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

by Annie Duke

After 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. When I consult with enterprises on building decision trees and determining probabilities of different futures, people frequently resist having to make a guess at the probability of future events mainly because they feel like they can’t be certain of what the likelihood of any scenario is. But that’s the point. The reason why we do reconnaissance is because we are uncertain. We don’t (and likely can’t) know how often things will turn out a certain way with exact precision. It’s not about approaching our future predictions from a point of perfection. 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. Even if our assessment results in a wide range, like the chances of a particular scenario occurring being between 20% and 80%, that is still better th...