Thinking in Bets: Making Smarter Decisions When You Don't Have All the Facts

by Annie Duke

When we lead with assent, our listeners will be more open to any dissent that might follow.

If someone expresses a belief or prediction that doesn’t sound well calibrated and we have relevant information, try to say and, as in, “I agree with you that [insert specific concepts and ideas we agree with], AND . . .” After “and,” add the additional information. In the same exchange, if we said, “I agree with you that [insert specific concepts and ideas you agree with], BUT . . . ,” that challenge puts people on the defensive. “And” is an offer to contribute. “But” is a denial and repudiation of what came before. We can think of this broadly as an attempt to avoid the language of “no.”

People dislike engaging with their poor execution. That requires taking responsibility for what is often a bad outcome, which,

When we validate the other person’s experience of the past and refocus on exploration of the future, they can get to their past decisions on their own.

By recruiting past and future versions of yourself, you can become your own buddy.

Away from the poker table, we don’t feel or experience the consequences of most of the decisions we make right away. If we are winning or losing to a particular decision, the consequences may take time to reveal themselves.

we must recognize that no strategy can turn us into perfectly rational actors.

When Night Jerry stays up late, it’s because it benefits him now; he discounts the benefits that come later from going to bed. Saving for retirement is a temporal discounting problem: the gratification of spending discretionary income is immediate.

“Every 10-10-10 process starts with a question. . . . [W]hat are the consequences of each of my options in ten minutes? In ten months? In ten years?” This

set of questions triggers mental time travel that cues that accountability conversation (also encouraged by a truthseeking decision group).

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

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.

The way we field outcomes is path dependent. It doesn’t so much matter where we end up as how we got there. What has happened in the recent past

Our feelings are not a reaction to the average of how things are going.

The problem in all these situations (and countless others) is that 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.

Figure out the possibilities, then take a stab at the probabilities. To start, we imagine the range of potential futures. This is also known as scenario planning.

When faced with highly uncertain conditions, military units and major corporations sometimes use an exercise called scenario planning. The idea is to consider a broad range of possibilities for how the future might unfold to help guide long-term planning and preparation.”

identifying as many of the possible outcomes as we can, we want to make our best guess at the probability of each of those futures occurring.

It’s about acknowledging that we’re already making a prediction about the future every time we make a decision, so we’re better off if we make that explicit. If we’re worried about guessing, we’re already guessing. We are already guessing that the decision we execute will result in the highest likelihood of a good outcome given the options we have available to us. By at least trying to assign probabilities, we will naturally move away from the default of 0% or 100%, away from being sure it will turn out one way and not another. Anything that moves us off those extremes is going to be a more reasonable assessment than not trying at all.

Poker players really live in this probabilistic world of, “What are the possible futures? What are the probabilities of those possible futures?” And they get very comfortable with the fact that they don’t know exactly because they can’t see their opponent’s cards.

In fact, if two people in the group are really far off on an estimate of the likelihood of an outcome, that is a great time to have them switch sides and argue the other’s position. Generally, the answer is somewhere in the middle and both people will end up moderating their positions. But sometimes one person has thought of a key influencing factor the other hasn’t and that is revealed only because the dissent was tolerated.

Third, anticipating the range of outcomes also keeps us from unproductive regret (or undeserved euphoria) when a particular future happens. Finally, by mapping out the potential futures and probabilities, we are less likely to fall prey to resulting or hindsight bias, in which we gloss over the futures that did not occur and behave as if the one that did occur must have been inevitable, because we have memorialized all the possible futures that could

have happened.

Grant prospecting is similar to sales prospecting, and this process can be implemented for any sales team. Assign probabilities for closing or not closing sales, and the company can do better at establishing sales priorities, planning budgets and allocating resources, evaluating and fine-tuning the accuracy of its predictions, and protecting itself against resulting and hindsight bias.

But it turns out that better decision trees, more effective scenario planning, results from working backward rather than forward.

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 outcome, holding up a newspaper with the headline “We Achieved Our Goal!” Then we think about how we got there.

Backcasting makes it possible to identify when there are low-probability events that must occur to reach the goal.

Backcasting and premortems complement each other.

Backcasting imagines a positive future; a premortem imagines a negative future.

over twenty years of research, consistently finding that people who imagine obstacles in the way of reaching their goals are more likely to achieve success, a process she has called “mental contrasting.”

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.

It may not feel so good during the planning process to include this focus on the negative space. Over the long run, however, seeing the world more objectively and making better decisions will feel better than turning a blind eye to negative scenarios.

temporal discounting: if we imagine a positive future, we feel better now, but we’ll more than compensate for giving up that immediate gratification through the benefits of seeing the world more accurately,

Forgetting about an unrealized future can be dangerous to good decision-making.

To some degree, we’re all outcome junkies, but the more we wean ourselves from that addiction, the happier we’ll

be. None of us is guaranteed a favorable outcome, and we’re all going to experience plenty of unfavorable ones.