#387： Think Like a Poker Player to Make Better Decisions
Episode Stats
Summary
It s been said that life is a series of decisions, but life is complex and filled with randomness and uncertainty. How do you make decisions when one, you don t know everything you need to know to make optimal decisions, and two, the factors influencing your decisions are constantly changing? My guest today suggests thinking like a poker player is the answer. She s a former World Series of Poker Champion turned business consultant, and in her new book, Thinking in Bets: Making Smarter Decisions When You Don t Have All the Facts, she shares insights from her career as a professional poker player on how to make smart decisions in the face of uncertainty.
Transcript
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Brett McKay here and welcome to another edition of the Art of Manliness podcast. It's been said that
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life is a series of decisions, but life is complex and filled with randomness and uncertainty. How do
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you make decisions when one, you don't know everything you need to know to make optimal
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decisions, and two, the factors influencing your decisions are constantly changing? My guest today
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suggests thinking like a poker player is the answer. Her name is Annie Duke. She's a former World Series
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of Poker Champion turned business consultant, and in her book, Thinking in Bets, Making Smarter
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Decisions When You Don't Have All the Facts, she shares insights from her career as a professional
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poker player on how to make smart decisions in the face of uncertainty. We begin our conversation
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discussing why life is more like poker than chess and why you should never judge the quality of
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decision based on the results. She then shares insights on why you need to factor in luck,
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both good and bad, when you're making decisions and how thinking of your decisions as bets can make you
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feel more comfortable with uncertainty. Annie and I then discuss some of the biases that prevent
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humans from thinking probabilistically and why probabilistic thinking can make you more
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compassionate and humble. She then makes the case that thinking of our political opinions as bets
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is one way to moderate our increasingly polarized society. We end our conversation discussing how
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leaders can use the ideas from her book to help the groups they lead make better decisions. This
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is a fascinating show filled with actionable insights that you can use right away. After the show's
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over, check out the show notes at aom.is slash thinkinginbets. And Annie joins me now via clearcast.io.
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All right. Annie Duke, welcome to the show. Thank you for having me on.
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So you just published a book called Thinking in Bets, Making Smarter Decisions When You Don't Have
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All the Facts. And this is a topic that I'm thinking about all the time. Like, how can I make good
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decisions when I don't know everything? And your book was like paradigm shifting for me. A lot of great
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insights. Oh, thank you. And I'm being sincere. I mean, it was I've been telling all my friends
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about this book that they need to check it out. What's interesting, you have an interesting
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background. You started off when you were in college, you were doing graduate studies, you got
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a fellowship doing cognitive psychology. But then you took a break from that and had a 20 year career
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in professional poker. So what's the backstory there? And then how did you then you eventually kind
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of came back to cognitive psychology after poker? So yeah, so actually, top secret, I came back to
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cognitive psychology during poker, which is something that, you know, wasn't my more public
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facing life. But let me get back to the beginning. So yeah, I went to Columbia undergraduate. Then I went
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on to University of Pennsylvania to study cognitive science with a National Science Foundation
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fellowship. And I was there for five years. I mean, I went through the whole thing. I got my master's,
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and I was actually on my way to becoming a professor, so much so that I already had all
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of my job talks lined up. And during my last year in graduate school, I've been struggling with some
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stomach issues. And that kind of came to a head, actually, as I was on my way to my first interview
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up at NYU. And I got really, they really came to the fore. And I got really sick. And I actually ended
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up in the hospital for two weeks. So I had to delay going out on the market. And in academics,
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the job market is seasonal. You don't just, you know, anytime you apply, you really only apply in
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the spring for the start of the, you know, the academic year in the fall. So I had to wait for a
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year. So during that time, while I was recuperating, I was sick. And so I couldn't really teach to make
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money. And, you know, I just needed money because I didn't have my fellowship then because I was taking
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time off. And I was, had actually gone to Montana with my then husband in order to recuperate. And
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my brother, Howard Letterer, who was already a professional poker player at that point,
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suggested to me that for money, I could go play in some poker games that were legal in Montana at the
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time. So off I went and I thought, okay, well, I'll try this out and I'll see if I can make some
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money in the meantime while I'm waiting to go back out onto the job market the next year. And,
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you know, I always joke that the meantime ended up being 20 years. So I started playing,
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that was in 1992. I declared myself to be a professional, which I guess means like that's
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what I was writing on my taxes in 1994. And I retired from the game in 2012. So it was a very
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long meantime. So, and since then, since you've retired, what have you been spending your time on
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and working on? Well, what I've been spending my time on is actually what I was doing in parallel
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to the poker playing from 2002 on. So in 2002, I had the very good luck of somebody asking Eric
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Seidel, who is an amazing poker player. He's actually a big character in my book. He shows
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up a lot in there, but he's an incredible poker player. He has like $38 million in tournament
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winnings. And he got asked by a friend of his to come and speak to a group of operators about the
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way that poker might inform how you think about risk. So that wasn't so crazy that Eric got asked
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to do that because Eric in another life had actually been an options trader. And so this was
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something that he knew through that life. And lucky for me, Eric really hates any kind of public speaking
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at all. So he recommended, he said, why don't, I don't want to do it, but why don't you ask Annie
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Duke to do it? She actually used to, you know, teach in college and I think she might be better suited
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for this. And so I got the call and that was the first talk that I ever gave where I really had to
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think in a really clear way about these issues of how do you make better decisions? How does
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uncertainty really muck the system up? How do you figure out how, what future you're supposed to bet
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on and think about how do you actually communicate that to another person, which is a whole different
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problem than actually sort of executing these skills at the table. It's actually really interesting
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to try to figure out like, how am I supposed to communicate these things that I'm kind of doing
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at the table in a way that another human being could then understand and actually learn from
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and being able to execute on themselves. So that, that idea of how do you teach it really helps
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clarify your own thoughts. So that was in 2002. And, you know, I say that there are these moments in
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my life where I kind of have these aha moments. And I would say one of them was definitely when I sat down
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at a poker table and started playing where it, it, that was a big aha moment for me of, oh my gosh,
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this is really the kind of problem that I love. And it seems to be a really interesting and practical
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application of the things that I was studying in cognitive psychology. And wow, like so much,
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I mean, I really just felt it deep in my soul that this was something that I wanted to be doing.
