Thinking in Bets Paperback – 1 January 2019

Thinking in Bets’ by Annie Duke is probably the best book on decision making that I have read. The Basic idea of the book is that thinking in bets will substantially improve the decision-making skills in our day-to-day life. Annie Duke is a professional poker player and according to her life imitates poker, not chess. Poker is a decision making game under uncertainty over time. It has valuable information hidden, there is element of luck in any outcome. The decision we make in our lives- raising kids, health, business- have uncertainty, hidden information & luck.What a bet really is?A bet a decision about an uncertain future. Thinking in bets starts with recognizing that there are exactly two things that determine how our lives turn out:the quality of our decisionsluck.Learning to recognize the difference between the two is what thinking in bets is all about.What’s your best and worst decision?Take a moment to imagine your best decision in the last year. Now take a moment to imagine your worst decision. Chances are you will equate the outcome of the decision to the quality of the decision. This is because we’re susceptible to “resulting” and hindsight bias.We must disassociate outcome with decision. A great decision is the result of a good process and that process must represent an accurate picture of our state of knowledge.Resulting: tendency to equate the quality of a decision with the quality of its outcomeHindsight bias: tendency, after an outcome is known, to see the outcome as having been inevitable.When we work backward from results to figure out why those things happened, we are susceptible to a variety of cognitive traps, like assuming causation when there is only a correlation, or cherry- picking data to confirm the narrative we prefer. We will pound a lot of square pegs into round holes to maintain the illusion of a tight relationship between our outcomes and our decisions.Two Brains:We’re susceptible to these mental traps because our brains are not built for rationality. Our brains work basically in two modes. Daniel Kahneman popularized the labels of “System 1” and “System 2”.System 1: encompasses reflex, instinct, intuition, impulse and automatic processing.System 2: is how we choose, concentrate and expend mental energy.Both systems are necessary for survival. Mistakes happen when System 1 overtakes System 2 in decision-making.Since most of what we do daily exists in automatic processing. We are used to thinking in System 1 mode. The challenge is to figure out how to make decisions within the limitations we already have.Embrace uncertainty and Redefine wrong:Embracing “I’m not sure” is difficult. We are trained in school that saying “I don’t know” is a bad thing. Not knowing in school is considered a failure of learning.Of course, we want to encourage acquiring knowledge, but the first step is understanding what we don’t know. “I don’t know” is not a failure but a necessary step toward enlightenment.There are many reasons why wrapping our arms around uncertainty and giving it a big hug will help us become better decision- makers. Here are two of them. First, “I’m not sure” is simply a more accurate representation of the world. Second, and related, when we accept that we can’t be sure, we are less likely to fall into the trap of black- and- white thinking.Decisions are bets on the future, and they aren’t “right” or “wrong” based on whether they turn out well on any particular iteration. An unwanted result doesn’t make our decision wrong if we thought about the alternatives and probabilities in advance and allocated our resources.Redefining wrong allows us to let go of all the anguish that comes from getting a bad result. First, the world is a pretty random place. The influence of luck makes it impossible to predict exactly how things will turn out, and all the hidden information makes it even worse. Second, being wrong hurts us more than being right feels good.All decisions are bets:All our decisions are always bets. We routinely decide among alternatives, put resources at risk, assess the likelihood of different outcomes, and consider what it is that we value.The betting elements of decisions— choice, probability, risk, etc.— are more obvious in some situations than others. Investments are clearly bets. A decision about a stock (buy, don’t buy, sell, hold, not to mention esoteric investment options) involves a choice about the best use of financial resources. Incomplete information and factors outside of our control make all our investment choices uncertainMost bets are bets against ourselves: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.Whenever we make a choice, we are betting on a potential future.Our bets are only as good as our beliefs:Our bets are only as good as our beliefs. our default setting is to believe what we hear is true.We might think of ourselves as open- minded and capable of updating our beliefs based on new information, but the research conclusively shows otherwise. Instead of altering our beliefs to fit new information, we do the opposite, altering our interpretation of that information to fit our beliefs. Our pre- existing beliefs influence the way we experience the world. This irrational, circular information- processing pattern is called motivated reasoning. The way we process new information is driven by the beliefs we hold, strengthening them. Those strengthened beliefs then drive how we process further information, and so on.Being smart makes it worse:Being smart makes it worse the smarter you are, the better you are at constructing a narrative that supports your beliefs, rationalizing and framing the data to fit your argument or point of view. we all have a blind spot about recognizing our biases. The surprise is that blind- spot bias is greater the smarter you are.Wanna bet?Offering a wager is the best way to fight these mental traps and brings the risk out in the open, making explicit what is already implicit. We can train ourselves to view the world through the lens of “Wanna bet?”Once we start doing that, we are more likely to recognize that there is always a degree of uncertainty, that we are generally less sure than we thought we were, that practically nothing is black and white, 0% or 100%. We don’t need someone challenging us to an actual bet to do this. We can think like a bettor, purposefully and on our own, like it’s a game even if we’re just doing it ourselves.Instead of thinking of confidence as all- or- nothing (“ I’m confident” or “I’m not confident”), our expression of our confidence would then capture all the shades of grey in between. Incorporating uncertainty into the way we think about our beliefs comes with many benefits.Use CUDOS:CUDOS stands forCommunism (data belong to the group)Universalism (apply uniform standards to claims and evidence, regardless of where they came from)Disinterestedness (vigilance against potential conflicts that can influence the group’s evaluation)Organized Skepticism (discussion among the group to encourage engagement and dissent)Techniques to become a better bets:Techniques like Suzy Welch’s 10-10-10, temporal discounting problem, pre-commitment, pre-mortem can help us make better bets on our futures.Our irrational, impulsive & instant gratification tendency are because we favor our present-self at the expense of our future-self. This is called “temporal discounting”. Thinking about the future and recognizing when we commit temporal discounting and helps us maintain the right frame of mind.Suzy Welch’s 10-10-10 has the effect of bringing the future-us into more of our in the moment decisions. Before taking a bet/decisions visualize how it will affect us in the next 10 minutes, 10 months and 10 years.Tilt is a poker term when a player is not in a mental or emotional state to choose optimal strategy.whenever you feel you are experiencing “tilt”, pre-commit to walk away from the situation.Backcasting is a useful time-travel exercise where we imagine a successful future and identify necessary steps for reaching our goals. Working backward helps even more when we give ourselves the freedom to imagine an unfavorable future. It also makes it possible to identify when there are low-probability events that must occur to reach the goalPremortems: working backward from a negative future. It’s an investigation into something awful, but before it happens. Asking “Okay, we failed. Why did we fail?” frees everyone to identify potential points of failure without the for fear of being viewed as a naysayer. Despite the popular wisdom that we achieve success through positive visualization, it turns out that incorporating negative visualization makes us more likely to achieve our goals.We are going to do better, and be happier, if we start by recognizing that we’ll never be sure of the future.Final thoughts:Although the book becomes repetitive places, this is easily one of the best books have read on decision making and cognitive psycology. If you are planning to read only one book for the year, I recommend you pick this up.In case if you are looking for super-short and concise book summary of the same, you can check out my twitter thread.

