Thinking in Bets
Thinking in Bets

Thinking in Bets

Table of Contents

A bet really is: a decision about an uncertain future.

Treating decisions as bets, I discovered, helped me avoid common decision traps, learn from results in a more rational way, and keep emotions out of the process as much as possible. (Location 113)

Tags: bet, decision

Note: A bet is a decision about an uncertain future. Treat decisions as bets.

There are two things that determine how our lives turn out:

The quality of our decisions and


Learning to recognize the difference between the two is what thinking in bets is all about. (Location 132)

Tags: luck, decision

Note: .decision .luck the quality of our decisions and luck play a big part in our lives

CHAPTER 1 Life Is Poker, Not Chess

Resulting = equating the quality of a decision with the quality of its outcome.

When I started playing poker, more experienced players warned me about the dangers of resulting, cautioning me to resist the temptation to change my strategy just because a few hands didn’t turn out well in the short run. (Location 163)

Tags: favorite, outcomes, resulting

Note: Do not equate the quality of a decision to the quality of the outcome

Resulting = Drawing an overly tight relationship between results and decision quality.

This affects our decisions every day, potentially with far-reaching, catastrophic consequences. (Location 177)

Tags: resulting

Note: .resulting

When we work backward from results to figure out why those things happened, we are susceptible to a variety of cognitive traps, like:

Assuming causation when there is only a correlation, or

cherry-picking data to confirm the narrative we prefer.

We will pound a lot of square pegs into round holes to maintain the illusion of a tight relationship between our outcomes and our decisions. (Location 231)

Theory of Games and Economic Behavior in 1944. The Boston Public Library’s list of the “100 Most Influential Books of the Century” includes Theory of Games. William Poundstone, author of a widely read book on game theory, Prisoner’s Dilemma, (Location 320)

Tags: toread

Note: .toread

Poker is a game of incomplete information. It is a game of decision-making under conditions of uncertainty over time. (Not coincidentally, that is close to the definition of game theory.) Valuable information remains hidden.

There is also an element of luck in any outcome. You could make the best possible decision at every point and still lose the hand, because you don’t know what new cards will be dealt and revealed. Once the game is finished and you try to learn from the results, separating the quality of your decisions from the influence of luck is difficult. (Location 353)

Tags: poker

If we want to improve in any game—as well as in any aspect of our lives—we have to learn from the results of our decisions. The quality of our lives is the sum of decision quality plus luck. (Location 367)

Tags: decisions

Note: .decisions

While explaining all this, Vizzini diverts Westley’s attention, switches the goblets, and declares that they should drink from the goblets in front of them. Vizzini pauses for a moment and, when he sees Westley drink from his own goblet, confidently drinks from the other. (Location 390)

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. That state of knowledge, in turn, is some variation of “I’m not sure.” (Location 434)

Tags: decisions

Note: .decisions

Decisions are bets on the future, and they aren’t “right” or “wrong” based on whether they turn out well on any particular iteration. (Location 518)

Tags: decisions, favorite

First, the world is a pretty random place. The influence of luck makes it impossible to predict exactly how things will turn out, and all the hidden information makes it even worse. If we don’t change our mindset, we’re going to have to deal with being wrong a lot. It’s built into the equation. (Location 548)

Tags: randomness, luck

Note: .luck .randomness

...being wrong hurts us more than being right feels good. We know from Daniel Kahneman and Amos Tversky’s work on loss aversion, part of prospect theory (which won Kahneman the Nobel Prize in Economics in 2002), that losses in general feel about two times as bad as wins feel good.

So winning $100 at blackjack feels as good to us as losing $50 feels bad to us. Because being right feels like winning and being wrong feels like losing, that means we need two favorable results for every one unfavorable result just to break even emotionally. Why not live a smoother existence, without the swings, especially when the losses affect us more intensely than the wins? (Location 557)

Tags: lossaversion

CHAPTER 2 Wanna Bet?