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And I think that when I gave that talk, that was another aha moment of remembering the joy that I felt
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in teaching. So I wanted more, you know, it was, wow, this it's so cool when you're up and you're
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giving a talk because it really is a conversation. You're trying to have the right conversation with
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the audience and you're seeing what the audience is responding to. It clarifies your thought. It
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changes the way you think about the world. It changes your mind in the most beautiful way.
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And then you talk to people afterwards and it's just, it's, I just love it. And so anyway,
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from that, that, that particular hedge fund manager actually started recommending me to
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other people. And so for, for the next two years, I would get these occasional recommendations coming
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in to be talking on these topics. And then about two years in, I said, you know what? I really like
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it when people occasionally call me, I'm going to start intentionally building this business.
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And I would say that I started intentionally building it right around 2004, probably. And
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from there actually built a very big kind of side, you know, business that I was doing that
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obviously wasn't on television. That wasn't really what I was known for. But so by the time 2012
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rolled around and I left poker, I already had this other part of my life, which I was actually at that
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point, a bigger part of my, really a bigger part of my life. And that, that's what developed into the
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book was, you know, all that speaking that I've been doing since 2002.
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Right. So you basically consult and teach people and businesses how to make better decisions.
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So, I mean, oftentimes when we think about decision-making, there's often, we often make
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analogies to games and some people say, Oh, you know, life is a game of chess. And the decisions you
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make, you make one decision, you see what the next person's decision is, you know, move is and so on
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and so forth. But you argue that no, life isn't really like chess or the decisions we make in life
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isn't like playing a game of chess. It's more like poker. Why is poker a better symbol for
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Yeah. Basically here, here's the, the problem with using chess as a model for the kinds of
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decisions that we make in life is that chess is a very constrained problem, meaning there just isn't
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a lot of uncertainty in it. There's a very little bit of luck. And really, if you, I mean, there's no
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hidden information in the sense that you can see all the pieces sitting right in front of you. So I
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have access to your whole position. Now there's certain things I don't have access to. Like,
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I don't know what openings you've recently been studying, for example, but as far as the pieces,
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as they lay, I can see all of those. And in terms of the luck element, you know, there's nobody rolling
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the dice. And then if it comes up, you know, nine, I get to take your bishop off the board. So
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there's just, there's almost no luck in that game. So what that means is that it's a very different
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problem than most of the kinds of problems that we have to tackle in life. Life is much more like
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poker where there is lots of hidden information. The cards are face down and the relationship between
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your decision quality and the way that an outcome might turn out on a single try is actually quite
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loose. So I'll give you an example that's actually a relatively high skill example in life where you
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can really see how this looks much more like poker than it does like chess. So have you ever in your
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life run through a red light? Yes, I have. Have you done it more than once? No, it was like, I can't,
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maybe I know once for sure I have. I've done it more than once. Right. It was when I was trying to beat
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the yellow light and I ran the red light. Right. Or, I mean, I imagine that there have been times
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when you didn't see that it turned red or you've never done like the three in the morning and you're,
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the light's taking forever and you're looking and you're seeing that nobody else is coming.
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I'm such a sheep. I have not done that. I'm like, I'm obeying the law. Yeah.
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Okay. I haven't either. I have friends who have done that.
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Yes. So, so when you happened to run that red light, did, did a cop pull you over and give you a ticket?
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No, no. That's interesting. Did you get in an accident? I did not.
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No, you went through the red light just fine. Right. Yes. Isn't that interesting? So I, so me
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too, by the way, I've never had anything happen to me when I went through a red light. So here's my
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question for you. I've only ever had good outcomes running red lights. Do you think that makes running
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red lights a good decision? Um, well, I'm going to say no. Um, and in fact, despite the fact that
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I've had some good outcomes, I actually do not try to, I mean, I'm not attempting ever to run a red
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light. So I don't even do it at two in the morning. I mean, I was just using that as an example,
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but if, if I happen to run a red light, it's generally accidental and rare. So, so here,
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here's the issue is that if, you know, in a game like chess, because there, there isn't this hidden
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information issue and the luck has such a small influence on, on the outcome of any game, it's
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kind of like, if you ran a red light, you would get at least a ticket every single time. Because
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in chess, if I make bad decisions, if I make bad moves now, now, you know, that's going to result
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in me losing the game, assuming that the choices that I make are worse than yours. Right now in
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poker, that's not true. In poker, I could make terrible decisions in comparison to you. We could
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be playing poker and I could make every decision that I make could be worse than yours. And I can
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still win the hand that, that can't happen in chess. If I make worse decisions than you in chess,
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I will lose. It's just, that's just true. So what that means is that as we're looking at
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how are we supposed to model the way that we're supposed to think about decisions, we have to
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take into account that in, in life, there's lots and lots of hidden information. There's lots of
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things we can't see. There's lots of information that we don't have. We can't see the other person's
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position. We can't see our own position very often. And we know that whatever decision we make,
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there are lots of possible futures that have could occur. Some good, some bad,
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some with higher probability, some with lower probability, but we can't know how it's going
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to turn out. And it causes this particular issue, which is that if we know what the outcome is
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about a decision that's occurring in life, we can't necessarily work backwards to what the decision
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quality is based on that one outcome. We can, if we have, you know, 10,000 outcomes, but not if we
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have one. Whereas in chess, that's a relatively reasonable strategy. So in chess, if you say to,
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you know, if you say to me, Hey, I lost a game, then I know that probably your decision quality
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in that game was not good. Certainly not in comparison to your opponents, right? I can make
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that link. But in poker, if you tell me, Hey, I lost a hand, I actually don't know very much about
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your decision quality. And that's true of most decisions in life. If I say to you, Hey, I got through
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light safely. That doesn't necessarily mean that I followed all the rules of the road. I could have
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done that just fine without doing it. Gotcha. So this is an interesting point because you say
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you're making the case that in life, most of the decisions we make involve luck, but I would say,
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you know, in America, I think there's this idea that, well, uh, I don't believe in luck or I make
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my own luck or in, in, in people think they can just kind of bootstrap themselves to success.
