The Book in Three Sentences
In this book summary of Thinking in Bets, you’ll learn to embrace uncertainty and make better decisions as a result. According to Annie Duke, former poker champion and author of this book, the best decision doesn’t always lead to the best result because there are elements outside of your control, such as luck. Therefore, the key to success is thinking in bets: what decision has the best chances of succeeding?
Thinking in Bets Summary
Introduction: Why This Isn’t a Poker Book
When Annie Duke was in her mid-20s, she thought she had her life figured out, but she got sick, got married, and needed money. She decided to give poker a try and what started as a hobby, soon took over her life. By the time she retired, Duke had won more than $4 million in tournaments. Apart from giving her financial security, poker taught Duke a lot about decision-making. An average hand of poker lasts two minutes and you could make up to twenty decisions in it. At the end of the hand, you either win money or lose money, but that alone won’t tell you if your decisions were good or bad because luck’s often involved.
Duke defines a bet as “a decision about an uncertain future”. Seeing decisions as bets can help you achieve better results and remove emotions from the equation. Thinking in bets is about moving closer to objectivity, accuracy, and open-mindedness, and all of this can change your life. There are two things that determine the outcome of your life: the quality of your decisions and luck.
Chapter 1: Life Is Poker, Not Chess
We tend to judge a decision based on its outcome. Yet it’s possible to make a good decision and be unlucky, just like you can get bad results from good decisions. In poker, this is called “resulting”. We mustn’t separate luck and skill. Once we’ve taken a decision, the outcome is outside of our control. A similar term to resulting is hindsight bias. Hindsight bias is our tendency to see an outcome as obvious, but only when the outcome is known.
Humans are irrational when it comes to decision-making. Our brains create certainty and order, so we feel uncomfortable with the idea of luck and randomness. To survive, our brains evolved to find order in the chaos of the world. These predictable connections are what allowed us to survive for so long. For instance, if a bush moved, that meant a predator was behind it. If we failed to interpret the moving bush as something caused by the wind or a falling fruit from a tree, that’s a false positive and this error isn’t serious. But if we hear the bush moving, we assume it’s the wind and it’s actually a predator, this could lead to death. This is a false negative and its consequences are fatal.
Psychologists often refer to our mind as something that can be divided into two: the reflexive mind is fast, automatic, and unconscious, and the deliberate mind is slow, deliberate, and judicious. While the former stream originated in ancient times, the deliberate mind developed in the newer parts of the brain. Ideally, we’d use the deliberate mind to make decisions, but its capacity is maxed out and there’s nothing we can do about it. But while we can’t change the way our brain works, we can look for strategies so that our decisions align with our goals. With this in mind, our goal is to make our reflexive minds execute the best intentions of our deliberate mind.
John von Neumann was an accomplished scientist who made huge contributions to the fields of mathematics and decision-making. He also participated in the Manhattan Project, developed the first computers, and is now known as the father of game theory. According to von Neumann, some games involve certainty, risk, and deception, such as poker. These are games of incomplete information. In such games, you make decisions under uncertainty, and luck is involved. So even when you make good decisions, you can still lose because you don’t know all the cards that will be dealt.
In the game of chess, there’s no luck involved and the best player always wins. In poker, on the other hand, you could teach the rules to a novice in a few minutes, put them against a champion and the novice could win. That’s impossible in chess. In other words, trying to make a decision when you don’t have all the answers is a mistake, but this is often what we do when we look for lessons in outcomes from our lives. When you don’t have all the facts, don’t try to articulate an answer because you just don’t know.
To become a better decision-maker, you have to get comfortable with not knowing. While acquiring knowledge is important, so is recognizing the limits of our knowledge. Ignorance is the first step toward enlightenment. Great decisions don’t always have great outcomes. Great decisions must accurately represent our knowledge or lack thereof. Sometimes, that stage of knowledge is “I don’t know” or “I’m not sure”. In some cases, we must embrace uncertainty in order to get used to the objective truth. Uncertainty lets us look at the world as it is: not black-and-white, but with shades of grey in between. While our brains have trouble seeing the world objectively, we should try to nonetheless.
We must redefine our relationship with wrong. When we determine the chances of a given outcome and make a decision based on them, if things don’t work out the way we expected, we’re not wrong. This just means that, out of all the possibilities, one played out.
Duke defines decisions as “bets on the future” and therefore, they aren’t always “right” or “wrong” depending on the outcome you get. As long as you think about the alternatives, unwanted results don’t make decisions wrong because that would be resulting. You can make the best decision, but luck can intervene or there might be hidden information you didn’t know about. To sum up, embrace uncertainty, redefine wrong, and recognize you’re always guessing.
Chapter 2: Wanna Bet?
Every decision we make in life is a bet. When we make a decision, we’re essentially deciding on an alternative future, each with its advantages and disadvantages. Since some aspects are unknown, there are no simple answers. But seeing decisions as bets leads to better decisions in general.