In most of our decisions, we are not betting against another person. Rather, we are betting against all the future versions of ourselves that we are not choosing. (Location 684)

Abstract belief formation (that is, beliefs outside our direct experience, conveyed through language) is likely among the few things that are uniquely human, making it relatively new in the scope of evolutionary time. Before language, our ancestors could form new beliefs only through what they directly experienced of the physical world around them. (Location 767)

Tags: imagination

Note: .imagination this is similar to content in sapiens and stumbling on happiness

For survival-essential skills, type I errors (false positives) were less costly than type II errors (false negatives). In other words, better to be safe than sorry, especially when considering whether to believe that the rustling in the grass is a lion. (Location 772)

Fake news isn’t meant to change minds. As we know, beliefs are hard to change. The potency of fake news is that it entrenches beliefs its intended audience already has, and then amplifies them. (Location 884)

Tags: fakenews

Note: .fakenews fake news doesnt change opinions, it amplifies existing views

If we think of beliefs as only 100% right or 100% wrong, when confronting new information that might contradict our belief, we have only two options: (a) make the massive shift in our opinion of ourselves from 100% right to 100% wrong, or (b) ignore or discredit the new information.

It feels bad to be wrong, so we choose (b). Information that disagrees with us is an assault on our self-narrative. We’ll work hard to swat that threat away. On the flip side, when additional information agrees with us, we effortlessly embrace it. (Location 897)

Tags: favorite

Confidence in the results is expressed through both p-values:

The probability one would expect to get the result that was actually observed (akin to declaring your confidence on a scale of zero to ten)

Confidence intervals (akin to declaring ranges of plausible alternatives). Scientists, by institutionalizing the expression of uncertainty, invite their community to share relevant information and to test and challenge the results and explanations.

The information that gets shared back might confirm, disconfirm, or refine published hypotheses. (Location 1045)

Tags: forecasting, confidence

Note: .confidence

CHAPTER 3 Bet to Learn: Fielding the Unfolding Future

American soccer great Mia Hamm said, “Many people say I’m the best women’s soccer player in the world. I don’t think so. And because of that, someday I just might be.” (Location 1492)

Tags: success

Note: .success

Thinking in bets triggers a more open-minded exploration of alternative hypotheses, of reasons supporting conclusions opposite to the routine of self-serving bias. We are more likely to explore the opposite side of an argument more often and more seriously—and that will move us closer to the truth of the matter. (Location 1544)

CHAPTER 4 The Buddy System

I agreed to the group’s rules of engagement.

Focus on the things I could control (my own decisions),

Let go of the things I couldn’t (luck)

Work to be able to accurately tell the difference between the two. (Location 1676)

Tags: control

Good blueprint for a truthseeking charter:

- A focus on accuracy (over confirmation),

- Rewarding truthseeking, objectivity, and open-mindedness within the group;

- Accountability, for which members have advance notice; and

- Openness to a diversity of ideas. (Location 1753)

Tags: growth, openminded, truthseeking

CHAPTER 5 Dissent to Win

Be a data sharer. That’s what experts do. In fact, that’s one of the reasons experts become experts. They understand that sharing data is the best way to move toward accuracy because it extracts insight from your listeners of the highest fidelity. (Location 2113)

Tags: experts, share

Note: .share

When I used hands I had played as illustrations, I would describe the hand up to the decision point I was discussing and no further, leaving off how the hand ended. This was, after all, how I had been trained by my poker group. When we finished the discussion, it was jarring to watch a roomful of people look at me like I had left them teetering on the edge of a cliff. “Wait! How did the hand turn out?” I gave them the red pill: “It doesn’t matter.” (Location 2232)

Tags: resulting

Skepticism is about approaching the world by asking why things might not be true rather than why they are true. It’s a recognition that, while there is an objective truth, everything we believe about the world is not true.

Thinking in bets embodies skepticism by encouraging us to examine what we do and don’t know and what our level of confidence is in our beliefs and predictions. This moves us closer to what is objectively true. (Location 2260)

Tags: curious, true, skepticism

Note: .skepticism .true .curious

lead with assent.

Listen for the things you agree with, state those and be specific, and then follow with “and” instead of “but.”

If there is one thing we have learned thus far it is that we like having our ideas affirmed. If we want to engage someone with whom we have some disagreement (inside or outside our group), they will be more open and less defensive if we start with those areas of agreement... (Location 2301)

Tags: feedback, argument

Note: .argument .feedback start with what you agree on and replace but with and

In the performance art of improvisation, the first advice is that when someone starts a scene, you should respond with “yes, and . . .” “Yes” means you are accepting the construct of the situation. “And” means you are adding to it. That’s an excellent guideline in any situation in which you want to encourage exploratory thought. (Location 2314)

Tags: improv

If someone is off-loading emotion to us, we can ask them if they are just looking to vent or if they are looking for advice. (Location 2319)