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And then they, you know, they read, well, look at this guy. He started from nothing and ended up
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the top. Cause it was just hard work and he made his own luck. Are you saying that's like,
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that's a faulty way to look at the world? I don't think it's a faulty way to look at the
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world. I think it's a faulty way to understand luck. So let me explain what I mean by that.
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Sure. You can improve the probability that you will have good outcomes by improving your decision
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making, but that is not making your own luck. That is increasing the chances that you have a good
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outcome. So you can't guarantee that things will turn out well. And you, even though you might
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have made decisions that increase the probability that you have a good outcome, you cannot guarantee
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it. You cannot make luck go your way. So it's this idea of incrementally increasing the chances that
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things go well for you and that hopefully those things play out over time. So if I'm somebody who's
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making decisions where I'm going to have a really good outcome, you know, 55% of the time,
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and you're making decisions where you're going to have really good outcomes, 62% of the time,
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I'd rather be you, but you didn't make luck. You made better decisions that then increased the
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probability that good things were happening. But neither of us have any control beyond that.
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Once, once we've made the decision and we're hurtling ourselves to some set of futures,
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each of which have some sort of, you know, some probability associated with them,
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we have no control beyond that. I can have a coin that's going to flip heads 50% of the time and
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flip tails 50% of the time. And I can know that, right? And I can know exactly what the probability
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is. And that doesn't mean that I know whether it's going to flip heads on the very next flip.
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And that's what life is like. And I think that when people say, I make my own luck,
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they're acting like somehow you, I know better than you that it's going to land heads. And I
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don't think that that's true. And I think that having that kind of realistic view of the fact
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that all we can do is increase the probability. We can't do anything beyond that. We never have
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any control of luck. I think a lot of really good things come out of that because I think it does
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drive you to be a better decision maker. And I think the other thing it does is it creates a lot
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more compassion in the world. Because one of the things that I think comes out of this idea of,
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well, you make your own luck is that if people have a bad outcome, there's this idea, well,
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if you had just worked harder, it would have worked out for you. And this much more sort of
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ownership of your own successes than necessarily maybe is rational for you to take. And I think
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that both of those things actually really hurt us. So one of the things that they talk about,
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of course, is like survivor bias. And I think that make your own luck idea really contributes to
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survivor bias. So survivor bias is that when we're reading case studies of, you know, we're reading
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the books of people who are telling you there are secrets to getting rich, you're reading the people
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who have succeeded. Nobody's buying a secrets to getting rich book from somebody who has failed.
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But that person might have actually had a better strategy than the person who succeeded. I think a
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good place to sort of see that is to look at outliers. Malcolm Gladwell's book,
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Outliers, because he really talks about like timing, right? That there's a lot of things that have to
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do with timing. If you look at all the people who made their fortunes in computers, they were all born
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around the same time. People who came out of college during the Great Depression, they didn't do so
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well. But they might have had great strategies and been great decision makers. They just, you know,
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there were things that were under, that weren't under their control. And I think it's just a more
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rational way to look at the world. And I think it causes you to focus in much more on decision
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process and become much less outcome oriented. I like that. I like that a lot. And also it's,
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you know, it's compassion for yourself too. If things aren't going your way, you might be doing
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everything you're supposed to be doing and making the right decisions. But there's some factor that
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it's out of your control. Like you shouldn't feel so down on yourself. Yeah. I mean, I always like to say
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that we should probably spend less time beating ourselves up, but also less time patting ourselves on the
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back so hard, you know, and I think that that just creates a much smoother existence. And I think
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it does create a lot of compassion for yourself. And I think that when you do that, you also create
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a lot more compassion for other people. And I think that you're happier when you're able to do that,
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when you're able to see that other people might've had bad outcomes. And it doesn't necessarily mean
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that they were bad decision makers or that they deserved it. You know, I think that that's also a
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really tough way to live. So I'm all for compassion all around. Yeah, definitely. So here's the
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question. So if there's the outcomes of decisions are based on the quality of our decisions or skill,
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and then there's luck, how do you figure out if your results were due primarily to skill or luck? I mean,
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it sounds like you wouldn't be able to find that out just looking at one example. It sounds like you
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need multiple examples so you could eventually suss that out. Yeah. So here's this, I think this is
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going to be a little bit counterintuitive. So in most things in life, we don't have enough data
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to be able to get a big enough set of outcomes in order to be able to tell much, right? I mean,
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it's kind of the problem of like, you're usually getting like, you know, a few flips of the coin,
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you're not getting 10,000. So how do you then derive what the coin looks like if you don't have very
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many outcomes? And, you know, it feels like this really big problem. So what I would say is that
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the secret to trying to figure it out is to actually try to separate outcomes from decisions
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as much as possible. So the issue is this, is that there is hidden information and we don't know what
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we don't know. And, you know, we process the information that we have in very particular ways.
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And then there's luck in it that gets into the mix. And so it's all very opaque looking into
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the quality of a decision. It's, it's just hard. And what, what really, really makes that hard is
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when the outcome is already known, then it becomes almost impossible because the weight of the outcome,
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you know, basically the sort of, let's call it the cognitive size of the outcome overshadows
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everything else. And we can all, it's like, we can only see the outcome and we're trying to make
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the decision process fit with that. So what we actually want to do is be analyzing our decisions
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in absence of outcomes as much as possible. So let me give you an example, hopefully that's going to
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make this a little bit clearer. Okay. So, so I actually opened the book with this example.
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So it's 2015 and the Seattle Seahawks are on the one yard line of the New England Patriots and it's
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the Superbowl and you know, it's the Superbowl because the New England Patriots are there. So
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obviously it has to be the Superbowl because they're always in there anyway. So there are the
00:22:06.080
Seattle Seahawks are on the one yard line, 26 seconds left. It's second down. They have one time
00:22:11.480
out and they are down by four against the New England Patriots. Now people probably remember
00:22:18.800
what happens next. Pete Carroll calls a pass play. Russell Wilson passes the ball and it gets
00:22:28.820
intercepted by Malcolm Butler in the end zone and the game is over. Of course, everybody was expecting
00:22:35.260
him to hand off the ball to Marshawn Lynch. So now we have an outcome now, right? Which is
00:22:41.440
interception loss of game. What happened the next day was really spectacular. And actually what happened
00:22:47.420
even during the game, you can hear Chris Collingsworth calling this and you know, the ball gets
00:22:52.340
intercepted and he really comes down on Pete Carroll. Like he can't even believe that this was the call.
