Thinking In Bets

Annie Duke, “Thinking In Bets: Making Smarter Decisions When You Don’t Have All the Facts,” Penguin, 2018, 252 pp.

After a twenty-year career as a professional poker champion, the author turned to business consulting.  She graduated from Columbia and attended graduate school at the University of Pennsylvania where she won a fellowship from the National Science Foundation, earning a Master’s and completing all the doctoral course work in cognitive psychology.

Our judgment of whether or not we successfully chose an option wisely is usually determined after the outcome is available.  For instance, in Super Bowl XLIX, Seahawks coach Pete Carroll made what became a very controversial call.  With 26 seconds remaining and trailing by four at the Patriots’ one-yard line, he called for a pass instead of a handoff to his star running back. The pass was intercepted and the Seahawks lost. Critics called it the dumbest play in history. But was the call really that bad? Or did Carroll actually make a great call that was ruined by bad luck?

Even the best decision doesn’t yield the best outcome every time. There’s always an element of luck that you can’t control, and there is always information that is hidden from view. So the key to long-term success (and avoiding worrying yourself to death) is to think in bets (probabilities): How sure am I? What are the possible ways things could turn out? What decision has the highest odds of success? Did I land in the unlucky 10% on the strategy that works 90% of the time? Or is my success attributable to dumb luck rather than great decision making?

The author draws on examples from business, sports, politics, and (of course) poker to share tools anyone can use to embrace uncertainty and make better decisions. For most people, it’s difficult to say “I’m not sure” in a world that values and, even, rewards the appearance of certainty. But professional poker players are comfortable with the fact that great decisions don’t always lead to great outcomes and bad decisions don’t always lead to bad outcomes.

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.

My Notes:

Pg. 3ff:  A bet is really a decision about an uncertain future.  Treating decisions as bets makes it possible to find learning opportunities in uncertain environments.  It helps to learn from results and minimizes emotions as much as possible.  Thinking in bets recognizes that two things determine how our lives turn out: the quality of our decisions and luck.  However, we tend to equate good decisions with the result; if it turns out well, it was by our definition, a good decision.  This is called ‘Resulting.’  Chance or luck is not even considered.  Pete Carrol's decision in the Superbowl, with 26 seconds remaining in the game, to pass was, when considering the probabilities, the correct decision—because it did not work, it is judged a bad decision.  Drawing an overly tight relationship between results and decision quality affects our decisions, potentially with far-reaching, catastrophic consequences.

Pg. 13:  Our deliberative capacity is already maxed out, making more rational decisions isn’t just a matter of willpower or consciously handling more decisions in a deliberative mind.  Our reflexive and deliberative mind is necessary for our survival.  One system does its thing rapidly and automatically with or without our conscious awareness. Only one thought at a time can be deliberated.

Pg. 20f:  John von Neumann compared chess and poker.  Chess is not a game, it is a well-defined form of computation.  You may not be able to work out the answers, but in theory there must be a solution, a right procedure in any position. Chess, for all its strategic complexity, isn’t a great model for decision-making in life, where most of our decisions involve hidden information and a much greater influence of luck.  This creates a challenge that doesn’t exist in chess: identifying the relative contributions of the decisions we make versus luck in how things turn out.  Poker, by contrast, is a game of incomplete information.  It is a game of decision-making under conditions of uncertainty and luck over time. 

Pg. 39f:  During a poker game in the 1990s, John Hennigan, a gambler, was one night in a high-stakes poker game when the talk between hands somehow included the state capital of Iowa, Des Moines.  John had never been there and was curious about what life in Des Moines might be like—a ‘normal life.  The conversation ended up betting John that he couldn’t last a month there.  The stakes settled on couldn’t be so much that he would stay no matter what or too little to entice him.  The sum of $30,000 was settled on.  John lasted two days and called back, finally settling on paying the bettors $15,000 to let him out of the deal.

Pg. 44:  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 and eliminates acting on other alternatives.  Not betting is itself a bet. The betting elements of decisions—choice, probability, risk, etc.—are more obvious in some situations than others. 

