Thinking in bets

As a kid I’d occasionally watch World Series of Poker events on ESPN. During the broadcast they’d show the percentage likelihood each player had for winning the hand. I remember thinking, “How in the world do players remember all of this information…”

It certainly didn’t occur to me that some of the betting strategies players applied would also be effective in the business world. That’s part of why I found Annie Duke’s Thinking in Bets a worthwhile read. Duke is a professional poker player and her book is a guide to making decisions within uncertain environments.

She views a bet as, essentially, a decision about an uncertain future. To make effective bets we have to learn how to separate outcome quality from decision quality. The quality of our decisions is all we’re able to control. Yet we tend to evaluate our decisions by their outcomes; if the outcome is good then we made a good decision. The problem is it doesn’t work that way. A bad outcome can stem from a logically sound and effective decision.

Duke doesn’t advocate that we try to change this cognitive tendency through willpower alone. She holds that our capacity for deliberative decision-making is already maxed out. Instead she frames it this way:

The challenge is not to change the way our brains operate but to figure out how to work within the limitations of the brains we already have. 1

A path toward better decisions is to leverage our competitive drive to change our routines. We can change the features by which we compare ourselves (e.g. work to be the best credit giver rather than work to receive the most credit).

If we approach the decisions we make as bets then we can explore alternative reasons for why a given outcome came to pass. If we dismiss another’s good outcome as simply luck then we close down opportunities to learn from their expertise and skill. And it’s those lessons that we can apply to our own decisions.

A big part of what helped Duke in her career was having a decision group to deconstruct and debug situations with. It’s the Mertonian values of such a group that matter most. As she writes:

As a rule of thumb, if we have an urge to leave out a detail because it makes us uncomfortable or requires even more clarification to explain away, those are exactly the details we must share. The mere fact of our hesitation and discomfort is a signal that such information may be critical to providing a complete and balanced account.2

  1. Thinking in Bets, pg. 14.↩︎︎
  2. Ibid, pg. 154.↩︎︎