The book is a bit dented maybe because of the packaging, but it's fine. You can go for it.

Thinking in Bets answers question atleast for me why poker analogies are hot favourite among entrepreneurs. The books biggest take way is how to think objectively when in decision making mode and remove biases especially towards result. The book gives simple primer which can be applied in day to day life especially if you get excited about ideas and jump into execution or lost out hand to luckNotes from bookThinking in Bets - notes- We as humans remember decisions through It results - this phenomenon is called resulting. Over the years our brain has a build these systems for survival eg rustling of leaves in bushes in past meant animal is around and being aware/going away from the place meant safety/survival.- Seeking certainty over the years have kept us alive but it doesn’t drive result in uncertain world- Author talks about brain having 2 systems - reflexive mind and deliberative mind- Reflexive mind - seems to do things rapidly and automatically, with or without conscious awareness. Every day decision making is dependent on reflexive mind- Deliberative mind - deliberates , chews over the facts- Life decisions are not chess decisions with computational possibilities but they involve uncertainties, risk, occasional deception more similar to poker- It’s okay to be unsure and accepting this will make you comfortable to seek information/variable beyond the usual. Being unsure is not a wrong answer to question- Acknowledging uncertainties is first step but incorporating uncertainty in the way we think bring more open mindedness eg changing our answer From 58% to 40% May see small shift while changing from being complete right to wrong. It helps us not treat information which disagrees with us as threat- To become more objective towards outcome one needs to change habits of rewarding outcome to habit of maybe identifying your mistakes especially when you won the hand and feed it back to your learning. This takes lot more practise and is the hardest part- We can improve our decision making by being in group but it needs to be the right group, the group objective has to be to help you seek truth and require you to commit to objectivity instead of moaning bad luck, a Business which can build a company board with group members who are experienced in the direction of game being played and who challenge each other biases. More importantly author talks about its okay to disagree as dissent is equally important to have voice in potential outcome bias.- The author gives CUDOS framework for anyone looking to establish a group with goal to get objective towards outcome- Communism - You should put out all information irrespective of it being towards decision you are driving , incremental information can help get fair dissent and perspective- Universalism - treating all information at par irrespective of source , as some time source of decision can play in our bias to treat information equally- Disinterestedness - Its about avoiding bias, hint of future/outcome can again bring bias in our analysis . Eg if each decision of history can be evaluated without knowing the result, this will help us to improve our learning and again looking at things more objectively- Organized Skepticism - Having Devil’s advocate thinking towards decision which again goes back to principles of thinking in bets, its important for us to have people who bring those skepticism to decision making as it gives another critical view point and reinforce CUDOS framework-- 10-10-10 rule is a great way for us to do time travel thinking what will be impact of decision over next 10 mins, 10 days and 10 years- 2 best methods to use while doing business planning is back casting and premortem, back casting is something which amazon teams does for pitching a project by draft a positive PR on outcome and what lead to it’s success and premortem is opposite where teams are encouraged to do negative PR and predict reasons of failureOverall book sounds very meditative read as it just simplifies the way humans should remove emotion bias from decision making and stop living in past or future

The author discusses what to do and why to think in bets and arguments are based on heuristics but How to think in bets is missing with only a very few examples . Should have been more in depth !