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

by Annie Duke

This tendency we all have to favor our present-self at the expense of our future-self is called temporal discounting.*

Seeing our aged-self in the mirror, along with a spreadsheet showing us how future-us has to struggle to get by, is a persuasive reminder to put aside some discretionary spending money for retirement.

One of our time-travel goals is to create moments like that, where we can interrupt an in-the-moment decision and take some time to consider the decision from the perspective of our past and future. We can then create a habit routine around these decision interrupts to encourage this perspective taking, asking ourselves a set of simple questions at the moment of the decision designed to get future-us and past-us involved. We can do this by imagining how future-us is likely to feel about the decision or by imagining how we might feel about the decision today if past-us had made it.

“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?”

We can build on Welch’s tool by asking the questions through the frame of the past: “How would I feel today if I had made this decision ten minutes ago? Ten months ago? Ten years ago?” Whichever frame we choose, we draw on our past experiences (including similar decisions we may have regretted) in answering the questions, recruiting into the decision those less-reactive brain pathways that control executive functioning.

Recruiting past-us and future-us in this way activates the neural pathways that engage the prefrontal cortex, inhibiting emotional mind and keeping events in more rational perspective. This discourages us from magnifying the present moment, blowing it out of proportion and overreacting to it.

When we view these upticks and downticks under the magnification of that in-the-moment zoom lens, our emotional responses are, similarly, amplified. Like the flat tire in the rain, we are capable of treating things that will have little effect on our long-term happiness as having significant impact. Our decision-making becomes reactive, focused on off-loading negative emotions or sustaining positive emotions from the latest change in the status quo. We can see how this can result in self-serving bias: fielding outcomes to off-load the negative emotions we feel in the moment from a bad outcome by blaming them on luck and sustaining the positive emotions from good outcomes by taking credit for them. 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.

But for people involved in specialized activities, it’s worth it to be able to communicate a complex concept in a single word that laypeople would need lengthy phrases to convey. Having a nuanced, precise vocabulary is what jargon is all about.

Because poker players are in a constant struggle to keep in-the-moment fluctuations in perspective, their jargon has a variety of terms for the concept that “bad outcomes can have an impact on your emotions that compromise your decision-making going forward so that you make emotionally charged, irrational decisions that are likely to result in more bad outcomes that will then negatively impact your decision-making going forward and so on.” The most common is tilt.

When the emotional center of the brain starts pinging, the limbic system (specifically the amygdala) shuts down the prefrontal cortex. We light up . . . then we shut down our cognitive control center.

We can take some space till we calm down and get some perspective, recognizing that when we are on tilt we aren’t decision fit.

Most illustrations of Ulysses contracts, like the original, involve raising a barrier against irrationality.

For the decision swear jar, we identify the language and thinking patterns that signal we are veering from our goal of truthseeking. When we find ourselves using certain words or succumbing to the thinking patterns we are trying to avoid because we know they are signs of irrationality, a stop-and-think moment can be created. You can think about this as a way to implement accountability.

That’s hindsight bias, an enemy of probabilistic thinking.