When we think of bets, the image of casinos, sporting events, or lottery tickets comes to mind, but the definition of the word is broader. A bet refers to a choice we make thinking about what might happen. By definition, betting is all about choice, probability, risk, decision, and belief. We’re constantly placing bets. Making a decision rules out all the other alternatives.
We don’t naturally see decisions as bets. In most of our decisions, we aren’t betting against someone else, but against future versions of ourselves. This means that when we decide, we’re choosing an alternative future. As part of that bet, we could get money, time, happiness, health, or something else in return and we hope that our final decision will lead to better results than the alternative we don’t choose. But we’re often unsure about the option that’s best for us. The futures we imagine are mere possibilities and on top of that, luck comes into play. This implicit risk is what makes decision-making so uncertain and uncomfortable. But what if we could find ways to be comfortable with uncertainty?
Our beliefs about the world determine our bets. We’ve gathered data and experience about different things and used it to a situation to make a choice. These beliefs determine the car we drive, the movies we watch, the places we visit, and so on. As long as we use our experience and information to objectively update our beliefs, the better foundation we have for the bets we make. If our beliefs are wrong, the quality of our decisions will be negatively impacted.
We hold numerous misconceptions and myths. Despite contradicting science and logic, certain erroneous beliefs persist. As a default, we believe most of what we hear or read. This happens because our ancestors relied on their senses to form new beliefs. If they questioned those beliefs they could die. While this system persisted for millions of years, we’re flooded with information nowadays and most of it is inaccurate. The problem isn’t that we form false beliefs, the problem is that we never update them based on accurate information. Once a belief cements itself, we rarely challenge it again. In fact, we subconsciously pursue evidence to confirm it. We call this motivated reasoning. Despite what most people think, the smarter you are, the more you rationalize information to fit your point of view.
If someone challenges your beliefs, you ask yourself a series of questions to test your claim. This internal process forces us to examine our information more objectively. We can use this framework to challenge ourselves and accept that few things in life are black and white.
Nothing is certain nowadays and even scientific facts are often revised. This encourages us not to think in absolute terms. Examples include declarative statements like “I’m confident” or “I’m not confident”. Over time, we must replace those expressions with different degrees of certainty that lie somewhere in between. The easiest and most practical way to do that is to use a number from zero to ten. This is a way to welcome uncertainty and become more open-minded and objective. Being uncertain about facts means you’re less interested in being right but more interested in getting at the truth.
Chapter 3: Bet to Learn: Fielding the Unfolding Future
The beliefs you have can hold you back in life. When you have a losing strategy, don’t ignore the feedback you get. Use this as a learning opportunity to get ahead. Experience isn’t enough. To become an expert, we also need to think in bets.
The decisions we make are bets and we want them to create the best future. The future unfolds in the form of a series of outcomes and we must use them to learn from them. We must determine if those outcomes were the result of luck or our decisions. If it’s the latter, this creates a learning loop where we reinforce our beliefs and use them for future decisions.
There are two forces at play influencing our life: skill and luck. The difference between the two is that while the former is under our control, the latter isn’t. Luck disrupts the learning loop if we’re not careful. We have to discern between experiences that can teach us something (skill) and ignore those that can’t teach us anything (luck). This is difficult, but it makes us better, smarter, healthier, happier, and wealthier.
We have a tendency to classify our outcomes into two. We take credit for good outcomes and blame bad ones on luck. As a consequence, we learn nothing from experience. We must understand that luck and skill affect all outcomes. To learn from experience, watch other people. The best part about this is that you don’t need to waste money, time, health, happiness, or anything else to learn from them.
Our ego often gets in the way of our decision-making. We might blame others for bad results but don’t give them credit for good ones. This happens because humans are competitive in nature, so when we see someone else winning, we assume we’re losing. Whether we like it or not, our happiness depends on how other people are doing relative to us. We must reshape these bad habits to be accurate and objective. Even when we get a desirable outcome, you should still analyze if the decisions we made that got you there were good ones. So give credit when it’s due, admit mistakes, and be open-minded. Your ego might still get in the way from time to time, but this is the way forward.
Chapter 4: The Buddy System
Not everyone’s interested in looking for the truth. To be effective, the act of seeking the truth needs an agreement by everyone involved. Our brains are built to make the world a more comfortable place than it actually is. It’s our choice to live in that made-up world or we can focus on our mistakes and learn from them.
The buddy system is designed in such a way that nobody can get lost or wander into a dangerous system. The people that help you out can be friends or family members who are open-minded and objective about their own decision-making, as well as yours. The author refers to this process as truthseeking.
Having a like-minded group is helpful to reshare our habits. While we have a tendency to look for people who think similarly to us, it’s important to have ideological diversity in our group if we want the truth. Duke defines accountability as “a willingness to answer for our actions or beliefs to others”. By definition, a bet is a kind of accountability.
Chapter 5: Dissent to Win
American sociologist Robert Merton wrote a series of norms for the scientific community called CUDOS. This stands for:
- Communism
- Universalism
- Disinterestedness
- Organized Skepticism
This paper became a manual for truthseeking groups and a great way for any group to remain objective. The Merton paper can also help people to think in bets and be profitable decision-makers.
