Thinking in Bets: Making Smarter Decisions When You Don't Have All the Facts

"It’s an interesting question, and Annie Duke spends a good portion of the book trying to explain it. As you said, she is an ex-professional poker player who got very interested in cognitive behavioural decision science. She tried to become an expert on how people make decisions and what her poker years could potentially teach her about it, and then she wrote this book, Thinking in Bets . In it, she compares poker to chess . She explains that chess is an information-complete game. The two players who look at the board know exactly what’s happening, they have all the information at their disposal, and they know the complete state of the world. Of course, they don’t know what the other player is thinking, but no information from the game is hidden. In poker, it’s the opposite. You know the cards you have in your hands, but most of the information is hidden. You don’t know what the other players around the table have in their hands and you don’t know the cards that are about to be revealed. It’s very much an information-incomplete game. Her theory—and I very much agree with her—is that life is a lot more like poker than chess. In life, you don’t have a complete picture of all the information you wish you could have, you’re not omniscient about the state of the world. You’re very much guessing things—about people’s intentions, about how things are going to play out. And so because life is much more like poker, you need to live life much more like a poker player and that means thinking in bets. Her idea is that if you’re going to “win” at life, you’ll need to think in terms of probabilities and use the techniques that poker players use to make better decisions. Support Five Books Five Books interviews are expensive to produce. If you're enjoying this interview, please support us by donating a small amount . One of the most important things she argues we should avoid is what she calls ‘resulting’. ‘Resulting’ is the idea of judging the quality of your thought process by the final outcome. So, for example, in poker, you would make a decision during the game, and sometimes it will end up in a bad outcome. But saying the outcome was bad is completely different from saying you made the wrong decision in the first place because there is a lot of randomness in poker. If, after the game, you think back carefully about the decision, and you still think it was the best given the circumstances, then you should think of this as a success! In the same way, she gives the example of a company that hires a new CEO because it’s in a bad state. A year later, the board realises the company is in an even worse state, so they ask themselves, ‘Did we make the wrong decision?’ But actually, the fact that the company is in a worse state a year later does not necessarily mean that they made a bad decision by hiring that new CEO. Maybe with all the information they had at their disposal at the time, it was the best decision that they could have made. Another example of where we see this behaviour a lot is in sports. After any football match, you will hear pundits spend hours analysing everything that happened and draw huge conclusions from it. They’ll make big statements about how the coach should be fired, or a player should not have been bought from another club, or a player should have been substituted at this point in the game. What they forget is that football is an extremely random sport; maybe the coach made all the right decisions, but even with the right decisions, he could not possibly have reached a better outcome because there’s just so much randomness. I think this idea of avoiding ‘resulting’ is extremely interesting. Like a lot of ideas in Duke’s book, it comes from poker, but it can be applied in many areas of life."