00:22:58.840
And then the next day, the headlines, you know, they seem to be sort of having an argument about
00:23:04.180
whether it was the worst kick call in Superbowl history or the worst call in football history,
00:23:08.940
period. What was interesting was there wasn't a lot of like, oh, well, maybe the decision was
00:23:14.240
pretty good, but they just got unlucky and had an interception. There was a little bit of it.
00:23:19.140
So there was a writer on slate who's made that argument. Also Benjamin Morris over on 538 made this
00:23:24.540
argument. Subsequently, a couple of years later, Bill Belichick even made the argument that it was
00:23:29.520
actually a pretty good play, but nobody thought that. And even today, really nobody thinks that.
00:23:35.620
And when I get up in front of audiences and I show the clip of this play, even after I explain some of
00:23:40.520
that reasoning, which we can go into if you want to, I don't, I don't know if you want to go into the
00:23:44.080
reasoning, but even after I go into the sum of the reasoning, you know, people still argue with me
00:23:47.880
about it. The main thing that is really important to know about that play call is that the chances of
00:23:53.140
an interception there are only between one and 2%. So it's tiny. So an interception there was a very
00:24:00.040
unlucky result. It was a very, very, very low probability future to have occurred as a result of this
00:24:06.300
pass play. And they got a lot in return for that one or 2% interception rate that they might be paying,
00:24:12.800
but it's really low. Now, once you know how low that interception rate is, one would think that the idea
00:24:20.720
that it's the worst play and call in Superbowl history might go away because you just, you know
00:24:25.820
that there, clearly there was a tremendous amount of luck in the way that that turned out, but it
00:24:30.100
doesn't. And the reason that it doesn't is because you know the outcome. So let me do a thought
00:24:34.920
experiment with you so that we can see how knowing the outcome really mucks up our ability to analyze
00:24:39.600
these things. Let's imagine that there's 26 seconds left and the team is on the one yard line
00:24:46.340
and Pete Carroll calls a pass play and it's caught in the end zone for a touchdown. And the Patriots
00:24:54.700
fail to score in however many few seconds they have left and the Seahawks win the game. What do you
00:25:01.000
think the headlines would have looked like the next day? Gutsy call, greatest call ever. Amazing.
00:25:06.380
Right. And we kind of know that because if you watch the Superbowl this year, what were the headlines
00:25:12.400
about Doug Peterson and the Philly special? Yeah. Yeah. It was all that. Yeah. Right. He was
00:25:17.820
brilliant. So let's do the reverse thought experiment there. Cause remember everybody was
00:25:23.140
expecting them to go for the field goal there. So that now the Philly, it's the end of the second
00:25:27.540
quarter and it's fourth and one last play of the quarter. Everybody's expecting they're going to go
00:25:34.040
for a field goal. They do this crazy Philly special situation where Nick Foles, the quarterback
00:25:38.920
manages to catch a, you know, catch a pass in the end zone. So imagine that that pass had been
00:25:44.460
intercepted and that Philly had gone on to lose the game. What do you think people would have been
00:25:50.600
saying about that play call that they did not go for the field goal? Worst call ever. Should have done
00:25:55.980
it. Yeah. Okay. So when you ask me, how is it that we're supposed to figure out what's due to luck
00:26:01.300
and what's due to skill? And this is again, counterintuitive. The first step is to isolate
00:26:08.580
yourself from the outcome of the decision as much as possible. So because it just, it just ends up
00:26:14.960
distorting everything. It's like a huge gravity well on your decision analysis, right? It just,
00:26:20.360
it's like putting blinders on. You can't see past it. So there's two ways to do that. One is as much
00:26:26.460
as possible. Really analyze the decision in advance of the outcome. So you could imagine,
00:26:32.160
for example, if you're doing strategic planning to really think through that strategic plan
00:26:37.340
in a, in a real way, imagine what the possible outcomes are. All the possible outcomes are
00:26:43.420
assigned probabilities to them, put action plans in place for trying to increase the probabilities of
00:26:48.660
the good outcomes and decrease the probabilities of the bad outcomes and memorialize it. You know,
00:26:54.140
put it on a whiteboard, take a picture, pass it around, pin it to your whatever, like make sure
00:27:00.180
that you have that so that everybody can see it. So that when the past gets intercepted, you can look
00:27:05.400
at that and you say, look, we took that into account. There's the 1%. So you know, it's there in
00:27:10.160
advance. That's one thing that you can do is do as much as possible before the outcome. But sometimes
00:27:15.400
the outcome has already happened. And in that case, go find some people who have been quarantined from the
00:27:21.000
outcome who don't know the outcome and talk to them as if it's a brand new decision and don't tell them
00:27:26.960
what the outcome is. Just talk to them as if you're talking to them about a brand new decision. And
00:27:31.140
that's going to be really the first step in terms of digging down into, you know, what's a good
00:27:35.520
decision, what's not, what has to do with luck, what doesn't, where can we change the decision process,
00:27:40.120
what information could we have been seeking that maybe we didn't know, and start getting more
00:27:45.440
into the skill portion of the game, right? And not getting so overshadowed by the luck portion of
00:27:50.500
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Gotcha. So detach yourself, avoid resulting. I think that's what they call it in poker,
00:30:21.060
Yes, right. And the best way to avoid resulting is to not know the result. That's a really good way
00:30:26.460
to avoid resulting. If I don't know the result, it's very hard for me to be a resultor.
00:30:30.100
Sure. So you mentioned an interesting point when you're calculating, when you're trying to figure
00:30:35.320
out whether your decision process is a sound one, a good one. One of the things you suggest is to
00:30:40.680
assign probabilities to different outcomes. From what I understand it, like humans are really bad
00:30:46.340
at probabilities. Like we're actually like, we're not like, we're absolutely terrible at it. So how do
00:30:50.400
you go about assigning probabilities to things you don't know or how they're going to like, you know,
00:30:56.120
basically I'm trying to think of like a life decision. Like, should I go to this college?
00:30:59.020
Right. There's a lot of unknown factors going on. So how do you assign probabilities to that?
00:31:04.840
The step one is stop worrying about whether you've got the right answer.
