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 1) you don’t know everything you need to know to make the optimal decision, and 2) the factors influencing your decision are constantly changing?
My guest today suggests thinking like a poker player.
Her name is Annie Duke. She’s a former World Series of Poker champion turned business consultant. In her 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. We begin our conversation discussing why life is more like poker than chess and why you should never judge the quality of a decision by the results. She then shares insights on why you need to factor in luck, both good and bad, when you’re making decisions and how thinking of your decisions as bets can make you feel more comfortable with uncertainty. Annie and I then discuss some of the biases that prevent humans from thinking probabilistically, and why probabilistic thinking can make you more compassionate and humble. She then makes the case that thinking of your political opinions as bets is one way to moderate our increasingly polarized society. We end our conversation discussing how leaders can use the ideas from her book to help the groups they lead make better decisions.
This is a fascinating show filled with actionable insights that you can use right away.
- Annie’s professional poker career, and how she found her way back to cognitive psychology
- How teaching something helps you clarify your own thoughts and ideas
- Why poker is a better analogy for making decisions in life than chess
- Why you can’t actually make your own luck
- Spending less time beating yourself up, and patting yourself on the back
- How do you know if your results were due to luck, hard work, or a combo of both?
- The Seahawks’ final play against the Patriots in Super Bowl 49; was it really the worst play call ever?
- How to avoid “resulting”
- Why you need to stop worrying if you’ve got the right answer or not
- Why your best guess is better than the default
- Choosing the “right” college
- Leading from a place of uncertainty
- How can we treat our opinions more like bets? And why should we?
- Thinking in bets in politics
Resources/People/Articles Mentioned in Podcast
- Erik Seidel
- The Role of Luck in Success
- 5 Tools for Thriving in Uncertainty
- Meditations on the Wisdom of Action
- Survivorship Bias
- Outliers by Malcolm Gladwell
- Seahawks’ final play against the Pats in Super Bowl 49
- The “Philly Special” play by the Eagles in this year’s Super Bowl
- How Ben Franklin Made Decisions
- How to Make Difficult Decisions
- How Leaders Build Great Teams
Connect With Annie
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Recorded with ClearCast.io.
Read the Transcript
Brett McKay: Welcome to another edition of The Art of Manliness Podcast. 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 the decisions are constantly changing? My guest today suggests thinking like a poker player is the answer. Her name is Annie Duke.
She’s a former World Series of Poker champion, turned business consultant and in her 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. We begin our conversation discussing why life is more like poker than chess and why you should never judge the quality of decision based on the results. She then shares insights on why you need to factor in luck, both good and bad when you’re making decisions and now thinking of your decisions as bets can make you feel more comfortable with uncertainty.
Annie and I then discuss some of the biases that prevent humans from thinking probabilistically and why probabilistic thinking can make you more compassionate and humble. She then makes the case that thinking of our political opinions as bets is one way to moderate our increasingly polarized society.
We ended our conversation discussing how leaders can use the ideas from her book to help the groups they lead make better decisions. This is a fascinating show, filled with actionable insights that you can use right away. After the show is over, check out the show notes at Aom.is/thinkinginbets and Annie joins me now via Clearcast.io. Right, Annie Duke, welcome to the show.
Annie Duke: Thank you for having me on.
Brett McKay: You just published a book called. It’s called “Thinking in Bets: Making Smarter Decisions When You Don’t Have All The Facts” and this is a topic that I’m thinking about all the time. How can I make good decisions when I don’t know everything? Your book was paradigm shifting for me, a lot of great insights.
Annie Duke: Oh, thank you.
Brett McKay: And I’m being sincere. I’ve been telling all my friends about this book. That they need to check it out. What’s interesting, you have an interesting background. You started off when you were in college, you were doing graduate studies. You got a fellowship doing cognitive psychology, but then you took a break from that and had a 20-year career of professional poker. What’s the back story there and then you eventually came back to cognitive psychology after poker?
Annie Duke: Yeah, so actually, top-secret, I came back to cognitive psychology during poker, which is something that wasn’t my more public-facing life, but let me get back to the beginning. Yeah, I went to Columbia undergraduate, then I went on to the University of Pennsylvania to study cognitive science with a National Science Foundation Fellowship and I was there for five years. I went through the whole thing. I got my Masters and I was actually on my way to becoming a professor, so much so that I already had all my job talks lined up.
During my last year in graduate school, I had been struggling with some stomach issues and it kind of came to a head actually as I was on my way to my first interview up at NYU. They really came to the fore and I got really sick and I actually ended up in the hospital for two weeks, so I had to delay going out on the market. In academics, the job market is seasonal. You don’t just any time you apply, you really only apply in the spring for the start of the academic year in the fall, so I had to wait for a year.
