Duke, Thinking in Bets

Annie Duke, a near Ph.D. in cognitive psychology and a renowned poker player, shares what she learned “in smoky poker rooms” (and from academic research) about decision-making in general. Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts (Portfolio/Penguin, 2018) is itself a smart book for the reader who isn’t comfortable with thinking probabilistically in an uncertain, unpredictable world.

Duke’s basic premise is that “thinking in bets starts with recognizing that there are exactly two things that determine how our lives turn out: the quality of our decisions and luck. Learning to recognize the difference between the two is what thinking in bets is all about.” In practice, however, knowing whether something happened as a result of skill or as a result of luck is rarely clear-cut; ambiguity reigns. And yet, if we can get this right, we can “focus on experiences that have something to teach us (skill) and ignore those that don’t (luck).” And thus get closer to our goals.

We can never know precisely how anything will turn out. And so, good decision-makers, “instead of focusing on being sure, … try to figure out how unsure they are, making their best guess at the chances that different outcomes will occur. The accuracy of those guesses will depend on how much information they have and how experienced they are at making such guesses.”

All decisions, she postulates, are bets, and most bets are bets against ourselves. In my favorite two sentences of the book, she writes: “In most of our decisions, we are not betting against another person. Rather, we are betting against all the future versions of ourselves that we are not choosing.”

Duke tackles a range of subjects integral to decision-making: for instance, belief systems, habit formation, and perspective (taking the long view).

In the final analysis, she writes, “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.”