00:31:09.640
So what I feel like is a lot of people don't want to assign probabilities to things because
00:31:14.300
they're afraid they're going to get it wrong. And I like to think about it from the frame of
00:31:19.500
the only way to get it wrong is to not try. So because here's the thing, let's agree that if you
00:31:27.340
choose a particular college, the probability of you liking that college is not 0% or 100%.
00:31:33.180
Does that seem fair to you for me to make that assertion?
00:31:38.240
Okay. So if it's not 0% or 100%, it's definitely some probability in between.
00:31:44.720
So take your best guess because your best guess is better than the default because there's kind of
00:31:53.820
like only two ways that the default can go, right? The default is either you're acting like you're 100%
00:32:00.960
sure it's going to be great or 0% or it's like, well, I'll like it or I won't. I'm not sure what
00:32:08.820
that is. Maybe you're thinking everything's like a 50-50 shot or something like that. But the fact
00:32:15.240
is that it's none of those things, right? There is some probability that you're going to like it.
00:32:20.280
We know it's not 0% or 100%. So just take a stab. Try to get somewhere in the middle because that's
00:32:26.400
better than nothing at all. So it's more right than not trying to do it at all, even if it's a range,
00:32:33.000
right? Even if you say, this is really hard for me, I really don't know. There's just a lot of
00:32:39.320
factors. So I'm like between 30% and 70% of the time, I think I'm going to like this college.
00:32:46.680
That's still better. You narrowed it down. You're doing better than 0% or 100%. So that's the first
00:32:53.600
thing is don't be afraid to try because what happens is that as you try, there's some really
00:33:01.860
wonderful things that come from taking those stabs at it. Number one is that you're motivated
00:33:08.320
to figure out how to get better at it. That's the first thing. So that you're really thinking
00:33:14.280
about as your life is unfolding, like how is my experience informing the way that I'm thinking
00:33:20.920
about these probabilities so that you can start to narrow those ranges down. You now have a motivation
00:33:25.820
to try to improve. Number two, you become super, super information hungry because in order for me
00:33:33.560
to narrow those probabilities down, obviously the more information that I have, the better off I am.
00:33:40.020
So like if you're thinking about the college decision, you're much more likely to be going
00:33:44.120
through like, what are my values? What are the things that I think I'm going to like? Let me try to
00:33:48.940
make some sort of ordered list from most important to less important of the things that I think are really
00:33:54.080
important for me to have in a college. And then let me really research the college instead of just
00:33:59.660
going and visiting and it happens to be a sunny day, right? So I liked it. Let me actually think
00:34:07.000
about where does the college fit with what my values are. So, and you're going to be more likely to talk
00:34:11.900
to other people who have experienced that college. You might actually seek out people who didn't like
00:34:16.520
the college to try to talk to them, which is something that you normally wouldn't do because you're really
00:34:21.220
trying to get a sense now of how do I come up with the best guess, the best stab at how much I'm going
00:34:27.300
to like this. So you become information hungry. The third thing that happens that I think is really
00:34:32.980
good is that when you start to express yourself this way, you invite other people to tell you what
00:34:40.440
they know, what their opinions are about it, why they think that maybe your perspective
00:34:47.620
needs to be calibrated information that they might have that they otherwise wouldn't share you
00:34:53.820
with you. So think about it this way. If you're like, I want to go to this college, I'm a hundred
00:34:57.840
percent sure. This is definitely where I want to go. And you know, somebody who really didn't like
00:35:02.000
that college. You're probably not going to tell me that because I already told you, I made my decision.
00:35:06.620
I already told you I'm a hundred percent sure. Why would you want to make me sad by telling the
00:35:10.460
story about your friend who really hated it and dropped out after six months? So you're now not
00:35:16.260
sharing relevant information that would help me with my decision. But when I say to you, I'm thinking
00:35:22.160
about this college and I'm like, you know, I don't know, maybe I'm 60% sure that I'm going to like it.
00:35:28.120
Now you're going to tell me all the people who liked it and why they liked it and all the people who
00:35:32.500
didn't, because I've invited you into this process in a way where the way that I've expressed myself
00:35:38.200
ensures that, you know, that I'm not going to be defensive about the information that you're
00:35:43.280
giving me, that I'm not going to think that you're attacking my beliefs or attacking my viewpoint.
00:35:48.700
I am, I am signaling to you that I am open-minded. And if we know that a lot of the problem with
00:35:55.000
decision-making that makes it different than chess and more like poker is that there's all these
00:36:01.500
face-down cards. There's all this information that we don't have. There's all this stuff that I don't
00:36:06.440
know that you don't know because you've had different experiences than I do. I have, you have
00:36:11.220
different hypotheses than I have. You think about the world in a different way than I do. So you have
00:36:16.800
all this stuff that might be really valuable to me. I need to start to get those cards to be able,
00:36:22.680
you know, to narrow down what's in those cards. And that means that I have to be getting as much
00:36:26.520
information as I can. I have to reveal the unknown to myself as much as I can. And I can do that
00:36:31.380
in the way that I express these kinds of probabilistic guesses to you. And that in turn
00:36:36.600
is going to help me refine those guesses. And it's going to invite you in the process to work
00:36:40.980
through it with me so that I now have collaborators and helpers in the process.
00:36:45.740
That's awesome. So, you know, admitting your uncertainty from the, from the get-go
00:36:48.900
allows you to get more information, which allows you to refine your uncertainty and become more
00:36:54.100
certain, you know, increase the probability. So that's kind of, kind of, kind of counterintuitive.
00:36:57.780
Right. I just want to say, like, I think that this is a big problem for leadership,
00:37:01.780
like leaders of teams. I think that a lot of people think, well, in order to really be believable
00:37:07.180
to my team, in order for them to believe that I have the right to be leading them,
00:37:12.260
that I need to be expressing things with certainty. And when you do that, a few things happen. One is that
00:37:18.520
you, you end up actually creating a version of resulting, which is that once the leader has expressed
00:37:23.380
their belief, people will reason toward that in the same way that they reason toward making an
00:37:28.260
outcome make sense. So you've, you've created another kind of version of resulting, which is
00:37:33.100
people will start to reason toward what the leader has, has stated as the absolute truth. Number one,
00:37:38.620
number two, when they state things with certainty, people in the room are much, much less likely to
00:37:45.260
share information that might be contrary to whatever the, the opinion that's been expressed is.