During that time while I was recuperating, I was sick and so I couldn’t really teach to make money and I just needed money because I didn’t have my fellowship then because I was taking time off. I had actually gone to Montana with my then husband in order to recuperate and my brother, Howard Lederer, who was already a professional poker player at that point suggested to me that for money I could go play in some poker games that were legal in Montana at the time so off I went.
I thought, “Okay, well I’ll try this out and I’ll see if I can make some money in the meantime while I’m waiting to go back out onto the job market next year.” I always joke that the meantime ended up being 20 years. I started playing, that was in 1992, I declared myself to be a professional, which I guess means that’s what I was writing on my taxes in 1994 and I retired from the game in 2012, so it was a very long meantime.
Brett McKay: Since then, since you’ve retired, what have you been spending your time on and working on?
Annie Duke: Well, what I’ve been spending my time on is actually what I was doing in parallel to the poker playing from 2002 on. In 2002, I had the very good luck of somebody asking Eric Seidel, who is an amazing poker player, he’s actually a big character in my book. He shows up a lot in there. He’s an incredible poker player. He has $38 million in tournament winnings.
He got asked by a friend of his to come in speak to a group of options traders about the way that poker might inform how you think about risk. That wasn’t so crazy that Eric got asked to do that because Eric in another life had actually been an options trader and so this was something that he knew do that life lucky for me, Eric really hates any kind of public speaking at all, so he recommended … He said, “I don’t want to do it, but why don’t you ask Annie Duke to do it? She asked to usually teach in college and I think she might be better suited for this,”
I got the call and that was the first talk that I ever gave where I really had to think in a really clear way about these issues of how do you make better decisions? How does uncertainty really muck the system up? How do you figure out what future you’re supposed to bet on and think about how do you actually communicate that to another person, which is a whole different problem than actually executing these skills at the table?
It’s actually really interesting to try to figure out how am I supposed to communicate these things that I’m doing at the table in a way that another human being could then understand and actually learn from and being able to execute on themselves? That idea of how you teach it really helps clarify your own thoughts.
That was in 2002 and I say that there are these moments in my life where I have these aha moments and I would say one of them was definitely when I sat down at a poker table and started playing, where that was a big aha moment for me of, “Oh my gosh, this is really the kind of problem that I love,” and it seems to be a really interesting and practical application of the things that I was studying in cognitive psychology and wow, so much fun. I really just felt it deep in my soul that this was something that I wanted to be doing.
I think that when I gave that talk that was another aha moment of remembering the joy that I felt in teaching, so I wanted more. It was, “Wow, it’s so cool when you’re up and you’re giving a talk because it really is a conversation.” You’re trying to have the right conversation with the audience and you’re seeing what the audience is responding to. It clarifies that your thought. It changes the way you think about the world. It changes your mind in the most beautiful way and then you talk to people afterwards. I just love it.
Anyway, from that that particular hedge fund manager actually started recommending me to other people and so for the next two years I would get these occasional recommendations coming in to be talking on these topics and then about two years in I said, “You know what? I really like it when people occasionally call me. I’m going to start intentionally building this business.”
I would say that I started intentionally building it right around 2004 probably and from there actually built a very big side business that I was doing that obviously wasn’t on television. That wasn’t really what I was known for. By the time 2012 rolled around and I left poker, I already had this other part of my life, which I was actually at that point a bigger part of my life and that’s what developed into the book was all that speaking that I had been doing since 2002.
Brett McKay: Right, so you basically consult and teach people and businesses how to make better decisions?
Annie Duke: Hmmm-mm (positive)
Brett McKay: Often times, when we think about decision-making, there is often, we often make analogies to games and some people say, “Oh, life is a game of chess and the decisions you make, you make one decision, you see what the next person’s decision is, move is and then so on and so forth.” But you argue that no, life isn’t really like chess or decisions we make in life isn’t like playing a guess of chess. It’s more like poker. Why is poker a better symbol for decisions in life compared to some other game?
Annie Duke: Yeah, basically, here’s the problem with using chess as a model for the kinds of decisions that we make in life is that chess is a very constrained problem, meaning there just isn’t a lot of uncertainty in it. There is a very little bit of luck and there’s no hidden information in the sense that you can see all the pieces sitting right in front of you, so I have access to your whole position. Now, there’s certain things I don’t have access to, like I don’t know what openings you’ve recently been studying, for example. As far as the pieces as they lay, I can see all of those.
In terms of the luck element, there’s nobody rolling the dice and then if it comes up nine, I get to take your bishop off the board, so there’s almost no luck in that game. What that means is that it’s a very different problem than most of the kinds of problems that we have to tackle in life. Life is much more like poker where there is lots of hidden information, the cards are face-down and the relationship between your decision quality and the way that an outcome might turn out on a single try is actually quite loose. I’ll give you an example that’s actually a relatively high skill example in life, where you can really see how this looks much more like poker than it does like chess. Have you ever in your life run through a red light?