Tags: favorite, claudia, advice

Note: .advice .claudia ask if someone is looking to vent or for advice

“Do you want to just let it all out, or are you thinking of what to do about it next?” (Location 2326)

Tags: claudia, sharemark, advice

Note: .advice .sharemark

CHAPTER 6 Adventures in Mental Time Travel

This tendency we all have to favor our present-self at the expense of our future-self is called temporal discounting.* We are willing to take an irrationally large discount to get a reward now instead of waiting for a bigger reward later. (Location 2409)

Tags: temporaldiscount

Note: .temporaldiscount

10-10-10 that has the effect of bringing future-us into more of our in-the-moment decisions. “Every 10-10-10 process starts with a question. . . .

- What are the consequences of each of my options in ten minutes?

- In ten months?

- In ten years?” (Location 2491)

The way we field outcomes is path dependent. It doesn’t so much matter where we end up as how we got there. What has happened in the recent past drives our emotional response much more than how we are doing overall. That’s how we can win $100 and be sad, and lose $100 and be happy. (Location 2572)

Tags: outcome

Note: .outcome outcome is path dependent

Non-surfers just call all of these “waves.” On rare occasions when we non-surfers need to be more specific, we just add a lot of extra words. Those extra words don’t cost us much because it doesn’t come up very often—maybe never.

For people involved in specialized activities, it’s worth it to be able to communicate a complex concept in a single word that laypeople would need lengthy phrases to convey.

Having a nuanced, precise vocabulary is what jargon is all about. It’s why carpenters have at least a dozen names for different kinds of nails, and in the field of neuro-oncology, there are more than 120 types of brain and central nervous system tumors. (Location 2591)

Tags: language, jargon

Note: .jargon nuanced and precise vocabulary

At the very beginning of my poker career, I heard an aphorism from some of the legends of the profession: “It’s all just one long poker game.” That aphorism is a reminder to take the long view, especially when something big happened in the last half hour... (Location 2629)

Ulysses contracts can help us in several ways to be more rational investors. When we set up an automatic allocation from our pay into a retirement account, that’s a Ulysses contract. We could go through the trouble of changing the allocation, but setting it up initially gives our goal-setting, System 2–self a chance to precommit to what we know is best for our long-term future. And if we want to change the allocation, we have to take some specific steps to do so, creating a decision-interrupt. (Location 2669)

Poker players really live in this probabilistic world of,

“What are the possible futures?

What are the probabilities of those possible futures?” (Location 2780)

Tags: probabilities, poker, forecasting

...if two people in the group are really far off on an estimate of the likelihood of an outcome, that is a great time to have them switch sides and argue the other’s position.

Generally, the answer is somewhere in the middle and both people will end up moderating their positions. (Location 2787)

Tags: planning, estimate

Grant prospecting is similar to sales prospecting, and this process can be implemented for any sales team. Assign probabilities for closing or not closing sales, and the company can do better at establishing sales priorities, planning budgets and allocating resources, evaluating and fine-tuning the accuracy of its predictions, and protecting itself against resulting and hindsight bias. (Location 2838)

Tags: sales, forecasting

Note: .forecasting .sales give a percentage liklihood of closing each sale

The main difference between passing and running is that calling a pass likely gives Seattle a total of three plays to score, instead of two if Carroll calls a running play. An unsuccessful run would require that Seattle use their final time-out to stop the clock so they could run a second play. An incomplete pass would stop the clock and leave Seattle with a time-out and the chance to call those same two running plays.

An interception, which negates the possibility of a second or third offensive play, is only a 2%–3% probability, a small price to pay for three chances to score rather than two. (A turnover caused by a fumble on a running play is 1%–2%.) (Location 2852)

Just as great poker players and chess players (and experts in any field) excel by planning further into the future than others, our decision-making improves when we can more vividly imagine the future, free of the distortions of the present. By working backward from the goal, we plan our decision tree in more depth, because we start at the end. (Location 2882)

Note: Start at the end and look backward to visualise how you got there

Backcasting and premortems complement each other.

- Backcasting imagines a positive future;

- A premortem imagines a negative future.

We can’t create a complete picture without representing both the positive space and the negative space. Backcasting reveals the positive space. Premortems reveal the negative space. Backcasting is the cheerleader; a premortem is the heckler in the audience. (Location 2917)

Tags: premortem, backcasting

Note: .backcasting .premortem

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. (Location 3047)