Thinking in Bets: Making Smarter Decisions When You Don't Have All the Factsby Annie Duke
Even the best decision doesn't yield the best outcome every time. There's always an element of luck that you can't control, as well as information hidden from view. To avoid worrying yourself to death and achieving long-term success, you need to learn how to think in bets in which you examine the accuracy of your beliefs that may influence your decisions.
By shifting your thinking from a need for certainty to a goal of accurately assessing what you know and what you don't, you'll be less vulnerable to reactive emotions, knee-jerk biases, and destructive habits in your decision-making. You'll become more confident, calm, compassionate, and successful in the long run.
Life is Poker, Not Chess
“We all struggle to execute our best intentions. Poker players have the same struggle, with the added challenges of time pressure, in-your-face uncertainty, and immediate financial consequences. That makes poker a great place to find innovative approaches to overcoming this struggle. And the value of poker in understanding decision-making has been recognized in academics for a long time.”
Professional poker players are surely familiar with the term “resulting.” It’s a tactic we use when we tend to equate the quality of our decision with its results. However, players know that they should not base their decisions on how many hands they lost or won.
Creating a close relationship between results and decision quality influences our daily decisions, eventually with dramatic consequences. For example, when gamblers win, they are motivated to win more, but some stop once they lose it all.
Chess strategies aren’t fully applicable to real-life decision-making. This is because, in chess, each move is a well-thought process, while in life, we still need to consider that dose of luck. Unlike chess, poker is more similar as it combines luck with uncertainty. Thus, the quality of our lives depends on the quality of our decisions plus a dose of luck.
If you don’t think you are good at making decisions or are very indecisive, that’s normal. Remember that a decision should not be qualified as “good” by relying on the outcome. Rather, a good decision is one that goes through a process reflecting our current state of knowledge, and being confused sometimes is valid.
Actions to take
“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.”
Decisions are bets on the future. When we choose one alternative, we reject all the other alternatives of how our future would turn out. Our decisions are based on specific factors:
- We bet on the future versions of ourselves;
- We bet on what we believe about the world;
- We bet according to our past experiences.
However, the accuracy of our beliefs determines the quality of our decisions: the more accurate our beliefs, the better our decisions will be. But what happens when we have the wrong beliefs?
Once our beliefs are embedded into our system, they become extremely difficult to change. While human nature claims we’re drawn to truth-seeking, studies show the opposite: Just when we’re aware we must change our beliefs to correspond to new valid information, we tend to change how we interpret the information to match our beliefs.
When someone challenges us to bet on our belief, telling us that it’s wrong, we tend to bet just to prove them wrong. However, this action is triggered differently when money is involved, as material things are at stake.
People are more inclined to feel the loss of an argument once tangible items are at risk. We tend to reconsider the facts, be more honest with ourselves and examine our beliefs more objectively.
Actions to take
Bet to Learn: Fielding the Unfolding Future
“Thinking in bets triggers a more open-minded exploration of alternative hypotheses, of reasons supporting conclusions opposite to the routine of self-serving bias. 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.”
How can we use past experiences to shape our future? It turns out that our skills significantly play a big role in the evolution of our decisions.
No matter how many experiences we have gone through, learning nothing from them won’t make you an expert. There’s no number of pleasant or unpleasant experiences that can make you a pro when it comes to the outcome of your decisions.
When making a decision (or even a bet), we tend to concentrate on the future it will cause. However, we must understand that our decision affects our future, meaning our skill has the biggest influence. If the quality of our decision doesn’t influence the outcome, then luck interferes.
Apparently, those who take credit for their good decisions and blame the bad ones on their luck are the ones who didn’t learn from their past. If we want to learn and grow, we should take credit for our mistakes too.
Aside from learning from our past experiences, envisioning our desired outcome already happening to us is also beneficial in decision-making. Take deciding to move abroad, for example. To know whether you’re making the right decision, try envisioning yourself living there first. Do you picture yourself living happily or miss your old life? If it’s the former, then you’re making the right decision, but if it’s the latter, you should consider other options. This is how you would know what’s better for yourself and how your decisions will impact your life.
Actions to take
The Buddy System
“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.”
Joining a group of people who believe in “thinking in bets,” the analytical way of thinking based on factual information instead of personal beliefs, will encourage you to break the common social contract. People who want to start thinking this way must be open-minded enough to respect those who disagree with them and take responsibility for their mistakes, even when it’s uncomfortable.
This type of thinking is triggered when people learn that they will be held accountable for their actions before forming any opinion. To be a part of such a focus group, you must be extremely tough-skinned.
Members of such a group have the following traits: - They have views and opinions which are different than yours; - They are interested in accuracy; - They are reasonably informed; - They celebrate and embrace different points of view.
The last trait is possibly the most important for creating a safe space where people can evolve. For example, members of AA groups are given chips or other prizes to celebrate different milestones or achievements during their sobriety journey. This is a well-thought practice to show members they are celebrated for their achievements so that they can grow their motivation for discipline.
Actions to take
Dissent to Win
“It’s a recognition that, while there is an objective truth, everything we believe about the world is not true.”
The typology of bettering ourselves embodies different community opinions:
- Communism - all accurate information belongs to the powerful group.
- Universalism - apply the same standards to proof or other claims despite the source of your information.
- Detachment - adopting a non-conflictual approach to avoid influencing others’ perspectives.
- Skepticism - a desire to debate.
When we’re in a situation where a decision is up to discussion, we must be aware of any omissions we or others may make and be careful to add all necessary information. Additionally, we should also not ignore or belittle one’s idea when evaluating opposing beliefs; just don’t tolerate the source or the person delivering the information.
One way to determine if you let the messenger influence how you perceive the information is by imagining you receive it from a source you trust or another source you don’t value. If there are differences, you should reconsider your perception.
If you’re searching for the truth and you encounter others having a different perception from you, it’s best to lead the conversation with assent and replace words like “but” with “and.” Ask them for a temporary agreement to engage them in your scenario. To make the discussion more constructive, you should also ask the other person what they wish to gain after the conversation ends. Do they need advice or just someone they can vent out to?
Actions to take
Adventures in Mental Time Travel
“We’re not perfectly rational when we ponder the past or the future and engage the deliberative mind, but we are more likely to make choices consistent with our long-term goals when we can get out of the moment and engage our past- and future selves.”
We can adapt future versions of ourselves to act as our "decision buddies," just as others can hire people to make decisions for them. This is what companies that manage retirement plans do. They shape out pretty accurate future versions of their client based on their income, saving habits, age, and goals, painting a picture of how their lifestyle will be and what they can expect.
Suzy Welch, a business journalist, developed a helpful method to help people make more insightful decisions. This is called the ‘10-10-10’ method, in which you will need to ask yourself questions that will help you see the potential outcomes of your decisions. You could ask yourself: “How will the consequences of my decision affect me in ten minutes? Ten months? Ten years?” Or “What are the consequences of all of my options in ten minutes? Ten months? Ten years?”
When we find ourselves being blinded by our personal beliefs and disconnecting from the truth when making decisions, using a ‘decision swear jar’ can help. This is a good tool to preserve our healthy and new “thinking in bets” system. We can incorporate it by putting a dollar every time we disconnect from truth-seeking, and we fall back from our unhealthy old patterns, like when we’re making excuses to stick to our biased beliefs.