Thinking in Bets: Making Smarter Decisions When You Don't Have All the Facts

This book is about how to make better decisions, from the trivial to the most consequential, in all endeavors of life: personal, business, political/economic forecasting, gambling, etc. It explains how to think about potential decision options, given that most entail varying degrees of risky or uncertain outcomes. Without attempting to bog the reader down in the mathematics of probability theory, the core of most textbook approaches to decision making, it clearly demonstrates how to incorporate probabilistic uncertainty into our decision-making thought processes. Since most decisions we make lead to outcomes which have an element of probabilistic uncertainty, the book's approach is relevant to all walks of life. Although Duke does not frame it this way, I think a brief explanation of two fundamentally different types of situations captured by the tool of probabilistic reasoning may be helpful. This dichotomy leads to what have been termed Objective and Subjective probabilities. Objective probabilities are those associated with outcomes that are truly random with specific known numerical probabilities governing various occurrences. For these, no amount of thinking or information on the part of those of us observing the situation can improve on understanding inherent randomness of the underlying activity leading to some outcome, i.e., the known probabilities are the best we can do in anticipating the ultimate outcome of the event. In other words, we can't improve on the odds of various outcomes however smart we may be. The best examples for this type of probability are things happening in the world of quantum mechanics, e.g., predicting the time at which a radioactive element or a neutron will decay. A close second for most practical purposes would be the outcome of the spin of a roulette wheel or the outcome of a fair roll of a pair of dice. Objective probabilities are set by the laws of nature, and, once known, the actual outcomes of a large number of repetitive observations of the same situation will lead to a predictable distribution of outcomes. Subjective probabilities, on the other hand, are probabilities we assign to various outcomes when faced with decisions leading to uncertain outcomes. They are not fixed or absolute numbers driven by the laws of nature. We may assign a numerical value to a particular outcome, e.g., a 70% chance the Patriots will win the Super Bowl against the Eagles, or, they may be qualitative rankings of possible outcomes, e.g., highly likely, pretty likely, not sure, very unlikely, etc. Three key things about Subjective probabilities are: 1. Different people thinking about the same event will usually have different estimates of the probabilistic outcomes. Subjective probabilities are not facts. They are opinions. 2. The information/knowledge the decision maker has about the situation will affect their probability estimates of different outcomes. 3. Good decision makers in many particular endeavors like poker or investing will usually, i.e., more frequently but not always, have better success in predicting uncertain outcomes than will poor decision makers. During the first couple of hundred years that mathematicians tried to develop the field of probability, they were generally focused on thinking about things they believed were governed by Objective probabilities. Even the game of poker was thought of in this way for years. Early in the 20th century, thinkers began to crystallize the idea of Subjective probabilities as distinctly different from Objective probabilities. John Maynard Keynes attempted to develop a full blown theory with his 1921 book "A Treatise On Probability". Although it had some excellent ideas, it did not succeed in laying out a firm mathematical basis for Subjective probability. This took the Italian mathematician, Bruno de Finetti, to define a mathematically rigorous treatment of Subjective probability in his 1937 book. And, thinking in bets was core to his approach. By the 1950's, de Finetti's approach became the basis for aspects of economics , game theory, and decision making under uncertainty. The latter pertains to virtually all decision making we encounter in daily life. So, what does Subjective probability have to do with bets. In short, everything. When we make a bet, we do so with a view of the chances of winning, either a qualitative view, or a quantitative view, i.e., a probability. A bet is the manifestation of one's personal estimate of the Subjective probability of the outcome you are favoring. The beauty of Duke's book is that it explains with lots of examples of how to apply Subjective probabilistic thinking in all sorts of situations without having to worry about the sound basis of the underlying mathematics. Poker is a great example of a situation in which a Subjective probabilistic assessment is critical, since trying to gauge how others will behave in playing a hand is truly a subjective, rather than objective, assessment. Thus her poker and human psychology background really do mark her as expert in teaching smart decision making for a broad audience. Since information and knowledge are key to making sound estimates of Subjective probabilities, Duke spends a lot of time on how to build a broad information base pertaining to prospective decisions, and how to guard against biases we naturally have that can cause us to resist relevant information that may rub us wrong. She implies that for lots of decisions, one can do better simply by stepping back and thinking about the pro's and con's, rather than just going on an impulse. Oftentimes we have relevant information in our head, if only we would think about it. Get external inputs as well, e.g., friends or Google. Information is key and being open to inputs that may conflict with your beliefs will improve your decision quality in the long run. Thus,the book is suitable for both the mathematically inclined and the mathematically averse. Although the math is absent, some may find some of the concepts a bit difficult or, on the surface, repetitive, as evidenced by some of the reviews posted here on Amazon. Stated differently, it may be difficult sometimes to appreciate the applicability of the advice to settings that go beyond the specific example used preceding her current point, but a little thought brings it home. No doubt, a few readers of the book will 'get it' and some won't, though they may still find some of the stories entertaining. None-the-less, I highly recommend it as worthwhile for both personal improvement, as well as supplemental reading in almost any graduate school curriculum.

