In her book, Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts, Annie Duke draws on examples from business, sports, politics, and poker to share tools anyone can use to embrace uncertainty and make better decisions.
These are some of my favorite concepts and takeaways from reading the book.
Habits operate in a neurological loop with three parts: the cue, the routine, and the reward. When we have a good outcome, it cues the routine of crediting the result to our excellent decision-making ability, delivering the reward of a positive update of our self-narrative.
A bad outcome cues the routine of off-loading responsibility for the result, delivering the reward of avoiding a negative update of our self-narrative. We invert the cue and the routine parts for our peers, so we continue to get a reward of feeling good about ourselves under similar circumstances.
How can we leverage this technique to initiate and build good habits? One approach is to substitute the routine of truth-seeking for the outcome-oriented instinct to focus on seeking credit and avoiding blame. If we put in the work to practice this routine, we can field more of our outcomes in an open-minded way to drive learning.
It is not productive to compare ourselves with others or get a good feeling when the comparison favors us. However, it is fruitful to use that urge for comparison to strengthen our focus on accuracy and truth-seeking. Sorting outcomes into the luck and skill buckets can carry a high amount of risk at the expense of learning from our experience.
“The hard way”
Thinking in bets or treating outcome fielding as a bet can have some advantages as a decision-making tool.
First, the prospect of a bet can make us examine and refine our beliefs. Only a few things carry a high degree of absolute certainty in life. We also should make the appropriate adjustments to our decision-making process to account for those uncertainties.
Second, when we treat outcome fielding as a bet, we are better positioned to field outcomes more objectively into the appropriate buckets.
Third, thinking in bets also triggers a more open-minded exploration of alternate hypotheses. We are more likely to explore the opposite side of an argument more often and more seriously.
However, thinking in bets is also hard to do it well, at least initially. It must start as a deliberative process, and it will feel clunky and slow at first. Despite the difficulties, striving for accuracy through probabilistic thinking is a worthy routine to get right.
Thinking in bets is a worthy approach because the benefits of recognizing just a few extra learning opportunities compound over time. We can think of our decision-making ability as a ship traveling on a long journey. A small degree of the course might not be seen as significant at first or even noticeable. Over time, the error compounds, and we find ourselves strayed miles away from the intended destination.
Thinking in bets can be our tool for correcting the course as we go. A string of small corrections and learning and compound over time helps us get to our destination more safely and without wasting too much time.