by Annie Duke
Problem
In decision-making, we often judge decisions by their outcomes, leading to result-based thinking and ignoring the role of luck and other uncontrollable factors.
Promise
“Thinking in Bets” provides a new perspective to enhance decision-making skills by treating decisions as bets, considering the uncertainties, and learning from the process regardless of the outcome.
Perspective
“Every decision is a bet on a possible future, and recognizing this fact helps me make more rational and effective choices.”
Précis
Annie Duke’s “Thinking in Bets” challenges traditional thinking around decision making and outcome evaluation. Duke, a former professional poker player, draws on examples from business, sports, politics, and poker to present a new approach to making decisions in the face of uncertainty.
In the first part of the book, Duke makes the case that life, like poker, involves decision-making under conditions of uncertainty. She suggests treating decisions as bets – acknowledging what we know, what we don’t know, and how these uncertainties could impact the outcome.
She further explains that we tend to judge decisions based on their results – a mindset that she calls “resulting.” This tendency can lead to flawed decision-making because it ignores the role of luck and uncontrollable factors. A good decision can have a bad outcome, and a bad decision can have a good outcome.
To counteract this bias, Duke introduces the concept of “thinking in bets.” This involves making decisions based on the probabilities of possible outcomes, rather than being swayed by the outcome of one particular event.
Finally, Duke discusses how to foster an environment that encourages learning and truth-seeking. She advises creating “decision groups” where individuals can challenge each other’s thinking, helping to expose biases and facilitate more objective decision-making.
Playbook
- Recognize Uncertainty: Accept that every decision involves a degree of uncertainty. For example, a business leader making an investment decision cannot control market factors that may impact the investment’s success.
- Think in Bets: Consider the probabilities of different outcomes when making a decision, rather than focusing on a single expected result. A project manager might assign different probabilities to various project outcomes based on factors like team performance, resources, and timeline.
- Avoid Resulting: Do not judge a decision solely based on its outcome. Acknowledge that luck and uncontrollable factors often play a role in the results. For instance, a hiring manager shouldn’t deem their hiring process flawed just because a chosen candidate didn’t perform as expected.
- Learn from Outcomes: Use outcomes, both successful and unsuccessful, as learning opportunities. For instance, an athlete can analyze both winning and losing games to understand what contributed to those outcomes and how they can improve.
- Create Decision Groups: Establish a group of trusted individuals to challenge your thinking and expose potential biases. A leader might create a team of advisors to provide different perspectives on strategic decisions.
Prompt
Think of a decision you recently made and its outcome. In retrospect, was this decision influenced by ‘resulting’? How could you apply the principles of ‘thinking in bets’ to make better decisions in the future?