Thinking in Bets: Making

Smarter Decisions When

You Don’t Have All The
Facts — Book Notes
Annie Duke
 A bet: a decision about an uncertain future. The
implications of treating decisions as bets made it
possible for me to find learning opportunities in
uncertain environments. 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.
 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.

Chapter 1: Life is Poker, Not Chess

 Pete Carroll was a victim of our tendency to equate the
quality of a decision with the quality of its outcome.
Poker players have a word for this: “resulting”. 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.
 Resulting is a routine thinking pattern that bedevils all
of us. Drawing an overly tight relationship between
results and decision quality affects our decisions every
day, potentially with far-reaching, catastrophic
consequences.
 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.
 Our goal is to get our reflexive minds to execute on our
deliberative minds’ best intentions.
 “No, no,” von Neumann said. “Chess is not a game.
Chess is a well-defined form of computation. You may
not be able to work out the answers, but in theory there
must be a solution, a right procedure in any position.
Now, real games,” he said, “are not like that at all. Real
life is not like that. Real life consists of bluffing, of little
tactics of deception, of asking yourself what is the other
man going to think I mean to do. And that is what
games are about in my theory.”
 Chess, for all its strategic complexity, isn’t a great
model for decision-making in life, where most of our
decisions involve hidden information and a much
greater influence of luck. This creates a challenge that
doesn’t exist in chess: identifying the relative
contributions of the decisions we make versus luck in
how things turn out.
 Poker, in contrast, is a game of incomplete
information. It is a game of decision-making under
conditions of uncertainty over time. 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.
 The quality of our lives is the sum of decision quality
plus luck.
 We make this same when we look for lessons in life’s
results. Our lives are too short to collect enough data
from our own experience to make it easy to dig down
into decision quality from the small set of results we
experience.
 We get only one try at any given decision — and that
puts great pressure on us to feel we have to be certain
before acting, a certainty that necessarily will overlook
the influences of hidden information and luck.
 We are discouraged from saying “I don’t know” or “I’m
not sure”. We regard those expressions as vague,
unhelpful and even evasive. But getting comfortable
with “I’m not sure” is a vital step to being a better
decision maker. We have to make peace with not
knowing.
 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.”
 An expert in any field will have an advantage over a
rookie. But neither the veteran nor the rookie can be
sure what the next flip will look like. The veteran will
just have a better guess.
 If we misrepresent the world at the extremes of right
and wrong, with no shades of grey in between, our
ability to make good choices — choices about how we
are supposed to be allocating our resources, what kind
 of decisions we are supposed to be making, and what
kind of actions we are supposed to be taking — will
suffer.
 When we think in advance about the chances of
alternative outcomes and make a decision based on
those chances, it doesn’t automatically make us wrong
when things don’t work out. It just means that one
event in a set of possible futures occured.
 Any prediction that is not 0% or 100% can’t be wrong
solely because the most likely future doesn’t unfold.
 Decisions are bets on the future, and they aren’t right
or wrong based on whether they turn out well on any
particular iteration. An unwanted result doesn’t make
our decision wrong if we thought about the alternatives
and probabilities in advance and allocated our
resources accordingly.
 When we think probabilistically, we are less likely to
use adverse results alone as proof that we made a
decision error, because we recognize the possibility that
the decision might have been good but luck and/or
incomplete information (and a sample size of one)
intervened.
 Redefining wrong allows us to let go of the anguish that
comes from getting a bad result. But it also means we
must redefine “right”. If we aren’t wrong just because
things didn’t work out, then we aren’t right just
because things turned out well.

Chapter 2: Wanna Bet?

