Annie Duke, a poker champion and business consultant, teaches people to become comfortable with uncertainty and make better decisions even if they don’t have all the facts.
In this summary, we look at some of the most important concepts that Annie Duke shares in her book. These concepts will help you to learn how to “think in bets.”
Think in Percentages (rather than in terms of right and wrong, black or white, etc.)
Annie explains that this kind of thinking allows you to rank all possible outcomes so that you decide accordingly. For example, you may say “X” event is likely to happen because I rate its likelihood at 80%. This way of thinking allows you to look at situations as objectively as possible, instead of blindly acting on your beliefs. Thinking in percentages also allows others to contribute or volunteer useful information so that the final decision is a better one.
Annie Duke argues that it is a big mistake to judge your decision as right or wrong based on the outcomes you obtained after acting on that decision.
As every poker player knows, judging the correctness of your decisions based on the outcome is incorrect since you can get lucky even if you have a bad hand and it is also possible to be very unlucky while having a premium hand (during a poker game).
So, just because you lost money on a bet doesn’t mean it was a bad bet, and the same goes for making money. When we think in probabilities, we are unable to use adverse results as proof that we made a decision error. This is because probabilities allow us to make room for factors like luck and insufficient information as contributors to the outcome.
This means that in life, we have to train ourselves to be uncomfortable with not having all the answers. It is okay to say “I’m not sure” because you leave room for other factors to influence an outcome. Being comfortable about not knowing all the answers also helps us to avoid becoming biased (by for example thinking your “smart” decision resulted in a positive outcome and yet it was just by luck that you succeeded).
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Furthermore, showing that you don’t have all the answers paves the way for people who have helpful suggestions to offer them to you. Otherwise, if you are 100% convinced that you are correct, why would anyone even bother to make a suggestion that would prompt you to look at things from a different perspective? You can see how you would set yourself up to fail.
Life is Like Poker, Not Like Chess
This is another concept presented in the book “Thinking in Bets.” There are two key elements to success in anything. The first is skill, and the other is luck.
The luck element is what makes poker different from chess. In the same way, luck makes life different from chess. For example, luck may exert just a 2% impact on something and skill accounts for 98%, but the outcome would swing in favor of the influence of luck.
Think of someone who gets hit by a vehicle while crossing the street. The person waited for the pedestrian light to turn green (skill) but an errant driver just ignored the traffic light and ended up hitting the pedestrian (luck, or bad luck in this case).
In contrast, think of someone who crosses the street while the pedestrian light is still red yet they don’t end up being hit by a vehicle. What percentage would you give to luck in this case?
Research shows that human beings tend to do the same things over and over. When things don’t go our way, we tend to blame luck (the teacher doesn’t like me, the company products are hard to sell, etc.). However, when things go well, we tend to attribute that success to our skill (thank goodness I bought that stock because I knew it was going up in value, I know this hand shouldn’t be played but I knew he was bluffing, etc.).
In poker, luck, uncertainty, risk-taking and even deception are the norm. Life is like that too. However, chess is all about skill and there isn’t anything hidden, or luck rarely plays a role in the outcomes.
When you go about life in the same way as you would approach chess, you will be in trouble because nothing is always straightforward in life.
Everything in Life is a Bet
When you make a decision to relocate for employment, you are taking a bet. The same happens when you choose chicken and not beef at a restaurant, one spouse and not any other potential spouse, signing a business contract, etc. All these decisions are bets because you are betting against all future outcomes.
You will make better life decisions if you take into account the element of risk (bet) inherent in those decisions rather than downplaying this crucial factor.
Overall, the quality of your life will be the sum total of the quality of the bets you take plus the element of luck. It works like compound interest; tiny gains add up and snowball over time. Bets are won not by being in love with our own ideas, but by calibrating our predictions of possible outcomes based on the current reality.
Mental Time Travel
Annie Duke says human beings aren’t as objective as we like to think we are. Consequently, our beliefs are hard to change even when faced with overwhelming evidence that they aren’t accurate.
For that reason, it is imperative that we learn patterns that help us to make objective decisions even when we have strongly held beliefs. One technique is to use mental time travel before making a decision. In practical terms, Annie suggests the 10-10-10 process.
In this rule, you ask yourself what the consequences of each of the available options before a decision is made will be in 10 minutes, then in 10 months and finally, in 10 years. These questions cause you to act based on more of logic than on emotions and beliefs.
This book is an elegant fusion of poker table street-smarts and cognitive science insights, Annie Duke’s work will make you a shrewder and wiser player in the game of life if you can only train yourself to think in bets. Get hold of the book, learn all the concepts, and start implementing them. You will be amazed at how your decision making will be transformed for the better, especially during this time when the COVID-19 pandemic has blindsided everyone.
To Your Success
Source: Thinking In Bets by Annie Duke