00:37:52.480
And there's two reasons why they might not do that. One is that they might feel like they're wrong.
00:37:57.380
So if they're not a hundred percent certain of their own beliefs, if they have any uncertainty
00:38:01.760
themselves, if they think maybe we should be going a different way, but I'm like only 40% on that,
00:38:06.900
they're not going to speak up for fear that people are going to, you know, that's going to be,
00:38:09.840
you're wrong or you're disagreeable. Like, why are you disagreeing? You're wrong. Or they're,
00:38:14.660
they're afraid of telling the leader that they're wrong. They're afraid of saying, no, I don't agree with you,
00:38:19.640
that they're going to get in trouble for that. And so they tend to keep their mouth shut.
00:38:23.520
But if a leader actually expresses things with some sort of modulation on the belief,
00:38:29.180
they're much more likely to get people to speak up because then the person doesn't feel like
00:38:33.140
they're not being a team player. You know, when the leader themselves said, I really, I really
00:38:37.120
believe that this is, you know, the best possible way to go. You know, when I think about all of the
00:38:41.900
things that could happen, I think this has a 70% chance of succeeding, you know, sort of compared to
00:38:46.580
all the other ways that things could go just by saying that now, if you have some belief that
00:38:54.480
you're 40% on, you no longer feel bad about, you know, maybe disagreeing, you know, or going against
00:39:00.880
what the tide is because I haven't expressed the tide is certain. No. Yeah. I've definitely been in
00:39:05.560
meetings where a leader will say, here's what I think. And then say, what does you all think? And
00:39:11.160
no one says anything because of course you don't want to disagree with that guy.
00:39:14.220
Yeah. So would it be great if the leader started with, Hey, here's the problem. What do you guys
00:39:19.220
think? Right. And they, they kept their mouth shut now. They, you know, it's sort of that same thing
00:39:25.140
of how do you stop from, you know, how do you actually get good decision process? Well, you know,
00:39:29.380
quarantine yourself from the outcomes as a leader. How do you get the best opinions in the room to
00:39:34.260
express themselves? Quarantine the room from your beliefs. You say what you believe last.
00:39:40.820
No, that's a fantastic, like brass tacks to people can start doing, implementing today.
00:39:45.860
One of the most profound things I got from this book that really hit me was, you know,
00:39:50.440
particularly in this day and age of like just extreme polarization that we have, they use one,
00:39:55.840
one way we can probably moderate some of that is treating our opinions like bets. How can that help
00:40:02.380
moderate our opinions? Well, so there's lots of opinions that people might have. And particularly in
00:40:09.800
this day and age, and particularly when you can type it out in, I guess, 280 characters now in
00:40:14.920
about three seconds without really thinking about it, you know, people seem very free to express
00:40:19.800
their opinions with absolute certainty. So they just say, I know this is true. So let's think about
00:40:25.360
what the framework of thinking about decisions as bets does. So what is a bet? A bet is a decision
00:40:32.060
that's informed by your beliefs about the way that you think the future might turn out. So if I'm in a
00:40:40.180
restaurant and I'm trying to decide between, you know, do I want to order the chicken or the fish?
00:40:45.040
I have beliefs about what things I like in my past experiences and, you know, what I know about the
00:40:50.800
restaurant and how they might, what their specialties might be and such. And so my beliefs inform
00:40:56.540
which future I think is going to be better for me, the future where I'm eating chicken or the future
00:41:01.340
where I'm eating fish. And when I make a decision, I'm betting on, you know, let's say I decide to
00:41:06.000
order the chicken. I'm betting that Annie eating chicken will be happier than Annie eating fish.
00:41:11.060
So that's, that's, that's what a bet is. It's really, and, and that's what all decisions are,
00:41:15.720
right? So I've just put decisions into the frameworks of bets. So when we're making decisions,
00:41:20.420
we are actually betting. We just don't think about it explicitly. So what would happen if we started to
00:41:25.880
think about that explicitly? Well, let's think about what happens when you express an opinion
00:41:29.560
and someone actually challenges you to a bet. So, you know, for example, you know, let's say it's a
00:41:35.900
couple of weeks ago and the stock market took a dive, you know, an 1100 point dive and you announce
00:41:44.660
over the weekend, well, I think on Monday, the stock market's going to be at 400 points. So now I've just
00:41:51.400
expressed that with certainty, right? What happens when someone says to me, well, do you want to bet on
00:41:55.100
that? I mean, what would happen to you if I said to you, do you want to bet on that in that spot?
00:41:59.360
I'd be like, I do some him and he and hawing. Right. You would back off. Yeah. So why would
00:42:05.760
you, why would you back off? I mean, you just, you know, let's say that I did that. And I said,
00:42:10.440
I think it's going to go up 400 points. I mean, I just made a declaration, right? I mean,
00:42:14.020
I just expressed something with total certainty. And if you say, want to bet to me, all of a sudden,
00:42:18.320
I'm like, well, actually, I mean, I didn't really mean like, I'm sure that it's going to go up 400
00:42:24.980
points. I mean, I could do a lot of, you know, now all of a sudden I'm, you know, completely
00:42:29.820
backtracking and why am I backtracking? Because what your question has done to me by saying want
00:42:35.660
to bet is it's reminded me that there's risk in every decision that we make, that when, when I make
00:42:43.260
the decision to order the chicken versus the fish, there's risk in that. Because when I order the
00:42:47.720
chicken, I'm forgoing all the other options that I have. And I'm investing in this case, some money,
00:42:54.180
time, happiness, health, enjoyment, all sorts of limited resources in that decision on, on the
00:43:01.900
future that I've now directed myself to. And so, so, so it's risky. So when I, when you say want to bet
00:43:09.480
to me, you've reminded me of that. And now what happens is I go through this inventory where I
00:43:14.100
think, well, why do I really think that? Like, what is my overall knowledge of the way that the
00:43:19.000
stock market goes? Like, how much do I really know about this, that I've just declared this?
00:43:24.340
Maybe I should find some more information. Why might I be wrong? That's a really important question
00:43:28.920
that makes you ask. Why might I be wrong? Here's another one. What does Brett know that I don't know?