Interesting and useful perspective on taking decisions in every aspect of life with a more objective point of view that normally people have when making decisions. It has a couple of good recommendations to apply and test. Also useful advice for analyzing a goal in order to increase the chances of achievement by doing a premortem and also backcasting (imagining a positive future outcome in order to determine what needed to happen in order to reach that outcome).

Annie Duke is best known as a professional poker player and author of poker oriented books, but in "Thinking In Bets" retraces her academic history -- it's a business book, a strategy book, a behavioral psychology book, an organizational effectiveness book and of course has residual elements of a poker book at its core. It is, quite simply, one of the best business books and actionable management books I have read in years -- it's up there with Peter Thiel's "Zero to One." If you're wondering what Pete Carroll's pass play call at the end of the 2014 Super Bowl, Steve Bartman's interference in the Cubs playoff game that eventually forced him out of Chicago, legal strategists, poker professional Phil Ivey and corporate planning have in common, buy and read, then re-read Duke's book. I digested an advanced reader's copy of the book, and it's one of the few things I've annotated as I went, making notes that I've used in staff meetings and 1:1 discussions in the last few weeks. The whole thing reads the way you'd expect and want; it's like talking to Annie Duke in your living room with the right blend of snark, deep insights wrapped in powerful examples, and force. I've read several dozen business and strategy books, and most of them paint generic pictures of leadership or organizational behavior - "Thinking In Bets" actually lays out a map for where your decision making processes (and as a result, leadership and organizational acumen) are deficient, and how to build a self-improvement plan to address those shortcomings. It's a bit of personal coaching in a purely positive direction, which is as rare as it is helpful. Here are just some of the things I took away: - Resist the urge to associate bad outcomes (Seahawks losing to the Patriots in the Super Bowl) with bad decisions (Pete Carroll's play call was backing by solid data). My concern is that as we make continued investments in data science and analytics, we will tend to use that data for "resulting" rather than supporting the quality of decisions, and we'll end up with many fewer aggressive or game-changing decisions. - We can improve the way in which we collect and vet data, and that process may challenge some of our assumptions (one of my immediate reactions was that adopting this line of thinking actually addresses the closely held belief firewall that Matt Inman addresses in his "belief" comic - Finding a peer group that can help you build a non-confrontational, non-threatening decision review team will improve your executive function and "network leadership" (which explains why there are CxO councils, nerd exchanges, and even why hackathons are popular -- they are immediate and safe spaces in which to share decisions ranging from corporate strategy to Javascript toolkit choice) - Some decision paths have hysteresis - even if you end up at the same outcome, the path you take to get there may be different and therefore your valuation of the outcome is different. The example Duke dissects is winning $1,000 and then losing $900 of it back, versus losing $1,000 and winning $900 back -- you're likely to be happier you "only lost" $100 versus the outcome where you "only won" $100. - We have to imagine the future impacts of our decisions, which involves scenario planning, careful consideration of risks and future inputs (information) we may or may not see, and some of that future-proofing involves changing our reward valuation such that we are able to break consistently bad or ill-informed decision making processes. Sound like a lot? It is. It's a dense book. I read it in parallel with a some "lighter" science fiction because I found I had to turn over some of the ideas in my mind and think about both how I've personally exhibited some of the impairing behaviors, and how I could better use these strategies in my professional and personal domains.

I gave this 3 stars other folks love it. If you work with probability reasoning - especially with beta distribution reasoning the book distills down to Jefferys and update and be done. However, if that is not where you are coming from - you'll appreciate the stories and learn a ton. Plus. you'll be entertained by the settings.