 Whenever we choose an alternative, we are
automatically rejecting every other possible choice. All
those rejected alternatives are paths to possible futures
where things could be better or worse than the path we
chose. There is potential opportunity cost in any choice
we forgo.
 Our decisions are always bets. We routinely decide
among alternatives, put resources at risk, assess the
likelihood of different outcomes and consider what it is
we value.
 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.
 At stake in a decision is that the return to us will be
greater than what we are giving up by betting against
the other alternative future versions of us.
 We bet based on what we believe about the world.
 Part of the skill in life comes from learning to be a
better belief calibrator, using experience and
information to more objectively update our beliefs to
more accurately represent the world. The more
accurate our beliefs, the better the foundation of the
bets we make.
 We form beliefs in a haphazard way, believing all sorts
of things based just on what we hear out in the world
but haven’t researched for ourselves.
 Daniel Gilbert: “Our default is to believe that what we
hear and read is true. Even when that information is
clearly presented as being false, we are still likely to
process it as true.”
 Truthseeking, the desire to know the truth regardless of
whether the truth aligns with the beliefs we currently
hold, is not naturally supported by the way we process
information. We might of think ourselves as open-
minded and capable of updating our beliefs based on
new information, but the research conclusively shows
otherwise. Instead of altering our beliefs to fit new
information, we do the opposite, altering our
interpretation of that information to fit our beliefs.
 Once a belief is lodged, it becomes difficult to dislodge.
 The potency of fake news is that it entrenches beliefs its
intended audience already has, and then amplifies
them. The Internet is a playground for motivated
reasoning. It provides the promise of access to a greater
diversity of information sources and opinions than
we’ve ever had available, yet we gravitate toward
sources that confirm our beliefs, that agree with us.
 Blind-spot bias (an irrationality where people are
better at recognizing biased reasoning in others but are
blind to bias in themselves) is greater the smarter you
are.
 When someone challenges us to bet on a belief,
signaling their confidence that our belief is inaccurate
in some way, ideally it triggers us to vet the belief,
taking an inventory of the evidence that informed us.
 Being asked if we are willing to bet money on it makes
it much more likely that we will examine our
information in a less biased way, be more honest with
ourselves about how sure we are of our beliefs, and be
more open to updating and calibrating our beliefs.
 Offering a wager brings the risk out in the open,
making explicit what is already implicit (and frequently
overlooked.)
 What if, in addition to expressing what we believe, we
also rated our level of confidence about the accuracy of
our belief on a scale of zero to ten?
 Incorporating percentages or ranges of alternatives
into the expression of our beliefs means that our
personal narrative no longer hinges on whether we
were wrong or right but on how well we incorporate
new information to adjust the estimate of how accurate
our beliefs are.
 By saying “I’m 80%” and thereby communicating that
we aren’t sure, we open the door for others to tell us
what they know. They realize they can contribute
without having to confront us by saying or implying
“you’re wrong.”

Chapter 3: Bet to Learn: Fielding the

Unfolding Future
 What are the obstacles in our way that make learning
from experience so difficult?
 There is a big difference between getting experience
and becoming an expert. That difference lies in the
ability to identify when the outcomes of our decisions
have some thing to teach us and what that lesson might
be.
 Any decision is a bet on what will likely create the most
favourable future for us. How we figure out what — if
 anything — we should learn from an outcome becomes
another bet.
 To reach our long-term goals, we have to improve at
sorting out when the unfolding future has something to
teach us, and when to close the feedback loop.
 If making the same decision again would predictably
result in the same outcome, or if changing the decision
would predictably result in a different outcome, then
the outcome following that decision was due to skill.
 If our decisions didn’t have much impact on the way
things turned out, then luck would be the main
influence.
 For any outcome, we are faced with this initial sorting
decision. That decision is a bet on whether the outcome
belongs in the luck or skill bucket.
 The way we field outcomes is predictably patterned: we
take credit for the good stuff and blame the bad stuff on
luck. The result is we don’t learn from our experience.
 Maybe the solution that has evolved is to compensate
for the obstacles in learning from our own experience
by watching other people do stuff.
 Instead of feeling bad when we have to admit a
mistake, what if the bad feeling came from the thought
that we might be missing a learning opportunity just to
avoid blame?
 Keep the reward of feeling like we are doing well
compared to our peers, but change the features by
which we compare ourselves: be a better credit-giver
than your peers, more willing than others to admit
mistakes, etc. In this way, we can feel that we are doing
 well by comparison because we are doing something
unusual and hard that most people don’t do.
 A good strategy for figuring out which way to bet would
be to imagine if that outcome had happened to us.