00:43:34.600
Why is he challenging me to this bet? So now it forces me to think about your perspective and think
00:43:38.560
about what you might know that I don't know why I have to think about why would you be arguing against
00:43:44.360
me? Cause that's really what you're declaring. And all of those things actually caused me to do a lot
00:43:48.840
of vetting of this belief or prediction that I've just declared with such certainty. So it backs me off
00:43:56.160
and basically moves me into a place where I acknowledge the uncertainty in my beliefs. I acknowledge
00:44:03.920
the inherent uncertainty in any prediction that I make about the future. And that's a good place to
00:44:10.820
be because we can't be certain. You know, our beliefs are rarely certain. Our predictions about
00:44:17.440
the future can't be certain because luck intervenes. And so it actually puts us in a place where we are
00:44:22.420
more accurately representing the beliefs that we have. We're more accurately representing the predictions
00:44:29.100
that we might have. Now think about how wonderful that would be for Twitter. You know, if before you
00:44:35.520
posted anything on Twitter, you, you know, someone said to you, well, do you want to bet on that
00:44:39.240
opinion? Right. I think that people would start saying, well, you know, I was thinking about this
00:44:43.940
and you know, I like sort of 60% believe this. Right. No. And I was reading that. I was like,
00:44:49.700
that'd be cool. Someone made some sort of like Twitter plugin where you had to, for every opinion,
00:44:54.120
you spout it off. You had to like put, you know, a few bucks on the line. I don't know. Crazy idea
00:44:59.300
that I got. I think that'd be great. So listen, I think you should do that. Okay. Create an app.
00:45:03.720
I will. No, sir. Which is like, literally, it just stops and says like, do you want,
00:45:08.160
would you be willing to bet on this belief? You know? Yeah. So, and ask how much. So,
00:45:13.240
so like here, here's a really good, I think here's a really good example where I think the public would
00:45:17.320
have been a lot better off if people were thinking through this frame. So in November of 2016,
00:45:24.120
2016, you might recall that we had a presidential election. And I thought that there was this really
00:45:28.060
interesting divide between the people who were looking at the polls so that the people were
00:45:33.720
actually doing these polls and sort of figuring out from that, what, you know, what different
00:45:38.680
futures might occur and the pundits. So, you know, when you're watching news programs on TV and the
00:45:45.020
pundits are speaking, like their job is to deliver you the answer with certainty, right? Like they're
00:45:49.400
supposed to express their certain opinion and they're certainly not supposed to waffle. I think
00:45:54.000
you know, sadly a pundit who expressed things, you know, as like, well, you know, I'm kind of 60%
00:45:59.500
that, you know, I mean, like when, if you said like, what's the solution to, to school shootings,
00:46:06.060
you know, wouldn't it be great if instead of a declaration about what it was, they were like,
00:46:09.760
well, I, I think this strategy might be 20% and this strategy might help things, you know,
00:46:15.000
wouldn't that be wonderful, but no pundit is ever going to do that.
00:46:17.480
Okay. So now it's the election, November, 2016. And Nate Silver is looking at the numbers in the
00:46:27.840
week before the election. And it seems to be bouncing between about 70% Clinton, 30% Trump
00:46:34.220
and 60% Clinton, 40% Trump. That's what his, his analysis is, right? Cause he's looking across all
00:46:42.260
the polls and he's, he's, you know, sort of running his analysis. He has a model. And so that's what
00:46:47.240
he's coming out with. And that translates when you're watching on TV to the pundits saying Hillary
00:46:53.140
Clinton's going to win the election. So Nate Silver was acting much more like someone had asked him,
00:46:59.860
do you want to bet on this? Because notice his opinion is quite modulated. Whereas the pundits are
00:47:05.940
not thinking about that. They're just trying to tell you who's going to win. And they've declared
00:47:09.580
that it's Clinton. And of course the people who, you know, you're really hearing are the pundits.
00:47:13.600
So what happens the next day when Trump wins the election, everybody's in shock. And, and what are
00:47:20.440
they saying? The pollsters are wrong. They got it wrong. Boy, these people, they don't know what
00:47:24.600
they're doing with their polls. And even a year later, you're still hearing that when people talk
00:47:28.680
about, oh, such and such as polling at such and such a place, you know, this election is polling
00:47:34.320
this way. People will still refer back to November and they'll say, well, you know, I don't believe in
00:47:39.180
polls. Polls are just wrong. Well, no, it's not that the polls were wrong. It's that the pundits
00:47:43.840
were expressing what the data from the polls were telling them with certainty. They weren't expressing
00:47:48.860
it. Like someone was saying to them, do you want to bet on it? Because here's the deal. I bet if
00:47:52.980
somebody had said to one of those, those pundits who declared, well, Hillary Clinton's going to win
00:47:57.900
this election. Hey, do you want to bet on it? I bet they would back off. Because if you looked at
00:48:03.120
Nate Silver's data, it would be the exact same question as saying here, I have a gun and it
00:48:09.160
has 10 chambers in it and I have filled three to four of them with bullets. So now would
00:48:19.180
you like to hold that to your head and pull the trigger? And I'm guessing that they would
00:48:23.260
say, well, actually, let me rephrase. I don't think Hillary Clinton's going to win. I think
00:48:27.860
like most, you know, she's, she's, she's favored. Right, right. She's going to win a lot of the
00:48:33.200
time, but not all the time, which would have been the right reaction. So had that been communicated in
00:48:40.640
that probabilistic way, wrapping the uncertainty into it in an effective way to the public,
00:48:46.320
the public's reaction the next day would have been much better, you know, because they would
00:48:50.480
have said like, oh, well, you know, he was going to win like 40% of the time. I guess that's not that
00:48:54.480
surprising. And they would have stopped dismissing the expertise of the pollsters because pollsters
00:49:00.380
really do have a lot of expertise. They're statistically quite adept. They wouldn't have
00:49:04.560
been dismissing this group of experts is really not knowing what they're doing. And the other
00:49:09.420
thing I think that's interesting is that if that had been communicated to the public, if any election
00:49:15.160
were to get communicated to the public in that way, I think the public would be able to make much
00:49:19.100
better choices about what their actions should be. So let's take, for example, a situation where
00:49:24.360
people are just telling you that your preferred candidate is going to win. Then maybe you're not
00:49:29.500
really working hard to make sure that candidate wins or that your preferred candidate is definitely
00:49:33.940
going to lose. Again, maybe you're not working that hard to make sure that your preferred candidate
00:49:38.320
doesn't lose. But if you express it as like 60-40, you know, now all of a sudden that's going to change
00:49:45.860
the kinds of decisions that you make around how hard do you want to work on either side of the
00:49:50.880
equation. You're going to have a much better sense of what the actual odds are. You know, is it really
00:49:55.240
important for me to get out and canvas for my, you know, candidate? Do I think it's really going to
00:49:59.260
make a difference? And it's going to change your decision structure in terms of what you do in
00:50:04.120
front of the election as well, if you think about those in a probabilistic way. So, I mean, I think
00:50:08.620
that's just a really good example where you can see how not thinking about things, you know, as a
00:50:14.580
construct of want to bet really mess things up. I mean, I'm sure you've heard this even today where,
00:50:19.500
you know, you've heard people saying, oh, the polls were wrong.