Brett McKay: Yes, I have.
Annie Duke: Have you done it more than once?
Brett McKay: No, it was … I know once for sure I have.
Annie Duke: I’ve done it more than once.
Brett McKay: It was when I was trying to beat the yellow light and I ran the red light.
Annie Duke: Right, or I imagine that there have been times when you didn’t see that it turned red or you’ve never done the three in the morning and the light’s taking forever and you’re looking and you’re seeing that nobody else is coming …
Brett McKay: I’m such a sheep I have not done that. I’m like I’m obeying the law, yeah.
Annie Duke: Wow, okay, I haven’t either. I have friends who have done that.
Brett McKay: Right, I know people who have done that, yes.
Annie Duke: Yes, so when you happen to run that red light did a cop pull you over and give you a ticket?
Brett McKay: No.
Annie Duke: No, that’s interesting. Did you get in an accident?
Brett McKay: I did not.
Annie Duke: No, you read through the red light just fine, right?
Brett McKay: Yes.
Annie Duke: Isn’t that interesting? Me too, by the way, I have never had anything happen to me when I went through a red light. Here’s my question for you. I’ve only ever had good outcomes running red lights. Do you think that makes running red lights a good decision?
Brett McKay: Well, I’m going to say no.
Annie Duke: In fact, despite the fact that I’ve had some good outcomes, I actually do not try … I’m not attempting ever to run a red light, so I don’t even do it at two in the morning. I was just using that as an example, but if I happen to run a red light, it’s generally accidental and rare.
Here is the issue is that in a game like chess because there isn’t this hidden information issue and the luck has such a small influence on the outcome of any game, it’s like if you ran a red light you would get at least a ticket every single time because in chess if I make bad decisions, if I make bad moves, that’s going to result in me losing the game, assuming that the choices I make are worse than yours, right?
Now in poker that’s not true. In poker, I could make terrible decisions in comparison to you. We could be playing poker and I could make every decision that I make could be worse than yours and I can still win the hand. That can’t happen in chess. If I make worse decisions than you in chess, I will lose. That’s just true.
What that means is that as we’re looking at how are we supposed to model the way that we’re supposed to think about decisions, we have to take into account that in life there’s lots and lots of hidden information. There’s lots of things we can’t see. There’s lots of information that we don’t have. We can’t see the other person’s position. We can’t see our own position very often and we know that whatever decision we make, there are lots of possible futures that could occur, some good, some bad, some with higher probability, some with lower probability, but we can’t know how it’s going to turn out.
It causes this particular issue, which is that if we know what the outcome is about a decision that’s occurring in life, we can’t necessarily work backwards to what the decision quality is based on that one outcome. We can if we have 10,000 outcomes, but not if we have one. Whereas in chess that’s a relatively, reasonable strategy.
In chess, if you say to me, “Hey, I lost a game,” then I know that probably your decision quality in that game was not good, certainly not in comparison to your opponent. I can make that link. But in poker if you tell me, “Hey, I lost a hand,” I actually don’t know very much about your decision quality and that’s true of most decisions in life. If I say to you, “Hey, I got through a light safely,” that doesn’t necessarily mean that I followed all the rules of the road. I could’ve done that just fine without doing it.
Brett McKay: Gotcha, you raise an interesting point, you’re making the case that in life most of decisions we make involve luck, but I would say in America, I think there’s this idea that, “Well, I don’t believe in luck,” or “I make my own luck,” and people think they can just bootstrap themselves to success and then they read, “Well, look at this guy. The started from nothing and ended up at the top because it was just hard work and he made his own luck.” Are you saying that’s a faulty way to look at the world?
Annie Duke: I don’t think it’s a faulty way to look at the world. I think it’s a faulty way to understand luck. Let me explain what I mean by that.
Brett McKay: Sure.
Annie Duke: You can improve the probability that you will have good outcomes by improving your decision-making, but that is not making your own luck. That is increasing the chances that you have a good outcome. You can’t guarantee that things will turn out well and even though you might have made decisions that increased the probability that you have a good outcome, you cannot guarantee it. You cannot make luck go your way. It’s this idea of incrementally increasing the chances that things go well for you and that hopefully, those things play out over time.
If I am somebody who’s making decisions where I’m going to have a really good outcome 55% of the time and you’re making decisions where you’re going to have really good outcomes 62% of the time, I’d rather be you. But you didn’t make luck, you made better decisions that then increase the probability that good things would happen but neither of us have any control beyond that. Once we’ve made the decision and we’re hurtling ourselves to some set of futures, each of which have some sort of sub-probability associated with them, we have no control beyond that.