Chapter 4: The Buddy System

 Members of a decision pod can be formed by anyone
where members can talk about their decision making.
Forming or joining a group where the focus is on
thinking in bets means modifying the usual social
contract. It means agreeing to be open-minded to those
who disagree with us, giving credit where it’s due, and
taking responsibility where it’s appropriate, even when
it makes us uncomfortable.
 Complex and open-minded thought is most likely to be
activated when decision makers learn prior to forming
any opinions that they will be accountable to an
audience (a) whose views are unknown, (b) who is
interested in accuracy, © who is reasonably well-
informed, and (d) has a legitimate reason for inquiring
into the reasons behind participants’
judgments/choices.
 They should also encourage and celebrate a diversity of
perspectives to challenge biased thinking by individual
members.
 For engaging in the difficult work involved in sobriety,
local AA groups given tokens or chips celebrating the
length of individual members’ sobriety. The tokens are
a tangible reminder that others acknowledge you are
accomplishing something difficult. There are chips for
 marking one to 65 years of sobriety. There are also
chips given for every month of sobriety in the first year.
 A diverse group can do some of the heavy lifting of de-
biasing for us.
 After 9/11, the CIA created “red teams” that are
dedicated to arguing against the intelligence
community’s conventional wisdom and spotting flaws
in logic and analysis.
 A growing number of businesses are implementing
betting markets to solve for the difficulties in getting
and encouraging contrary opinions.

Chapter 5: Dissent to Win

Ideal-type model of self-correcting epistemic community:
1. Communism — data belong to the group

2. Universalism — apply uniform standards to claims and

evidence, regardless of where they came from

3. Disinterestedness — vigilance against potential conflicts

that can influence the group’s evaluation

4. Organised Skepticism — discussion among the group to

encourage engagement and dissent
 When presenting a decision for discussion, we should
be mindful of details we might be omitting and be
extra-safe by adding anything that could possibly be
relevant. On the evaluation side, we must query each
other to extract those details when necessary.
 Don’t disparage or ignore an idea just because you
don’t like who or where it came from.
 The substance of the information has merit/lack of
merit separate from where it came from
 One way to disentangle the message from the
messenger is to imagine the message coming from a
source we value much more or much less.
 After the outcome, make it a habit when seeking advice
to give the details without revealing the outcome.
 Another way a group can de-bias members is to reward
them for skill in debating opposing points of view and
finding merit in opposing positions.
 Lead with assent. Listen for the things you agree with,
state those and be specific, and then follow with “and”
instead of “but”
 Ask for a temporary agreement in engage in
truthseeking. If someone is off-loading emotion to us,
we can ask them if they are just looking to vent or
looking for advice.

Chapter 6: Adventures in Mental

Time Travel
 just as we can recruit other people to be our decision
buddies, we can recruit other versions of ourselves to
act as our own decision buddies.
 Several organizations and companies with an interest
in encouraging retirement planning have resources
that allow clients to “meet” their future selves as they
 make retirement decisions. In the simplest versions of
these tools, clients plug in their age, income, savings
practices and retirement goals. The apps then show the
client the financial situation and lifestyle their future-
self can expect, compared with the present.
 Business journalist and author Suzy Welch developed a
popular tool known as 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?
 We can build on Welch’s tool by asking the questions
through the frame of the past: “how would I feel today
if I had made this decision ten minutes ago? Ten
months ago? Ten years ago?”
 Our problem is that we’re ticker watches of our own
lives. Happiness is not best measured by looking at the
ticker, zooming in and magnifying moment-by-
moment or day-by-day movements. We would be
better off thinking about our happiness as a long-term
stock holding.
 Ulyssess contract — involve raising a barrier against
irrationality. A kind of precommitment contract
designed to lower/raise barriers that interfere with
rational action
 A “decision swear jar” is a simple kind of
precommitment contract. We identify the language and
thinking patterns that signal we are veering from our
goal of truthseeking. When we find ourselves using
certain words or succumbing to the thinking patterns
we are trying to avoid because we know they are signs
 of irrationality, a stop-and-think moment can be
created.
 Belief -> Bet -> Set of outcomes
 Thinking about what futures are contained in that set
(which we do by putting memories together in a novel
way to imagine how things might turn out) helps us
figure out which decisions to make.
 Figure out the possibilities, then take a stab at the
probabilities.
 The best poker players think beyond the current hand
into subsequent hands: how do the actions of this hand
affect how they and their opponents make decisions on
future hands?
 Whether it involves sales strategies, business strategies
or courtroom strategies, the best strategists are
considering a fuller range of possible scenarios,
anticipating and considering the strategic responses to
each, and so on deep into the decision tree.
 Prospective hindsight — imagining that an event has
already occurred — increases the ability to correctly
identify reasons for future outcomes by 30%
 Backcasting: we imagine we’ve already achieved a
positive outcome, holding up a newspaper with the
headline “We Achieved Our Goal!”, then we think
about how we got there.
 Premortem: an investigation into something awful, but
before it happens. Imagining a headline “We Failed To
Reach Our Goal” challenges us to think about ways in
which things could go wrong that we otherwise
wouldn’t if left to our own devices.