Thinking in Bets by Annie Duke

INTRODUCTION: Why This Isn’t a Poker Book

Over time, those world-class poker players taught me to understand what a bet really is : a decision about an uncertain future.

Treating decisions as bets, I discovered, helped me avoid common decision traps, learn from results in a more rational way, and keep emotions out of the process as much as possible.

CHAPTER 1: Life Is Poker, Not Chess

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.“

CHAPTER 6: Adventures in Mental Time Travel

Improving decision quality is about increasing our chances of good outcomes, not guaranteeing them. Even when that effort makes a small difference — more rational thinking and fewer emotional decisions, translated into an increased probability of better outcomes — it can have a significant impact on how our lives turn out. Good results compound. Good processes become habits, and make possible future calibration and improvement.

When we make in-the-moment decisions (and don’t ponder the past or future), we are more likely to be irrational and impulsive.*

This tendency we all have to favor our present-self at the expense of our future-self is called temporal discounting.* We are willing to take an irrationally large discount to get a reward now instead of waiting for a bigger reward later.

When we imagine the future, we don’t just make it up out of whole cloth, inventing a future based on nothing that we have ever seen or experienced. Our vision of the future, rather, is rooted in our memories of the past. The future we imagine is a novel reassembling of our past experiences. Given that, it shouldn’t be surprising that the same neural network is engaged when we imagine the future as when we remember the past. Thinking about the future is remembering the future, putting memories together in a creative way to imagine a possible way things might turn out.

Suzy Welch developed a popular tool known as 10-10-10 that has the effect of bringing future-us into more of our in-the-moment decisions. “Every 10-10-10 process starts with a question…. What are the consequences of each of my options in ten minutes? In ten months? In ten years?“ This set of questions triggers mental time travel that cues that accountability conversation (also encouraged by a truthseeking decision group).

Moving regret in front of a decision has numerous benefits. First, obviously, it can influence us to make a better decision. Second, it helps us treat ourselves (regardless of the actual decision) more compassionately after the fact. We can anticipate and prepare for negative outcomes. By planning ahead, we can devise a plan to respond to a negative outcome instead of just reacting to it. We can also familiarize ourselves with the likelihood of a negative outcome and how it will feel. Coming to peace with a bad outcome in advance will feel better than refusing to acknowledge it, facing it only after it has happened.

The way we field outcomes is path dependent. It doesn’t so much matter where we end up as how we got there. What has happened in the recent past drives our emotional response much more than how we are doing overall.

When you think about the outcomes as having happened in the distant past, it is likely your preference for the results reverses, landing in a more rational place. You are now happier about the $ 100 win than about the $ 100 loss. Once we pull ourselves out of the moment through time-traveling exercises, we can see these things in proportion to their size, free of the distortion caused by whether the ticker just moved up or down.

watching is making us tilt, we can commit to develop certain habit routines at those moments. We can precommit to walk away from the situation when we feel the signs of tilt, whether it’s a fight with a spouse or child, aggravation in a work situation, or losing at a poker table. 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.

of the legends of the profession : “It’s all just one long poker game.“ That aphorism is a reminder to take the long view, especially when something big happened in the last half hour, or the previous hand — or when we get a flat tire.

This action — past-us preventing present-us from doing something stupid — has become known as a Ulysses contract. (Most translations of Homer use the hero’s ancient Greek name, Odysseus. The time-travel strategy uses the hero’s ancient Roman name, Ulysses.)

When you are physically prohibited from deciding, you are interrupted in the sense that you are prevented from acting on an irrational impulse ; the option simply isn’t there. That’s the brute-force way to do this kind of time traveling. Past-Ulysses interrupted present-Ulysses’s decision by taking the decision, literally, out of his hands.

the precommitment or predecision doesn’t completely bind our hands to the mast. An emotional, reactive, irrational decision is still physically possible (though, to various degrees, more difficult). The precommitments, however, provide a stop-and-think moment before acting, triggering the potential for deliberative thought.

For us to make better decisions, we need to perform reconnaissance on the future. If a decision is a bet on a particular future based on our beliefs, then before we place a bet we should consider in detail what those possible futures might look like. Any decision can result in a set of possible outcomes.

