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

by Annie Duke

I have yet to come across someone who doesn’t identify their best and worst results rather than their best and worst decisions.

Outcome bias

We need shortcuts, but they come at a cost. Many decision-making missteps originate from the pressure on the reflexive system to do its job fast and automatically.

Quick fixes are easy for brain to process as detailing will take an effort

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.

Its a designed system while real life is not. Learning through experiments

Poker, in contrast, is a game of incomplete information. It is a game of decision-making under conditions of uncertainty over time. (Not coincidentally, that is close to the definition of game theory.) Valuable information remains hidden. There is also an element of luck in any outcome. You could make the best possible decision at every point and still lose the hand, because you don’t know what new cards will be dealt and revealed. Once the game is finished and you try to learn from the results, separating the quality of your decisions from the influence of luck is difficult. In

Luck is randomness from Unknown favoring a decision.

But, also like all of us, he underestimated the amount and effect of what he didn’t know.

Our lives are too short to collect enough data from our own experience to make it easy to dig down into decision quality from the small set of results we experience.

Learn from others instead

We are discouraged from saying “I don’t know” or “I’m not sure.” We regard those expressions as vague, unhelpful, and even evasive. But getting comfortable with “I’m not sure” is a vital step to being a better decision-maker. We have to make peace with not knowing.

Not knowing, not investing, not buying are all decisions

In the book and the talk, Firestein points out that in science, “I don’t know” is not a failure but a necessary step toward enlightenment.

“Thoroughly conscious ignorance is the prelude to every real advance in science.” I would add that this is a prelude to every great decision that has ever been made.

What makes a decision great is not that it has a great outcome. A great decision is the result of a good process, and that process must include an attempt to accurately represent our own state of knowledge. That state of knowledge, in turn, is some variation of “I’m not sure.”

Jumping to conclusion is taking a short cut and ending up with more unknowns

The secret is to make peace with walking around in a world where we recognize that we are not sure and that’s okay.

When we think in advance about the chances of alternative outcomes and make a decision based on those chances, it doesn’t automatically make us wrong when things don’t work out. It just means that one event in a set of possible futures occurred.

Decisions are bets on the future, and they aren’t “right” or “wrong” based on whether they turn out well on any particular iteration.

When we think probabilistically, we are less likely to use adverse results alone as proof that we made a decision error, because we recognize the possibility that the decision might have been good but luck and/or incomplete information (and a sample size of one) intervened.

Decision not to be taken based on a proof of a lone outcome

The influence of luck makes it impossible to predict exactly how things will turn out, and all the hidden information makes it even worse. If

The world is structured to give us lots of opportunities to feel bad about being wrong if we want to measure ourselves by outcomes. Don’t fall for it!

This is ultimately very good news: part of the skill in life comes from learning to be a better belief calibrator, using experience and information to more objectively update our beliefs to more accurately represent the world. The more accurate our beliefs, the better the foundation of the bets we make.

Objective beliefs and being open to other ideas

“Findings from a multitude of research literatures converge on a single point: People are credulous creatures who find it very easy to believe and very difficult to doubt. In fact, believing is so easy, and perhaps so inevitable, that it may be more like involuntary comprehension than it is like rational assessment.”

This irrational, circular information-processing pattern is called motivated reasoning.

The potency of fake news is that it entrenches beliefs its intended audience already has, and then amplifies

Information that disagrees with us is an assault on our self-narrative. We’ll work hard to swat that threat away.

Getting married to an idea and then fall into confirmation bias trap

Surprisingly, being smart can actually make bias worse. Let me give you a different intuitive frame: 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. After all, people in the “spin room” in a political setting are generally pretty smart for a reason.

It turns out the better you are with numbers, the better you are at spinning those numbers to conform to and support your beliefs.

Expressing our level of confidence also invites people to be our collaborators. As I said, most of us don’t live our lives in poker rooms, where it is more socially acceptable to challenge a peer who expresses an opinion we believe to be inaccurate to a wager.

a funny story of a guy unique in his ability to hold tight to his strategy despite that strategy resulting in a lot of losing.

Learning might proceed in a more ideal way if life were more like chess than poker. The connection between outcome quality and decision quality would be clearer because there would be less uncertainty.

Tough to follow this method

Thinking in bets corrects your course. And even a small correction will get you more safely to your destination.

Our brains, likewise, have evolved to make our version of the world more comfortable: our beliefs are nearly always correct; favorable outcomes are the result of our skill; there are plausible reasons why unfavorable outcomes are beyond our control; and we compare favorably with our peers.

good decision group is a grown-up version of the buddy system. To be sure, even with help, none of us will ever be able to perfectly overcome our natural biases in the way we process information; I certainly never have.

Out in the world, groups form all over the place because people recognize how others can help us; the concept of working together on our individual challenges is a familiar one.

Lerner and Tetlock offer insight into what should be included in the group agreement to avoid confirmatory thought and promote exploratory thought.

A focus on accuracy (over confirmation), which includes rewarding truthseeking, objectivity, and open-mindedness within the group; Accountability, for which members have advance notice; and Openness to a diversity of ideas.

Exploratory thought becomes a new habit of mind, the new routine, and one that is self-reinforced.

Accountability, like reinforcement of accuracy, also improves our decision-making and information processing when we are away from the group because we know in advance that we will have to answer to the group for our decisions.

Diversity and dissent are not only checks on fallibility, but the only means of testing the ultimate truth of an opinion:

we should guard against gravitating toward clones of ourselves. We should also recognize that it’s really hard: the norm is toward homogeneity; we’re all guilty of it; and we don’t even notice that we’re doing it.

Peer review, the gold standard that epitomizes the open-mindedness and hypothesis testing of the scientific method, “offers much less protection against error when the community of peers is politically homogeneous.”

“Secrecy is the antithesis of this norm; full and open communication its enactment.”

The mere fact of our hesitation and discomfort is a signal that such information may be critical to providing a complete and balanced account. Likewise, as members of a group evaluating a decision, we should take such hesitation as a signal to explore further.

After all, as Jonathan Haidt points out, we are all our own best PR agents, spinning a narrative that shines the most flattering light on us.

etc. What the experts recognize is that the more detail you provide, the better the assessment of decision quality you get.

Details reveal the deduction process.

And because the same types of details are always expected, expert players essentially work from a template, so there is less opportunity to convey only the information that might lead the listener down a garden path to a desired conclusion.

We are naturally reluctant to share information that could encourage others to find fault in our decision-making.

Being open to learning can solve this problem

When we have a negative opinion about the person delivering the message, we close our minds to what they are saying and miss a lot of learning opportunities because of it. Likewise, when we have a positive opinion of the messenger, we tend to accept the message without much vetting. Both are bad.

Association of likeness with truth

The accuracy of the statement should be evaluated independent of its source.

We tend to think about conflicts of interest in the financial sense, like the researchers getting paid by the sugar industry. But conflicts of interest come in many flavors.

It is rare that we disagree with everything that someone has to say. By putting into practice the strategies that promote universalism, actively looking for the ideas that we agree with, we will more naturally engage people in the process of learning with us.

“But” is a denial and repudiation of what came before.

The rules of engagement have been made clear. Sometimes, people just want to vent. I certainly do. It’s in our nature. We want to be supportive of the people around us, and that includes comforting them when they just need some understanding and sympathy.

Finally, focus on the future. As I said at the beginning of this book, we are generally pretty good at identifying the positive goals we are striving for; our problem is in the execution of the decisions along the way to reaching those goals. People dislike engaging with their poor execution.

Execution is persuasion and motivating the team