What I Learned from Thinking in Bets by Annie Duke
I remember when I met my wife for the first time.
I worked at Hertz. I was a rental car agent for an off-airport location in Rockville Maryland. When I wasn’t cleaning cars or trying to persuade people to buy the insurance for their rental car, I would sit at my desk and stare out the glass plated windows waiting for customers to come into the location.
I was sitting at my desk on the day that she interviewed at my location. She wore white sneakers to the interview. I talked with her while she waited in the lobby to be interviewed. We talked about movies. Wall-E was going to premier in theaters. I’ve always loved Pixar movies, and so I asked her if she was going to see the movie.
“Oh, yeah. I love movies about fuzzy creatures,” she said.
“But Wall-E is a robot.”
“He’s a cute, fuzzy, creature.”
She confused me. But I liked her. When she left the office, I hoped she would get the job. I liked her. But I also knew there were a lot of reasons she wouldn’t take the job. She was from Cleveland and might not want to move to Maryland. Hertz might not want to hire her. They might hire her at another location. It was unlikely I would ever meet her again.
But she got the job and we worked together. That’s how we met. We’ve been married 11 years now. We have two children together.
There are a lot of universes where the life I’m living doesn’t exist.
We call it providence. We call it luck. We call it serendipity.
But when we’re making decisions in the moment, we want there to be a direct correlation between action and reaction. That doesn’t exist.
This is the crux of Thinking in Bets. It’ s a book by World Championship poker player Annie Duke. Life is the sum of decision making plus luck.
I could control that I was nice to Judy. I bathed that day. I didn’t do anything to offend her. That’s good decision making.
I didn’t control anything about whether she got the job or whether she took the job. That was just luck.
Annie wrote this book to help people be more accurate, objective, and open-minded with their decision making. This article is to articulate the things I learned from reading it.
1. The Past is Deceptive
The past is deceptive because it is so concrete. A lifetime is the sum of individual moments. Once that moment happens, there is no changing it. This creates the illusion that it was inevitable, or even predictable.
This is called hindsight bias.
For example, after Nvidia’s stock prices skyrocketed, it might seem like this was inevitable. However, before the AI boom, there were genuine reasons for concern about the business. Revenue had stagnated. Semiconductors are a cyclical business and it seemed like they were at the bottom of the cycle.
For most of us, the AI boom did not seem like a sure thing.
Yet it’s so easy to think “I should have seen that coming.”
No, you shouldn’t have. The future is always uncertain, and we make the decisions we can with the information we have at our disposal.
Then we hope for the best.
Acknowledging that uncertainty in the past makes it easier to be kind to ourselves and to others.
We can reevaluate our processes. We can review the information we had, the filters we used to interpret that information, and then determine whether that was the right process.
But the future is never inevitable and there are no sure bets.
I was kind to Judy. There was never a guarantee that she would become my wife.
2. Uncertainty can be paralyzing in the moment
I spend large chunks of time staring out the window of my office or going for walks around my neighborhood. Many times, I’m thinking about deals I’m working on.
I’m considering the person I’m working with. I’m considering my competition. I’m thinking about my underwriter and the chances I’ll get the coverage I need in order to properly take care of the client.
It’s very easy to get stuck in all the information. I want to make the right decision. I want to make the one winning move. I don’t want to make a move that loses the deal.
But there are no guarantees. There are no moves that have a 100% probability of victory.
When I start to feel this, I’ll feel a sense of frustration. As if I tied myself down.
Acknowledging the uncertainty in the situation is liberating. Instead of looking for the sure thing, I look for the highest probability of success. I assign probabilities to a situation.
I think there is an 80% chance I will win if I work on this deal, a 30% chance on this deal.
It’s more like choosing which poker hand I want to play than making chess moves.
And that’s the point that Annie Duke is trying to make.
Everyone makes mistakes in their decision making. We’re humans. We can’t see the future.
But making good decisions has a cumulative impact. Making enough good decisions over a long period of time will create a competitive advantage.
3. Surround yourself with people that will challenge your decision making, not your outcomes
Annie Duke tells numerous stories about poker players in her life. Some of them would come up to her in hallways and complain about their bad beats. They had the right cards, and the odds were in their favor that they would win, then the other player would make a stupid decision and get lucky. It was always bad luck.
She found she had to make a purposeful effort to surround herself with people that focused on the process, and not the outcome.
She and her friends would play out the hand and consider the strategy at every stage in the game. They would consider the odds, the tactics, then evaluate the process. The outcome was secondary.
But most people don’t want to do that. What they want to do is complain about their bad beats.
With insurance sales, I hear people complain they don’t have competitive products. They complain that the marketplace is saturated, or there are too many brokers in their area. They don’t want to challenge their process to get better.
Similarly, people are usually not interested in hearing conflicting opinions. In the world of fake news and echo chambers, I don’t think this will surprise anyone.
But if we’re going to have a worldview that truly embraces uncertainty, it’s critical to consider all opinions.
4. How to Strategically Look Forward
Annie Duke suggests a 10-10-10 rule. Consider yourself 10 minutes, 10 days, and 10 months in the future.
Basically, a great way to consider a large number of possible outcomes is to envision yourself in the future. Take time to consider the different ways a decision could play out.
Weigh out the different possible outcomes in terms of probabilities.
This is how sales forecasting works.
Each step in a sales process can be assigned a probability. Use the probability to create a weighted average.
There are no certain outcomes, but you can use probabilities to make guided decisions.
Conclusion:
Making a bet is about approaching an uncertain future. Just like everyone else, I like to fantasize about what it’s like to be a mastermind that can consider every outcome and make the perfect decision. It’s part of what makes shows like “Poker Face” so satisfying. Omniscient characters are so satisfying to watch. They fulfill a human desire for order in a chaotic world.
For us mere humans, chaos exists whether we like it or not. All we can do is make educated bets about how to navigate it.