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.

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 than not guessing at all.

Poker players really live in this probabilistic world of, “What are the possible futures? What are the probabilities of those possible futures?“ And they get very comfortable with the fact that they don’t know exactly because they can’t see their opponent’s cards.

First, scenario planning reminds us that the future is inherently uncertain. By making that explicit in our decision-making process, we have a more realistic view of the world.

Second, we are better prepared for how we are going to respond to different outcomes that might result from our initial decision. We can anticipate positive or negative developments and plan our strategy, rather than being reactive. Being able to respond to the changing future is a good thing ; being surprised by the changing future is not.

Third, anticipating the range of outcomes also keeps us from unproductive regret (or undeserved euphoria) when a particular future happens.

Finally, by mapping out the potential futures and probabilities, we are less likely to fall prey to resulting or hindsight bias,

Grant prospecting is similar to sales prospecting, and this process can be implemented for any sales team. Assign probabilities for closing or not closing sales, and the company can do better at establishing sales priorities, planning budgets and allocating resources, evaluating and fine-tuning the accuracy of its predictions, and protecting itself against resulting and hindsight bias.

When it comes to advance thinking, standing at the end and looking backward is much more effective than looking forward from the beginning.

Imagining the future recruits the same brain pathways as remembering the past. And it turns out that remembering the future is a better way to plan for it. From the vantage point of the present, it’s hard to see past the next step. We end up over-planning for addressing problems we have right now. Implicit in that approach is the assumption that conditions will remain the same, facts won’t change, and the paradigm will remain stable. The world changes too fast to assume that approach is generally valid.

Backcasting makes it possible to identify when there are low-probability events that must occur to reach the goal. That could lead to developing strategies to increase the chances those events occur or to recognizing the goal is too ambitious.

If our goal is to lose twenty pounds in six months, we can plan how to achieve that by imagining it’s six months from now and we’ve lost the weight. What are the things we did to lose the weight? How did we avoid junk food? How did we increase the amount of exercise we were doing? How did we stick to the regimen?

Backcasting and premortems complement each other. Backcasting imagines a positive future ; a premortem imagines a negative future. We can’t create a complete picture without representing both the positive space and the negative space. Backcasting reveals the positive space. Premortems reveal the negative space. Backcasting is the cheerleader ; a premortem is the heckler in the audience.

Oettingen recognized that we need to have positive goals, but we are more likely to execute on those goals if we think about the negative futures. We start a premortem by imagining why we failed to reach our goal : our company hasn’t increased its market share ; we didn’t lose weight ; the jury verdict came back for the other side ; we didn’t hit our sales target. Then we imagine why. All those reasons why we didn’t achieve our goal help us anticipate potential obstacles and improve our likelihood of succeeding.

The key to a successful premortem is that everyone feels free to look for those reasons, and they are motivated to scour everything — personal experience, company experience, historical precedent, episodes of The Hills, sports analogies, etc. — to come up with ways a decision or plan can go bad, so the team can anticipate and account for them.

Imagining both positive and negative futures helps us build a more realistic vision of the future, allowing us to plan and prepare for a wider variety of challenges, than backcasting alone. Once we recognize the things that can go wrong, we can protect against the bad outcomes, prepare plans of action, enable nimble responses to a wider range of future developments, and assimilate a negative reaction in advance so we aren’t so surprised by it or reactive to it. In doing so, we are more likely to achieve our goals.

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 good planning process, we can be better calibrators going forward.

None of us is guaranteed a favorable outcome, and we’re all going to experience plenty of unfavorable ones. We can always, however, make a good bet. And even when we make a bad bet, we usually get a second chance because we can learn from the experience and make a better bet the next time.

Life, like poker, is one long game, and there are going to be a lot of losses, even after making the best possible bets. We are going to do better, and be happier, if we start by recognizing that we’ll never be sure of the future. That changes our task from trying to be right every time, an impossible job, to navigating our way through the uncertainty by calibrating our beliefs to move toward, little by little, a more accurate and objective representation of the world.