About a quarter of the way into this latest missive from Annie Duke I found myself wondering if she's writing for the business community but in a way that regular folks, you know ones like you and me who make decisions all the time, would get something out of or written for us but in a way that those in the corporate world would be well-advised to read. At about the one-third mark I realized (duh) that it's both and it's written with such charm and insightfulness (and humor) that it succeeds splendidly on both agendas. Duke is a rare trifecta: she has a solid academic background in cognitive psychology, she was a world-class professional poker player, and is currently a corporate and business consultant. All three of these "Dukes" are poured into the book in compelling and unique ways. I'm a cognitive psychologist and have played a lot of poker (not in her league I can assure you) and so I'm intrigued by the way she lays out the lessons we need to learn. First: in science, poker, and business you rarely, if ever, have all the information. In poker you don't know your opponents cards and you don't know what they're thinking -- including what they're thinking about what they think you're thinking. In scientific research you only know what's been discovered so far. You're ignorant about the unknown and are trying to extrapolate from current knowledge. In business and finance you unsure of the future, only know some things about markets, and work with incomplete models. In these partial information settings decision-making becomes difficult, tricky, and often contaminated by bias. Second: virtually all the interesting things we do in life are bets. Every even mildly complex task we confront or decision we make is, in effect, a bet. And bets have consequences. We take an umbrella because we're betting it will rain. We hire a new manager and are betting on her skills. We chose college A over B and bet that we'll get better education. And in these and the myriad other bets we make every day, we don't have all the facts and, because of the ways in which our minds tend to work, we often run afoul of biases and misunderstandings that lead us to make poor decisions. And Duke lays out for us the roots of these biases and trenchant advice on how to circumvent them -- with sometimes jarring effectiveness designed to force the reader to suddenly confront what they think they know but don't. Some examples: a) Try asking someone "want to bet?" when they claim something to be true. It puts them in a totally different place than when they were simply stating what they believed to be true. b) Look at decisions on the basis of how they were made rather than how they turned out -- you can win with a poor decision and lose with a good one but in the long run, it's the decision-making process that counts. c) Emphasize the need to stop thinking in certainties and recognize probabilities. d) Stop imagining situations as either-or and acknowledge that most things lie along continuums. e) Recognize when you're in an "echo-chamber" where only viewpoints you're currently comfortable with are expressed. Quoting Mill, she reminds us that truth only emerges when all sides are heard. Along the way we're treated to stories of gamblers, pain and triumph in poker games, the noodling of philosophers, judicial habits of Supreme Court Justices, corporate CEO's, betting markets, biases of social psychologists, a short but penetrating exegesis on skepticism, some advice on child rearing, and a discourse on mental time travel -- and no, I'm not going to tell you what that is. Read the damn book. Duke makes her living now as a writer and presenter of her approach to decision-making, a corporate speaker, and a business consultant. I can just imagine jaws dropping when she tells a group of high powered corporate execs that one sure way to succeed is to make sure they have naysayers in corporate headquarters, ensure that they ask for dissenting views and voices before making major (or minor) decisions. Oh, and in passing, she's an engaging writer with a sense of humor who can turn a simple setting into a hilarious little psychodrama, especially when revealing some of the weird and wonderful things that happened to her during her days as a professional poker player.

Annie Duke's fundamental point is that nothing is a "sure thing" & life is a game of odds; the outcomes you experience will always be the product of 2 factors : Luck & the quality of your decision-making. Annie credits her success to a paradigm shift to Thinking in odds & percentages vs absolutes. Her key idea is to unhitch outcomes from the quality of decisions & realize that sometimes an 80% chance of success will land in the unlucky 20% of outcomes, but , in that case you should probably play ot the same way next time. & it's always a mistake to repeat an unnecessary riak just because a bad decision had a lucky outcome this time. Her message is that by shifting your thinking from a need for certainty to a goal of accurately assessing what you know and what you don't, you'll be less vulnerable to reactive emotions, knee-jerk biases, and destructive habits in your decision making. Further she advises to then act as if you were betting big money on your decision.... how sure are you now? If our decisions are bets, we can start to let go of the idea that we’re 100 percent “right” or “wrong," and start to quanitfy uncertainty to budget what we're willing to risk. Putting something at stake makes us more closesly vet our info & beliefs. When we discover & scrutinize our assumptions, we think more accurately. Annie suggests gaming out your decisions for perspective and an assessment of their quality. She encourages a practice where you think through your options by anticipating the impact of the likely outcomes & Play them out against 10-min from now, 10 mo's , & 10 years. Despite the popular advice that we achieve success through positive visualization, it turns out that incorporating negative visualization makes us more likely to achieve our goals. Gabriele Oettingen, professor of psychology at NYU and author of Rethinking Positive Thinking: Inside the New Science of Motivation, has conducted over twenty years of research, consistently finding that people who imagine obstacles in the way of reaching their goals are more likely to achieve success, a process she has called “mental contrasting.” Annie prescribes what she calls "backcasting" & a "Pre-Mortem" (vs a post-mortem). To take advantage of our human propensity for hysterisis; Backcasting imagines a positive future; a premortem imagines a negative future. Looking at the world through rose-colored glasses is natural and feels good, but Beware of self-serving bias. Use the outcome as a feedback loop to learn objectively without sentiment. A premortem is an investigation into something awful, but before it happens. We all like to bask in an optimistic view of the future. We generally are biased to overestimate the probability of good things happening. 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 and premortems complement each other. Stand in the future & experience the outcome & analyze how you got there. Remember, the likelihood of positive and negative futures must add up to 100%. The positive space of backcasting and the negative space of a premortem still have to fit in a finite amount of space. When we see how much negative space there really is, we shrink down the positive space to a size that more accurately reflects reality and less reflects our naturally optimistic nature. Act now... all the analysis is for naught without action. Each action is just one hand/ one bet / one test of your hypothesis. Focus on getting higher quality information for making higher quality decisions & you'll significantly improve your odds of success.

