Thinking in Bets

The author is a life-long poker player that tries to apply the examples from her poker games into real life by embracing uncertainty.

Learnings

Luck plays an important role in shaping life. Humans are inherently biased to attribute good outcomes to skill and bad outcomes to luck to preserve self-narrative. Every outcome is a combination of skill and luck. The focus should be on creating a framework that allows good decision making that could increase the probability of producing good outcomes. This reminds me of the age-old, sometimes cliched quote from Bhagwad Geeta about “Focusing on actions, not on results” that is ever so relevant.

Humans also operate on a set of beliefs usually formed by their subjective experience, but subjective experiences are usually far from the truth. Thus, humans are not conditioned for truth-seeking. Rather than changing our beliefs in accordance with the truth, the natural tendency is to change the interpretation of the information so it fits our belief systems. Fake news takes advantage of this to amplify the false beliefs of a certain audience.

Past is always fixed. The future is uncertain. The present is converting all possible branches of the future into a fixed trunk of the past. The path to the present always seems fixed when looking back. But the present could’ve been achieved as a result of a low probability event too. It is just not possible to see it this way from that vantage point.

The author suggests some ways to improve decision making and to enable thinking in bets.

Have a buddy group with the goal of bias free-thinking: Explaining and being accountable about certain decisions to a group that strives for bias-free thinking will naturally make one more cautious about biases.
Mental Contrasting: Expecting bad outcomes will force us to avoid all those paths that lead to them and make us better decision-makers.
Working Backwards: Thinking about an outcome that has already happened (good or bad) and tracing steps back to decisions that could lead to those outcomes is a great way of exploring all future possibilities.
Ulysses contracts: Raising a barrier against irrationality. E.g. when we know we’re going to probably not make a good decision, form systems that force us to make good decisions. This was also discussed in Atomic Habits at length in how to break bad habits.

Quotes

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.

What makes a decision great is not that it has a great outcome. A great decision is the result of a good process, and that process must include an attempt to accurately represent our own state of knowledge.

There is always opportunity cost in choosing one path over others.

Improving decision quality is about increasing our chances of good outcomes, not guaranteeing them.

Life, like poker, is one long game, and there are going to be a lot of losses, even after making the best possible bets. We are going to do better, and be happier, if we start by recognizing that we’ll never be sure of the future. That changes our task from trying to be right every time, an impossible job, to navigating our way through the uncertainty by calibrating our beliefs to move toward, little by little, a more accurate and objective representation of the world. With strategic foresight and perspective, that’s manageable work. If we keep learning and calibrating, we might even get good at it.