs, especially when a change would be a challenge to our self-narrative. Our decision-making is only as good as the accuracy of our beliefs, which are hopelessly biased and often wrong.
Because our beliefs are based on past experiences and inputs, it is wise to be purposeful about the inputs and experiences that we have going forward as that will guide our future selves.
We judge decisions based on how they turn out, known as “resulting,” in which we believe results indicate the quality of our decision: If we succeeded it was a good decision, but if we failed, it was a bad decision.
We guard our self-image via “self-serving bias,” which distorts our view of the world: We take credit for all good outcomes and blame bad luck for all bad outcomes, even when the truth is often shaded in grey.
Resulting ignores the role of luck. When a desired outcome doesn’t occur, it does not always mean it was a poor choice. It could have been bad luck. This insight moves us away from right-wrong thinking, and towards a probabilistic approach to interpreting outcomes, like betting in poker.
So, assess decisions on the basis of how they were made, not how they turned out You can win with a poor decision and lose with a good one. In the long run, it’s the decision-making process that counts.
Stop thinking in certainties and recognize probabilities, and avoid imagining situations as either-or. Most things lie along continuums.
Embrace uncertainty, by thinking in bets. Calibrate your confidence on a more granular level. Rather than say, “I know X with 100% certainty,” express a lesser confidence of, say, 65%. Calibrating preserves our self-narrative if we happen to be wrong, and it also makes us more credible.
Assess outcomes after the fact, through “outcome fielding.” Was an outcome driven by luck or skill, and in what combination? After winning a high profile tournament, for example, a poker player was focused not on basking in glory, but on de-constructing his play, and what he could have done better.
Practice tough love in the service of “truth-seeking.” No whining about how bad luck hurt us. No patting ourselves on the backs. Truth-seeking requires a special kind of contract with yourself.
Listen to arguments from all sides to get a clearer picture of the truth. Observe the world around you and learn from the choices that other people make by observing.
Create a group of individuals who can provide us with feedback on our weaknesses and blind spots. Focus on accuracy, accountability, and openness to diverse views. Court dissent and differing points of view, and take responsibility even when doing so is painful.
Strength in the Moment
We tend to act based on how we are affected right now, rather than how we will feel later. When we reach for that doughnut, rather than for a healthy apple, we’re doing so at the expense of our future self. Employ the 10-10-10 process: what are the consequences of each of my options in 10 minutes? 10 months? 10 years?
Finally, exercise caution after a streak of positive or negative outcomes to avoid becoming emotionally charged in a way that prevents us from thinking clearly.
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