What a bet really is: a decision about an uncertain futureAnnie Duke
Around a year and a half ago, I was working on a critical and time-sensitive project and realized that I was frequently making decisions without fully understanding how I arrived at them.
Despite making the right choices, I struggled to explain my reasoning and thought process. How was I coming up with these decisions?
That’s when I came up with the idea of a “Reading Marathon” where I would read ten to fifteen books on a particular topic, in this case, “Decision Making”.
My first book was “Thinking in Bets” by Annie Duke.
Duke starts with something most of us intuitively know: that our lives are determined by two things, the decisions we make, and luck.
On the path to teaching the reader how to see the difference between decision (and its outcome) and luck, she explores a very interesting concept called “Resulting”.
According to Duke, the quality of a decision should not be confused with the outcome. “Resulting” happens when we evaluate a decision based on its outcome.
Duke, however, argues that the decision and the outcome should be evaluated separately, because sometimes a good decision may end up with a bad outcome:
- You follow the rules and stop at a red light, only to get into an accident on the green light due to another driver’s mistake - Good decision, bad outcome.
- You may choose to undergo a very low-risk surgery, but experience severe unforeseen side effects.
Other times the opposite might happen where bad decisions lead to good outcomes:
- You may run a red light and nothing happens
- You may Invest in speculative stocks and it may pay off with huge returns (Gamestop and other Meme stocks)
This doesn’t mean every bad outcome is just bad luck. It’s just that sometimes even when we make a good decision, things don’t go our way due to factors beyond our control. That’s why separating the decision from the outcome is important in evaluating the success of a decision.
A good decision is the result of a good process that must include an attempt to accurately represent our current state of knowledge.
Later on, She pinpoints the main cause for the Resulting: When going backward from outcome to decision, we are susceptible to a lot of cognitive biases, for example, we might see causation where there’s only correlation. The author emphasizes that what makes a decision great is not the outcome, but the process of coming up with that decision.
The author goes on to explain that all decisions are bets and most of these bets are against ourselves. We are betting against all the future versions of ourselves that we are not choosing.
This turns out to be a basis for another tool she arms the reader with: Betting.
A great way to re-evaluate your beliefs is by asking yourself (or someone else) if you’d bet on it, and if so, how much? Instead of just asking if you believe something, ask how confident you are in that belief.
A) Bitcoin is going to be north of $100K by end of the year.
B) Wanna bet?
A) There’s going to be a recession in 6 months.
B) Wanna bet?
The moment we ask this question, small holes start to appear in our beliefs that once were looking solid, and it is through these holes that we can examine, scrutinize and evaluate our beliefs.
But she doesn’t stop there, Duke arms the reader with several tools to improve our decision-making process.
One of these tools is the 10-10-10 method.
It’s as simple as asking the following questions:
“What are the consequences of my decision 10 minutes from now? 10 months from now? 10 years from now?”
The 10-10-10 method can also be used in the past tense to help us reflect on our past decisions:
How would I’ve felt if I made this decision 10 minutes ago? 10 months ago? 10 years ago?
These two simple, and incredibly effective questions help us to do a mental time travel, put things in perspective and motivate us.
Duke also shares the idea of creating a “Ulysses Contract” to help us make better decisions. The term Ulysses Contracts comes from the legendary Greek hero Ulysses, who, according to the Odyssey, tied himself to the mast of his ship to resist the songs of the sirens.
By setting up barriers to temptations, we can steer clear of making poor choices and make it easier and more probable to follow through with good decisions.
Want to focus? Put your phone in another room.
Want to eat healthier? Stock up on healthy snacks.
Want to save more? Automate your savings or investing.
Want to spend less? Leave your credit cards at home.
Making these changes can lower the barrier to good decisions and raises it for bad ones.
The other two powerful tools Duke mentions are Backcasting and Premortem.
Backcasting starts by imagining a future where everything went great - you hit your weight loss goal, bought your dream home, or climbed the big mountain. Then, you work backward and figure out how you got there - what decisions, actions, and events helped you achieve success.
Premortem, on the other hand, starts from a negative future. Imagine you didn’t reach your goal, didn’t lose the weight, or missed out on buying the house. What went wrong? Maybe you didn’t track your calories, didn’t save enough, or didn’t consider inflation. The idea is to think about what you can do now to either mitigate these risks or avoid these roadblocks.
Both Premortem and Backtesting, albeit being on the opposite sides, help us make the invisible visible, the vague clear, and the implicit explicit.
They give us the advantage of identifying low-probability events that must happen or not happen for us to reach the goal and helps us create strategies to increase the chances of that happening.
The book covers more than what I wrote here, but I’d leave that to the reader to get their hands on the book and experience it themselves.
Should you read it?
Yes if you:
- Want to make better decisions and looking for a fun, yet actionable resource
- Have little to no exposure to decision-making literature (Thinking in bets is an amazing first read on the subject)
If any one the above applies to you, then give this book a shot.
You’ll be amazed by the insights and the transformation it brings.
Hope you enjoy it as much as I did.
10 out of 10 - Will read it again.