Artificial intelligence deals in weighted influences on outcomes. If we know the inputs and the weights, we can predict the outcome (that’s predictive modeling). If we know the outcome and the inputs, and seek to understand the weights, that’s machine learning. Human beings would be well-advised to think in weighted probabilities of possible outcomes, rather than in black-white / right-wrong decision making. Entrepreneurs are most likely to benefit from this approach. Carefully weighing probabilities, and looking for those situations where the weighted probability of a good outcome is better than 50%, is critical for business decisions from start-ups to mature innovators.
Probability-weighted decision making is “Thinking In Bets“, according to Annie Duke. Her book of the same name is educational in a way that might help entrepreneurs to adapt this line of thinking. Stephen Phillips wrote this book review in the Wall Street Journal.
At the age of 26, Annie Duke quit the cognitive-psychology doctoral program at the University of Pennsylvania to play poker full time. Over the course of her subsequent 20-year career as a pro, she won a World Series of Poker bracelet and more than $4 million in prize money. The lessons she learned from those years at the poker table are now distilled into “Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts.” It’s the dissertation she never got around to finishing.
Our Decisions Are Always Bets.
“Poker players have to make multiple decisions with significant financial consequences in a compressed time frame,” writes Ms. Duke. “Each decision can be worth more than the cost of an average three-bedroom house.” This may seem far removed from everyday life, but “our decisions are always bets.” Relocating for a job, for instance, amounts to a wager on the job’s future earnings. And yet we constantly make consequential decisions emotionally, based on unexamined beliefs and the presumption that we control the outcomes. We also frequently fail to learn from our experiences.
How then to see reality more clearly? Ms. Duke suggests recasting our judgment calls as bets. “We don’t win bets by being in love with our own ideas,” she writes. “We win bets by relentlessly striving to calibrate our beliefs and predictions about the future to more accurately represent the world.” Thinking about choices this way brings with it a profound attitudinal shift, from binary right-wrong thinking to a “probabilistic” approach, in which we choose “among all the shades of grey.” This reframing has a clarifying effect. “The more we recognize that we are betting on our beliefs (with our happiness, attention, health, money, time, or some other limited resource),” Ms. Duke writes, “the more we are likely to temper our statements, getting closer to the truth as we acknowledge the risk inherent in what we believe.”
More Flexibility In Decision Making.
Moreover, when we state our judgments circumspectly in the form of a bet, we are more inclined to revise them with the arrival of new information. “When confronted with new evidence, it is a very different narrative to say, ‘I was 58% [certain] but now I’m 46%,’ ” writes Ms. Duke. “That doesn’t feel nearly as bad as ‘I thought I was right but now I’m wrong.’ . . . This shifts us away from treating information that disagrees with us as a threat.”
We’re also less likely to assume that our decisions alone dictate outcomes. We habitually ascribe favorable outcomes to personal agency, discounting the role of fortune. Conversely, if a decision turns out poorly, we believe that it must have been ill-judged. Ms. Duke cites the closing moments of the 2015 Super Bowl, when Seattle Seahawks coach Pete Carroll directed quarterback Russell Wilson to pass the ball rather than hand it off. Later, most who had watched the game thought that this was the wrong play to call because it resulted in a turnover and cost the Seahawks their chance to win the game. Actually, it was a percentage play undone by an unlikely interception, Ms. Duke points out.
We often apply double standards when we judge our own decisions versus those of others: When we suffer a setback, we may dismiss it as an aberration, overlooking the extent to which it was self-inflicted. But we don’t extend the same pass to others; as the vilification of Mr. Carroll attests, they are the authors of their misfortune, merely lucky when they succeed.
We come by these instincts honestly—they are evolutionarily grounded in the survival benefits of “creating order out of chaos” and the reproductive payoff of aggrandizing ourselves at the expense of others. But they also cause us to miss out on teachable moments.
As a rookie poker player, Ms. Duke was susceptible to these tendencies. Basking uncritically in her wins yet slighting the victories of others as flukes, she ignored many of the insights that might have helped her improve her game. She credits the empirical, dispassionate habits of mind instilled by “thinking in bets” with opening up new learning opportunities.
Phil Ivey, a 10-time World Series of Poker bracelet winner, is an exemplar in this regard. Instead of reveling in his triumphs, Ms. Duke relates, he picks them apart to find what he might have done better. “When we look at the people performing at the highest level of their chosen field,” she notes, “we find that the self-serving bias that interferes with learning often recedes and even disappears. The people with the most legitimate claim to a bulletproof self-narrative have developed habits around accurate self-critique.”
Ms. Duke counsels us to seek strength in numbers, forming “truthseeking” cohorts committed to challenging self-serving narratives and critically interrogating the beliefs behind our decisions. She found such a “pod” among her poker-playing confreres, including her brother, Howard Lederer, and Erik Seidel, two-time and eight-time World Series bracelet winners, respectively. “My group helped me to give a little more credit [to others] than I otherwise would have,” Ms. Duke writes, “to spot a few more mistakes than I would have spotted on my own, to be more open-minded to strategic choices that I disagreed with.” It was hard-won, incremental improvement, but “that little bit had a huge long-run impact on my success.”
“Thinking in Bets” belongs to a tradition that locates decision-making acumen in the negative space of omission rather than in commission—checking one’s instincts, expunging wishful thinking, scourging oneself. It is a sober and disillusioning book, and that is not a bad thing.
Mr. Phillips writes a regular tech-books roundup for the San Francisco Chronicle.
Appeared in the Wall Street Journal February 21, 2018, print edition as ‘A Gambler’s Education.’