Thinking in bets | Annie Duke

Annie Duke is an American who for most of her life has been a professional poker player. She has won several major tournaments and has an estimated net worth of $8m. The book is partly a biography and partly a “how to guide” on how to think better and make more rational decisions. Duke left poker in 2012 and has since then been a lecturer and strategy consultant.

PROCESS BEFORE OUTCOME. The average person evaluates decisions by outcome. That is wrong. Instead, decisions should be evaluated based on the estimated expected value, and whether the basis for the decision was the best possible at the time of the decision. Our biases are our biggest obstacles for making high-quality decisions. Studies have shown that smart people are more prone to biases, as they are better at creating narratives that reinforce their opinions.

LIFE IS A LONG SERIES OF BETS. Every decision we make is actually a bet, the outcome of which will affect the direction our life take. To make good decisions, we need a good basis for decision-making and we need to be capable of rational thinking and action. Each decision provides more information that we should use to calibrate our opinions before future decisions. By repeating this process, we improve our ability to make decisions while maximizing our chances of getting the life we want. This mindset makes life a game with limited information. For every decision we make, our “opponent” is all alternative versions of ourselves that other decisions would lead to.

“Learning might proceed in a more ideal way if life were more like chess than poker. The connection between outcome quality and decision quality would be clearer because there would be less uncertainty. The challenge is that any single outcome can happen for multiple reasons. The unfolding future is a big data dump that we have to sort and interpret. And the world doesn’t connect the dots for us between outcomes and causes.”

WANNA BET? By asking yourself if you would be ready to invest money based on your opinion, you can more easily put biases aside. Depending on how much money you are willing to bet, and at what odds, it becomes clear how strongly you really believe in something. By having a constant “wanna bet?”-loop, we can more easily find shortcomings in our reasoning and become more open to taking in contradictory information. This makes it easier for us to become the rational “truth seekers” which makes us better decision makers.

PREMORTEMS & BACKCASTING. Premortems is a method that is based on imagining that five years have passed, and that we have failed in attaining our goal. We ask ourselves what went wrong and why. In this way, the traps we have in front of us become clearer and we can more easily avoid going into them. Backcasting is about imagining that we have reached our goal, and then going backwards through what took us there. That way we can see more clearly what we need to do to get there. It is easier to stand at the finish line and look back than to stand at the starting line and look forward.

ODYSSEUS CONTRACTS. Odysseus was the Greek mythological hero who would sail past the island with the seductively singing sirens. He knew that when he heard the song he would sail to the shore, and there death would meet him, like so many seafarers before him. But by tying himself to the mast, he overcame his irrational self. By setting up “Odysseus contracts”, voluntarily set rules, we can raise a barrier against irrationality. These contracts mean that in the future we can act according to what is long-term beneficial for us.

10-10-10. Duke believes that we often find it difficult to include a discounted future into our decision making. If something feels good at the moment, but is bad in the long run, the current enjoyment usually gets a higher weight. Typical examples are junk food and alcohol. One technique for thinking and acting more rationally around this type of question is to use the 10-10-10 method. To ask yourself that if you do x, how will it affect you in 10 minutes, in 10 months and in 10 years? It then becomes clear what is perhaps only positive for the moment, but bad over time, and then easier to avoid what attracts.

“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 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.”

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