Communism refers to the communal ownership of information within the group. For knowledge to advance in the scientific community, individuals must share their data. This is a way to avoid focusing solely on one side of the story because it would be biased and incomplete. The more information you have access to, the better decisions you can make. When you reveal every secret about something, your group will approve and respect you more. Winning isn’t about giving a self-enhancing narrative, it’s about giving an accurate, objective, and detailed account of a situation.
Universalism refers to separating an idea from the person behind it. In other words, don’t discard an idea because you dislike the person it came from. The accuracy of a statement should be judged independently of its source.
Failing to show disinterestedness can have serious ramifications. Conflicts of interest must be disclosed so that we see outcomes more objectively. Whenever possible, let your group be blind to an outcome in order to divorce decision quality from outcome quality. So as difficult as it may be, reveal the process but not the outcome. Knowing the outcome influences the opinion of everyone involved, so by not letting them know, their view will be more objective.
Skepticism has a negative connotation and people often associate it with cynicism. But skepticism is a good trait to have because it lets us see the world from a different perspective. This is a way to challenge our beliefs and get us closer to objectivity. Skepticism has nothing to do with being confrontational.
Truthseeking isn’t over once you’re away from your group. To engage in truthseeking, express uncertainty because this lets others share their ideas too. Then, lead with assent. To do this, first mention the points you agree with and then introduce the ones you disagree with. This makes the other person open to our point of view. Finally, pay attention to the future. We’re often more rational about the future than the past, but by examining upcoming events, we could circle back to the past to identify problems.
Chapter 6: Adventures in Mental Time Travel
In time travel movies, you’re not supposed to run into yourself or else there will be a time paradox that can destroy the universe. When it comes to decision-making though, getting our past and future versions of ourselves together can help us make better decisions. When making a decision, we want to think about similar decisions we’ve taken in the past, as well as the possible future ramifications. In a sense, we must fuse our long-term goals with our in-the-moment decisions.
Making in-the-moment decisions without considering the past and the future will likely lead to irrational and impulsive acts. We call this temporal discounting. Do you get a small reward now or do you put it off to the not-so-immediate future and get a bigger reward then? By thinking about our future selves, we can hopefully make the best decision.
Regret is a powerful emotion we can use to our advantage. The key is to feel regret before making a bad decision and not after. The author suggests the 10-10-10 tool that encourages you to think about the consequences of your decisions in ten minutes, ten months, or ten years from now. Using regret as a tool for making decisions leads to better ones and it helps us be more compassionate with ourselves.
We overestimate the impact of individual moments. When something bad happens to us, it feels like the end of the world, but we have to look at it from another angle. Will that moment affect our overall happiness? Chances are it won’t. Whenever possible, we have to look at a situation from a broad perspective.
Tilt is poker players’ term to refer to bad outcomes that affect your emotions and compromise your decision-making. Tilt results in emotional reactions that lead to a vicious circle. When our past self does something to prevent our present self from doing something stupid, we call this the Ulysses contract. This was named after the Roman hero Ulysses who told his crew to tie him to the mast of his ship and fill his ears with wax to resist the tempting song of the sirens and survive the perilous journey. The Ulysses contract is all about adding friction against irrationality.
Another strategy is reconnaissance which involves preparing for all potential scenarios. For our purpose, we must consider all possible futures before deciding. Part of doing reconnaissance is accepting that we are uncertain about the future. This is about cementing the idea that making decisions is the same as making predictions. In other words, we’re guessing.
When we look at the future, we lose focus and the view looks distorted. A better way to plan for the future involves looking at our goals and examining the decisions that can get us to them. A strategy to do this is backcasting when we imagine that a good outcome has already taken place and we try to explain how we got there.
A premortem is an investigation of something bad before it happens. It involves thinking about not achieving our goals and it complements backcasting. While backcasting focuses on a positive future, a premortem focuses on a negative future. By imagining a negative future, we can think about all the things that could have prevented us from achieving our goals. Focusing on worst-case scenarios makes it more likely to carry out your goals. Once we consider everything that can go wrong, we can have a stronger plan, prepare against bad outcomes, or assimilate negative outcomes so we’re less reactive and surprised if they actually happen.
A tree could very well represent our life. The trunk’s our past, the place where the trunk meets the branches is our present, and the branches are our possible futures. Thin branches are unlikely futures and thicker ones are probable ones. As the future becomes our past, the present works as a chainsaw. When improbable futures pan out, we see them as possibilities in retrospect. This is hindsight bias, our tendency to believe the things that happen were supposed to and that we should have foreseen them. Without thinking about all potential futures, it’s almost impossible to evaluate decisions after.
While we can’t control our outcomes, we can always make good bets. If we make a bad bet, we can at least learn from them and make a better bet next time. As in poker, life is full of bets and even when we make the best bets, we’ll lose. By recognizing that the future is uncertain we’ll be happier. The idea is to calibrate our beliefs to move toward accuracy and objectivity.
Further Reading
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