Essential for Decision-makers, psychologists, policy-makers, and those wishing to optimize their thinking. This book is in my list of 20 most useful books because it will help the reader lead more productive lives, with more wins and less losses. The big tests are, will I re-read it, will I refer to it in discussions, and will it actually change my life course. Yes, yes, yes, yes. Annie Duke gathers insights from many of the leading thinkers of the day to give us a great manual on thinking about risk for more productive lives. The only weaknesses are a very small bit of rambling (haven't I read this paragraph before?) and it is best if a person at least played poker a bit. But she is good about avoiding jargon and she explains it as well as can be done to a non-player. Also, I have read much of this, but not all insights, as I have read many of the books she gleans from. But, that works and consolidates those insights. I have a virtual board of directors (What would Einstein do? What would Ben Franklin do?) I think I can confidently add Annie Duke to that board. I don't know how much time it takes, but it is an easy read for 3 or so hours that will pay off if you integrate any one insight, much less most of them. Based on the current positive reviews there is an 87% chance you will love it! If you determine you are not of the mindset of the negative reviewers this bet is an almost certain win.

Finding ways to improve decision making will never go out of style. The concepts that this book covers are valuable, and Annie presents them in a way that makes them easy to comprehend. Coming from the poker community, I was already familiar with a bit of the content and have spent a lot of time trying (and failing) to help teach friends/family/coworkers how to think probabilistically and mitigate hindsight bias. I can now sleep easier, knowing that someone from the poker world was able to clearly articulate the powerful lessons one learns from dealing with uncertainty and variance for a living. While these concepts are not unique to poker, and there are many books that try to help improve our decision-making, Thinking in Bets stands out. There are only a handful of people in the world who have backgrounds in both consulting and poker, so it’s nice to get a fresh perspective on such an important topic. It also helps that Annie is an effective communicator, so the book is written in a way that you don’t need to know anything about poker. I don’t think any of my coworkers even know the rules to “Go Fish”, but they all loved the book and we’re working to implement some of the ideas suggested here. Side note: given the subtitle of “Making Smarter Decisions When You Don’t Have All the Facts”, I can’t think of a better book to read/gift while practicing social distancing in these uncertain times!

I’m not finished yet but this is not a pure poker book and I’m glad it’s not. Good advice inside with practical examples. It’s an interesting look at decision making.

I enjoyed this as it's a lens widening read.

One of the greatest book I have ever read about thinking in probabilities. MUST read

One of the best books I’ve ever read. Very insightful and had to be read

Annie Duke, the author of “thinking in bets” is a former World Series of Poker champion, turned business consultant. In the book, Annie discusses the importance of the different types of decisions. Good decisions can generate, bad outcomes and bad decisions can generate great outcomes. This is something she has learned from playing poker. She also discusses the difference between “skill” and “luck”, often in life if we had a good outcome we put that down to skill and a bad outcome, we put down to bad luck. Surely everything is about skill? Annie discusses that if you say to people “will you take a bet on that?” people will start unpacking their belief systems and the knowledge we have which we assume to be true. Once pushed, to put our money where our belief systems are will we really do it? Finally she discusses the need to have an open mind in life and a lifelong learner. I certainly enjoyed the book and it’s worth adding to the reading list.