Thinking In Bets
“ Making Smarter Decisions When You Don't Have All the Facts ”
by Annie Duke
- Rating: 4 / 5
Good book, a bit repetitive, but the core message is simple and interesting (decouple decision and outcome).
Decouple decision and outcome. Decision can be good even if outcome is bad. A 5% chance of something still happens 5 times out of 100.
Judge decisions based on the “tree of possible choices” available when taken rather than in hindsight. The best decision might have a bad outcome based on luck.
Avoid being categorical: think probabilistically for outcomes and core-beliefs. “I’m 75% sure of something”.
Outcomes are attributed to skill (in control) or luck (out of control). Self-serving bias is skewing the attribution. Reality is a mix of both, learning requires to analyze what we were in control of.
Be accountable of your decisions (to someone, or to future-self) to make sure you analyze correctly.
Time-travel: how will you feel about something 10y from now?
Life is poker
- Decisions and results are different
- In a prediction with a 75%/25% chance, you will still see the 25% choice happen 25% of the time
- The fact that it appears doesn’t make the prediction wrong.
- Life is more like poker than chess
- Poker is placing bets on incomplete information, and have incomplete information about results, like life
- Chess is a defined computation system
- When judging a decision consider the process rather than the results
- Humans are cabled to infer causation
- See alternatives as potential gains with probabilities.
- When you make a choice,
- when you just keep the status quo
- Not making a decision is making a decision
We establish probabilities based on beliefs that might be bogus
- Beliefs are made unconsciously
- Historically used to be a reasoning process - experiment -> conclude -> review occasionally
- Need to make sure we have the right set of beliefs
- Process to create beliefs is a bit goofy
- Being wrong is hard. Beliefs are hard to undo.
- People tend to disregard contradictory-evidence.
- People want to maintain their narrative, tend to post rationalize evidence to fit with their convictions
- The more emotionally loaded the topic is, the worse it gets
- Being wrong is detrimental to self-worth
- The smartest people are, the harder it is to actually see when they are wrong
Thinking in bets allows to see the facts better: “wanna bet”
- Using a certainty index about things rather than being categorical. I’m 80% sure
- This allows to re-calibrate beliefs: based on new data, certainty goes up or down.
- This is easier because it’s less judging towards oneself, and more scientific
Learning is necessary to get expertise from experience
- Must admit we were wrong
- And pay attention to the lessons we should learn from experience.
The answer is that while experience is necessary to becoming an expert, it’s not sufficient. Experience can be an effective teacher. But, clearly, only some students listen to their teachers. The people who learn from experience improve, advance, and (with a little bit of luck) become experts and leaders in their fields.
~ Annie Duke, Thinking in Bets
We attribute results to either luck or skill (what we have control upon / no control)
- Self-serving bias - Most of the time we attribute positive outcomes to skill, and negative to bad luck
- Reality is that it’s never 100% or the other
- Dual view of being right or wrong is an impediment to analyzing clearly, and so to learning
- When judging other people we tend to do the opposite (attribute their success to luck and their failure to skill) because of self serving bias as well (using them as comparison points)
- Humans are competing for resources by nature, because evolution
- Self-serving bias is serving our internal narrative, making us feel good about ourselves
- Instead, fix this habit by making you feel good that you see things with empathy and attribute part of your success to luck and other’s successes to skill
- Try to revert situation: if you were the successful person, would you attribute success to luck. Would you attribute failure to luck if it were someone else?
- Also, we feel better about being wrong if we feel we learned something from it
Create or find a truth seeking group
- Natural contract is to confirm bad luck of someone else
- When transgressing the contract people don’t like it.
- A truth seeking contract is a social contract where discussion is honest and attributing objectively the outcome of a decision to skill or luck, to learn from it. E.g: blue pill vs. red pill
- Switching to such a contract needs to be explicit
- E.g: AA
- You can blame bad luck to just vent, until you have the force to face the truth be conscious and honest about it
- Focus on what you have control on (skill) when discussing decisions
- Truth seeking group will disapprove of complaining about bad luck
- Accountability is allowing you to rely on the group even when away - “how will I explain this?”
- Needs diversity of opinion to force to see different aspects, else confirmatory effect (doing the same thing as others)
- Judgement works better when stakes
To keep you honest / review information, use CUDOs: Mertonian Norms
- Communism: share all data so people can judge, be skeptical when you don’t have the data
- Universalism: don’t shoot the message, consider ideas despite who it comes from.
The Mertonian norm of universalism is the converse. “Truth-claims, whatever their source, are to be subjected to preestablished impersonal criteria.” It means acceptance or rejection of an idea must not “depend on the personal or social attributes of their protagonist.” “Don’t shoot the message,” for some reason, hasn’t gotten the same historical or literary attention, but it addresses an equally important decision-making issue: don’t disparage or ignore an idea just because you don’t like who or where it came from.
~ Annie Duke, Thinking in Bets
- Disinterestedness: reveal conflict of interest, ignore/don’t give the result of a decision process to give an opinion. Act for the greater good
- Organized skepticism: scrutinize beliefs rather than accepting statements as true
Time travel -
- get rational by remembering the past or imagining the future
- We tend to look to the situation too zoomed in, this prevents rational analysis and decisions
- And we take a lot of decisions in the moment
- Decrease emotional state: how would you feel about the situation if it were 10 months/years ago
- How have you felt about behavior in the past
- How will you feel about that in 10 years
- How will you explain the decision to group / future self. Regrets ?
- When decisions are driven by local maximum / minima
- Ulysses contract: set rational boundaries when anticipating emotional behavior
- Increase barrier to irrational behavior (make things more difficult, i.e don’t buy ice cream, lock stuff, etc.)
- Fix limits to what you’ll bet/invest before emotional investment
- Determine the broadest range of potential outcomes possible, evaluate their likelihood
- Be prepared to react
- Prepare for negative outcome
- Determine expected value from weighted sum of outcomes by likelihood
- Walk backwards from expected outcome: back-casting - what are the things you did correctly
- Walk backwards from failure: pre-mortem - what are the errors you made
Hindsight bias makes us forget that all possible futures are a tree from which branches disappear as we make decisions. Judge outcomes based on the tree, not the only branch that came to be