Pg. 51:  Studies have confirmed that people are credulous creatures who find it very easy to believe and very difficult to doubt.  A series of experiments confirmed that 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.  As with many of our irrationalities, how we form beliefs were shaped by the evolutionary push toward efficiency rather than accuracy.  Abstract belief formation (that is, beliefs outside our direct experience, conveyed through language) is likely among the few things that are uniquely human, making it a relatively new ability in the scope of evolutionary time.

Pg. 54f:  Our belief formation process led hundreds of millions of people to bet the quality and length of their lives on their belief about the merits of a low-fat diet.  Led by advice drawn, in part, from research secretly funded by the sugar industry, Americans in one generation cut a quarter of caloric intake from fat, replacing it with carbohydrates, with the US government food pyramid confirming this misinformation.  Contrary to prediction, total calorie intake increased substantially, the prevalence of obesity tripled, the incidence of type 2 diabetes increased many-fold, and the decades-long decrease in cardiovascular disease plateaued and may reverse, despite greater use of preventive drugs and surgical procedures.

Pg. 164:  Back in 1967 three Harvard scientists conducted a comprehensive review of the research to date to determine whether sugar or fat was the culprit in the increasing rates of heart disease.  They published their results in the highly respected New England Journal of Medicine, they firmly pointed the finger at fat as the culprit.  It was later discovered, in 2016, that the sugar industry had paid all three professors (they are now all dead).  This journal now, since 1984, requires any conflict of interest to be made known. 

Pg. 55:  Truth-seeking, the desire to know the truth regardless of whether the truth aligns with the beliefs we currently hold, is not naturally supported by the way we process information.  Research confirms that instead of altering our beliefs to fit new information, we do the opposite, altering our interpretation of that information to fit our beliefs.

Pg. 60:  Fake news isn’t meant to change minds.  As we know, beliefs are hard to change.  The potency of fake news is that it entrenches beliefs its intended audience already has, and then amplifies them.  The internet speeds our retreat into confirmatory bubbles (silos).  Disinformation is different than fake news in that the story has some true elements, embellished to spin a particular narrative.  Disinformation is even more powerful because the confirmable facts in the story make it feel like the information has been vetted.

Pg. 62:  Surprisingly, being smart can actually make the bias worse.   The smarter you are the better you are at constructing a narrative that supports your beliefs, rationalizing and framing the data to fit your argument or point of view.  People are better at recognizing biased reasoning in others but are blind to bias in themselves.  This blind-spot bias is greater the smarter you are.

Pg. 89:  Self-serving bias is the term describing how don’t learn from experience well.  We take credit for the good stuff and blame the bad stuff on luck so it won’t be our fault.

Pg. 97:  In poker, the bulk of what goes on is watching.  An experienced player will choose to play only about 20% of the hands they are dealt, forfeiting the other 80% of the hands before even getting past the first round of betting.  There is a whole lot to be learned by watching the play of others.

Pg. 104:  Studies on happiness have determined that after having sufficient food, shelter, and clothing, the element most important is how we’re doing comparatively.  We also have a strong bias against loss: it takes two units of winnings to equal a single unit loss.

Pg. 149:  There has been a controversy over the last decade about a potentially large number of published studies in psychology that subsequent researchers could not replicate.  A Reproducibility Project has been working on replicating studies from top psychology journals.  They have set up a betting market based on the replication attempts.  They recruited a bunch of experts in the relevant fields and asked their opinions on the likelihood the Reproducibility Project would replicate the results of forty-four studies.  They gave the experts money to bet.  This betting market had a 71% accurate rate versus traditional peer reviews rate of 58%.

Pg. 169:  Skepticism is about approaching the world by asking why things might not be true rather than why they are true.  Thinking in bets embodies skepticism by encouraging us to examine what we do and don’t know and what our level of confidence is in our beliefs and predictions.  This moves us closer to what is objectively true.

Pg. 219:  Imagining the future and determining how you got there is better than forecasting the future from the present.