TL;DR

“Thinking in Bets” by Annie Duke is a captivating exploration of decision-making in an uncertain world. Duke emphasizes embracing uncertainty, becoming better “belief calculators,” and learning from experience. She advocates for diverse perspectives, objectivity, and action, providing practical strategies for making better decisions. By challenging our biases, surrounding ourselves with diverse perspectives, and embracing uncertainty, we can navigate life’s uncertainties with confidence and clarity.

Summary

“Thinking in Bets” is an entertaining book about how to use behavioral economics to make better decisions when you can’t rely on facts. Annie Duke is a world-class poker player and also a trained psychologist, which makes her the perfect advisor for making perilous decisions. The book could be divided into two different types of advice that are somewhat similar across all chapters: advice to take better decisions and advice on how to feel about it.

The core ideas I got from this book are the following. First, it’s okay to be unsure of things. All real scenarios have uncertainty, and it’s okay for it to happen. We must be willing to understand the degree of uncertainty we have over something and then assess and make a decision. We have to be comfortable with uncertainty since it is the basis of all bets.

Second, an important point here is to be a better “belief calculator”, meaning that we should be able to say that we are 80% sure we are right or 20% sure we are wrong. Third is that we are not original truth seekers, meaning we don’t go around looking for the truth but trying to make the truth align with what we know and believe. “Instead of altering our beliefs to fit new information, we do the opposite, altering our interpretation of that information to fit our beliefs.” To understand the degree of how sure we are, we can ask ourselves “wanna bet?”. That makes us double-guess our beliefs and help us achieve a more down-to-earth view of the decision. It is important to share our uncertainty once we have discovered it since it makes us more credible communicators. “By communicating our own uncertainty when sharing beliefs with others, we are inviting the people in our lives to act like scientists with us. This advances our beliefs at a faster clip because we miss out on fewer opportunities to get new information, information that would help us to calibrate the beliefs we have.”.

The third insight is on how we learn. We learn from experience and its outcomes, which we should always use to reinforce our beliefs. This reaffirmance closes the feedback loop of our brains, reducing uncertainty. To guarantee the quality of our learning, we must differentiate from skill outcomes and luck outcomes: “If making the same decision again would predictably result in the same outcome, or if changing the decision would predictably result in a different outcome, then the outcome following that decision was due to skill. The quality of our decision-making was the main influence over how things turned out. If, however, an outcome occurs because of things that we can’t control (like the actions of others, the weather, or our genes), the result would be due to luck. If our decisions didn’t have much impact on the way things turned out, then luck would be the main influence.” The action of fielding the outcome is defined as “Self-Serving bias”. It’s important to note that to be able to learn we must also be willing to not blame luck as our main enemy; this is what gives rationality to our decisions. We must be able to self-critique. “We can learn better and be more open-minded if we work toward a positive narrative driven by engagement in truth-seeking and striving toward accuracy and objectivity: giving others credit when it’s due, admitting when our decisions could have been better, and acknowledging that almost nothing is black and white.”.

Fourth, it’s important to have other people around us to help field outcomes. A buddy system is a good starting point, which is a group of individuals with similar interests that have the objective to seek the truth and advise each other in the chance of self-improvement. “A 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. But if we can find a few people to choose to form a truth-seeking pod with us and help us do the hard work connected with it, it will move the needle—just a little bit, but with improvements that accumulate and compound over time.” The buddy system helps us avoid confirmatory thought and move into exploratory thought. “Confirmatory thought promotes a love and celebration of one’s own beliefs, distorting how the group processes information and works through decisions, the result of which can be groupthink. Exploratory thought, on the other hand, encourages an open-minded and objective consideration of alternative hypotheses and a tolerance of dissent to combat bias.”.

Fifth, there is a great system designed by Merton and known as CUDOS, which stands for communism, universalism, disinterestedness, and organized skepticism. This system is supposed to help us and our groups achieve objectivity. “When there is a drift toward confirmation and away from exploring accuracy, it’s likely the result of the failure to nurture one of Merton’s norms.” Communism refers to the ownership of data, and is defined as the fact that everyone in the group should have access to the data that was used to achieve a conclusion. Universalism refers to the fact that “(t)he accuracy of the statement should be evaluated independent of its source.” Disinterestedness refers to the fact that we shouldn’t be biased about a desired outcome of the decision, nor should we aim towards proving a hypothesis true. Let’s not tell our group how the story ends, since that will bias the analysis. Organized skepticism refers to not buying everything everyone says, always be challenging facts with questions.

Sixth, Duke mentions we must always follow decisions with execution. Let’s apply what we have learned and keep improving. An important point is that we can use our past and future perspectives to make better decisions. Thinking, what would my past-self think? What would my future-self want? Duke calls this “mental time-traveling”: “Just as we can recruit other people to be our decision buddies, we can recruit other versions of ourselves to act as our own decision buddies. We can harness the power of mental time traveling, operationalizing it, encouraging it, and figuring out ways to cause that collision of past, present, and future as much as possible. Present-us needs that help, and past-us and future-us can be the best decision buddies for the job.” Annie explains that we should avoid “temporal discounting”, which means that we shouldn’t act in the present at the expense of our future self.

Seventh, we must not be tickers of our own time, meaning we don’t want to see our learning in the short term but in the long term. “Happiness (however we individually define it) is not best measured by looking at the ticker, zooming in and magnifying moment-by-moment or day-by-day movements. We would be better off thinking about our happiness as a long-term stock holding. We would do well to view our happiness through a wide-angle lens, striving for a long, sustaining upward trend in our happiness stock, so it resembles the first Berkshire Hathaway chart.”

Lastly, Duke mentions how we can use decisions and plan ahead. She mentions scenario planning, where we plan based on the different scenarios that could be caused by the outcomes from a decision: “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.” Another way to plan is to grant prospecting, which is basically assigning confidence to initiatives and see what gives the higher value. Lastly, we can always work backward from our goals, imagining we have already achieved and what we had to do to get there. Annie calls this backstalking. In all of our plans, we must always consider the scenario that we fail since this will help us find a middle ground, be less biased and get a better result.

To summarize the book, I attach this quote: “By keeping an accurate representation of what could have happened (and not a version edited by hindsight), memorializing the scenario plans and decision trees we create through a good planning process, we can be better calibrators going forward. We can also be happier by recognizing and getting comfortable with the uncertainty of the world. Instead of living at extremes, we can find contentment with doing our best under uncertain circumstances, and being committed to improving from our experience.”