00:50:22.080
No, I love that. And I've been doing that ever since I read that little insight about thinking of your
00:50:26.800
opinions as decisions and your decisions as bets, like giving like probabilities to my opinions,
00:50:31.940
like how sure am I, how sure am I about this opinion that I have? And yeah, it causes you to
00:50:36.780
like realize, okay, I'm not actually, I'm not as sure as I think. And it forces you, as you said,
00:50:41.420
to work a little bit harder so you get more information so you can refine that opinion even
00:50:45.040
more. It makes you open Google up, right? Right. Yeah. Or talk to you, you know, it makes having
00:50:50.180
a conversation about polarizing topics easier. You can tell people like, you know, you know, I'm,
00:50:56.140
I'm at 60% on this. Like I feel this. And like, it opens up people. They're not going to like
00:51:00.720
land blast you and just, they're going to modulate their opinion because they're going to, well,
00:51:05.420
this guy isn't completely decided. We can have a conversation.
00:51:08.700
And also I imagine that it doesn't feel to them like you're attacking their identity.
00:51:17.040
Right. Exactly. Yeah. You're not saying you're wrong, which I think is like,
00:51:21.520
I think that that's really the key. You're, you're basically signaling, signaling to them,
00:51:25.480
like, look, my belief is under construction, right? It's in progress. Can you help me with the
00:51:30.540
progress? I would like to, you know, move my belief forward. I would like to be able to calibrate it.
00:51:36.080
I'd like to be able to kind of get it right because it's in progress because I don't really
00:51:39.580
know. And the fact is that, you know, when we think about decisions, all of our decisions are
00:51:44.240
informed by the beliefs that we have. And so the better the beliefs we have in the sense of the
00:51:51.300
more accurate our beliefs are as a representation of the objective truth, the better our bets are going
00:51:57.480
to be, the better our decisions are going to be. I think I say in the book, the person who wins in a
00:52:01.340
bet is not the one who just knows their belief with certainty and processes of the world to make
00:52:07.540
sure that whatever their prior beliefs are, are right. Meaning I just want to be right as opposed
00:52:13.560
to true, which are two different things. So there's a difference between right and accurate.
00:52:18.480
Right is like, I believe this thing and everything that I do is just to prove that, that, that thing
00:52:22.980
that I believe. Right. But that person's going to do very poorly in a betting situation because
00:52:28.220
they're not viewing their beliefs as under construction. So their beliefs are never going
00:52:31.760
to progress. Their beliefs are never going to be calibrated to, you know, better calibrated to what
00:52:37.020
the objective truth is. But the, the person who, you know, views their beliefs as in progress and has
00:52:42.480
the goal of saying, I want to process the world in a way that makes my beliefs more accurate. That
00:52:47.880
person actually is going to do really well. So in order to do that, doing what you've started doing,
00:52:52.160
which is, you know, well, you know, this is what I think is right, but I'm like 60% on it.
00:52:56.200
So that's the best step to making sure that you start to reason toward accuracy as opposed to
00:53:01.940
toward rightness. I love that. Well, Annie, this has been a great conversation and there's so much
00:53:05.820
more we could dig into. Where can people go to learn more about thinking in bets?
00:53:09.520
Sure. Thanks for asking. So for, obviously you can go buy my book at your local bookstore or,
00:53:16.620
you know, on Amazon or burnsandnoble.com or indie books or wherever you can go to annieduke.com,
00:53:23.360
which is my website. And there you'll find a few things. First of all, if you happen to want to
00:53:27.480
hire me, you can hire me there. You can contact me there as well. But I also have a newsletter that
00:53:32.140
I send out every Friday, which actually takes things that are happening out in the world. You
00:53:37.580
know, a lot of current events, a lot of things that are, you know, in the news during that week
00:53:41.620
and looks at them through the lens of thinking in bets. So it's, it's a way for you to start seeing
00:53:47.520
how you might apply the concepts of the book to things that are happening in the world. And if
00:53:52.780
you go to annieduke.com, you can find archives of the newsletter to see if it's something that you
00:53:56.840
like. And if you like it, you can subscribe there and it will hit your inboxes every Friday. And you
00:54:02.560
can also find me on a variety of social media. I'm pretty active on Twitter. So you can go to
00:54:07.440
at Annie Duke is my Twitter handle. And you know, I post stuff that I find interesting there. So
00:54:13.040
you can find me in a bunch of places. Fantastic. Well, Annie Duke, thank you so much for your time.
00:54:17.120
It's been a pleasure. Well, thank you. My guest today was Annie Duke. Her book is thinking in
00:54:20.920
bets. It's available on amazon.com and bookstores everywhere. Also check out our show notes at
00:54:24.680
aom.is slash thinking in bets, where you can find links to resources, where you can delve deeper into
00:54:28.640
this topic. Well, that wraps up another edition of the art of
00:54:43.020
manliness podcast. For more manly tips and advice, make sure to check out the art of manliness website
00:54:46.760
at artofmanliness.com. Enjoy the show. I'd appreciate it if you take one minute to give us
00:54:50.180
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00:54:53.620
Please consider sharing the show with a friend or family member who you think would get something
00:54:57.000
out of it. As always, thank you for your continued support. Until next time, this is Brett McKay