Thinking in Bets – Annie Duke

Bet – A decision about an uncertain future. Thinking in bets should move us towards objectivity, accuracy, and open-mindedness. 

Resulting – our inaccurate tendency to equate the quality of a decision with the quality of an outcome. The tendency fails to acknowledge the impact of factors outside our control on the outcome. Bad luck, highly improbable events, etc. We are uncomfortable with the idea that luck plays a significant role in our lives. 

Hindsight bias – the tendency, after an outcome is known, to see the outcome as having been inevitable. 

The reflexive mind is what does the heavy lifting in our day to day lives. It’s goal is to simplify and use heuristics based on past experience to allow us to function without constant pause. This tendency is both good and bad. 

Our goal is to train the reflexive mind to execute our deliberate mind’s best intentions. Need to focus on learning common decision traps and avoiding them, learning from results, and preventing emotion from taking over. We must also become good at separating luck from skill. 

Quality of our lives is the sum of decision quality plus luck. 

We must be willing to admit when we are unsure. 1. Because it’s the most accurate representation of the world. 2. It prevents us from falling into the trap of black and white thinking.

Being wrong hurts us more than being right makes us feel good. Thinking fast and slow. 

Thinking in bets – decide between alternatives, put resources at risk, assess the likelihood of different outcomes, and consider what we value. 

Most of our bets are against ourselves – we are choosing one version of our future self over another. 

Our flawed way of taking in information and verifying it – 1. We hear something. 2. We believe it to be true. 3. Only sometimes, later, if we have the inclination, we think about it and vet it, determining whether it is, in fact, true or false. 

See above why lying and sticking with the lie is an effective way to persuade people. Trump does think wonderfully. 

We tend to alter our interpretation of information to fit the beliefs we already have as opposed to altering our beliefs to new information. This tendency is known as motivated reasoning. People who already hold beliefs in line with the story generally won’t question the evidence. 

Only when our beliefs are challenged – via a monetary reward / loss, public humiliation, etc – are humans more inclined to really test their own beliefs versus automatically assuming they are correct. We then start to think in terms of the relative confidence we have in our belief from the standpoint of probability. 

Need to overcome our tendency to assume everything good that happens to us is based on skill / ability, while everything bad is the by-product of luck. The outcome of every decision is the result of some combination of decision quality (skill) and luck.  

Goal is to become more competent on being able to differentiate between luck and decision quality when it comes to evaluating decisions and results. Identify first, then work to overcome your own blind spots. 

Exploratory thought – involves even-handed consideration of alternative points of view. This type of thought, in a group setting, can be useful in overcoming your own bias and evaluating decisions. 

Need to find a group that is equally committed to seeking truth. That group must – 1. Value accuracy ahead of confirmation. 2. Hold itself accountable. 3. Value a diversity of opinions. 

Without vigilance, every group will naturally turn into an echo chamber, and start to confirm and reinforce it’s belief systems. This is the human’s natural pattern of confirmatory thought. 

To keep a group objective, use the following principles: CUDOS

C- communism. Make all the data / information available to all without restriction. If you are really truthseeking, you want others to evaluate even the weakest point of your idea. If you don’t share or reveal everything, you have a bias or self-enhancing narrative. 

U – universalism. Apply universal standards to claims and evidence regardless of where it came from. Don’t allow the person who brings forward the idea to sway your evaluation of the idea itself. Status, appearance, etc should not be the deciding factor. 

D – disinterestedness – vigilance against conflicts that can influence / bias the group’s evaluations. Avoid conflicts of interests, or at least identify potential conflicts of interest as ideas / recommendations are being proposed. 

OS – organized skepticism – encourage engagement and disent. 

When engaging with someone we’re having a disagreement with, they will be more open to a debate without emotion if we start with areas of agreement. 

Also focus on the future – people will get more defensive if we focus on critiquing their previous decisions. 

Temporal discounting – the tendency we have to discount our future self in favor of our present self. Often can prevent us from doing things in our long term best interest. 

10-10-10 Rule – What are the consequences of each of my options in 10 minutes? In 10 months? In 10 years? How would I feel today if I made this decision 10 years ago? 

Perspective – remember, and consistently remind yourself, that the impact and importance of things become over-stated in the moment. When you look back with a longer term time perspective you can more accurately evaluate their importance. 

Order matters – remember that you wll feel better about losing $100 if you start $1000 in the hole and win back $900 as opposed to winning $1000 first and subsequently losing $1100. The order makes a big difference in your mind even though both outcomes are equal. 

Can’t allow order, perspective problems, etc lead you towards reactive, emotional decision. making. 

Precommitted Contracts – and effective way to combat reactive decision making. Set the rationale based on sound long term thinking and automate the decision. 

Things to avoid:

Illusion of Certainty in all of your conversations

Irrational evaluation of results – not factoring in luck in outcomes properly 

Overconfidence

Putting in a description of a person delivering an idea – thus creating or highlighting a bias in evaluating the actual idea itself. 

Over-editing a story when we are truth seeking. 

Infecting our truth seeking group with a conflict of interest. 

Hindsight bias – once something has happened, we take the outcome as a forgone conclusion, and forget that the result was one of many potential outcomes with a probability attached. 

Scenario Planning – with the use of probabilities to help direct our decision making. 

Backcasting- technique where we assume we reach a positive goal, then go through the process of mapping out how we got there. This in effect becomes a map we can use to move forward. Can build strategies, tactics, and actons to get there. 

Premortem – similar to backcasting, but instead of assuming a positive result, assume a negative one. 

Net – we don’t know what the future holds. We can’t focus solely on outcomes, because they are influenced by luck which we don’t control. So instead focus on the quality and rationality of your decision making, and let go of the rest!

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