I can have a coin that’s going to flip heads 50% of the time and flip tails 50% of the time and I can know that and I can know what exact probability is and that doesn’t mean know whether I know it’s going to flip heads on the very next flip and that’s what life is like. I think that when people say, “I make my own luck,” they’re acting like somehow I know better than you that it’s going to land heads and I don’t think that’s true.
I think that having that kind of realistic view of the fact that all we can do is increase the probability. We can’t do anything beyond that. We never have any control of luck. I think a lot of really good things come out of that because I think it does drive you to be a better decision-maker and I think the other thing it does is it creates a lot more compassion in the world because one of the things that I think comes out of this idea of, “Well, you make your own luck,” is that if people have a bad outcome, there is this idea, “Well, if you had just worked harder, it would have worked out for you,” and this much more sort of ownership of your own successes than necessarily may be is rational for you to take. I think that both of those things actually, really hurt us.
One of the things that they talk about, of course, is survivor bias and I think that make your own luck idea really contributes to survivor bias. Survivor bias is that when we’re reading case studies, we’re reading the books of people who are telling you their secrets to getting rich, you’re reading the people who have succeeded. Nobody’s buying a secrets to getting rich book from somebody who has failed, but that person might have actually had a better strategy than the person who succeeded.
I think a good place to sort of see that is to look at “Outliers,” Malcolm Gladwell’s book. “Outliers” because he really talks about timing. That there’s a lot of things that have to do with timing. If you look at all the people who made their fortunes in computers, they were all born around the same time. People who came out of college during the Great Depression, they didn’t do so well, but they might have had great strategies and been great decision-makers, there were things that weren’t under their control. I think it’s just a more rational way to look at the world and I think it causes you to focus in much more on decision process and become much less outcome-oriented.
Brett McKay: I like that a lot and also it’s compassion for yourself, too. If things aren’t going your way, you might be doing everything you’re supposed to be doing, making right decisions, but there’s some factor that’s out of your control, like you shouldn’t feel so down on yourself.
Annie Duke: Yeah, I always like to say that we should probably spend less time beating ourselves up, but also less time patting ourselves on the back so hard. I think that just creates a much smoother existence and I think it does create a lot of compassion for yourself and I think that when you do that you also create a lot more compassion for other people. I think that you’re happier when you’re able to do that, when you’re able to see that other people might have had a bad outcomes and it doesn’t necessarily mean that they were bad decision-makers or that they deserved it. I think that that’s also a really tough way to live, so I’m all for compassion all around.
Brett McKay: Yeah, definitely, here’s the question. If the outcomes or decisions are based on the quality of our decisions or skill and then there’s luck, how do you figure out if your results were due primarily to skill or luck? It sounds like you wouldn’t be able to find that out just looking at one example. It sounds like you’d need multiple examples, so you could eventually suss that out.
Annie Duke: Yeah, I think this is going to be a little bit counterintuitive. In most things in life, we don’t have enough data to be able to get a big enough set of outcomes in order to be able to tell much. It’s kind of the problem of you’re usually getting a few flips of the coin. You’re not getting 10,000, so how do you then derive what the coin looks like if you don’t have very many outcomes and it feels like this really big problem? What I would say is that the secret to trying to figure it out is to actually try to separate outcomes from decisions as much as possible.
The issue is this. That there is hidden information and we don’t know what we don’t know. We process the information that we have in very particular ways and then there’s luck that gets into the mix and so it’s all very opaque, looking into the quality of a decision, it’s just hard. What really, really makes that hard is when the outcome is already known. Then it becomes almost impossible because the weight of the outcome …
Basically, let’s call it the cognitive size of the outcome overshadows everything else and it’s like we can only see the outcome and we’re trying to make the decision process fit with that. What we actually want to do is be analyzing our decisions in absence of outcomes as much as possible. Let me give you an example, hopefully, that’s going to make this a little bit clearer. I actually opened the book with this example.
It’s 2015 and the Seattle Seahawks are on the 1-yard line of the New England Patriots and it’s the Super Bowl and you know it’s the Super Bowl because the New England Patriots are there so obviously, it has to be the Super Bowl because they’re always in there. Anyway, the Seattle Seahawks are on the 1-yard line, 26 seconds left. It’s second down. They have one timeout and they’re down by four against the New England Patriots.
Now, people probably remember what happens next. Pete Carroll calls a pass play. Russell Wilson passes the ball and it gets intercepted by Malcolm Butler in the end zone and the game is over. Of course, everybody was expecting him to hand off the ball to Marshawn Lynch. Now, we have an outcome now, which is interception, loss of game.
What happened the next day was really spectacular and actually, what happened even during the game. You can hear Chris Collinsworth calling this and the ball gets intercepted and he really comes down on Pete Carroll. He can’t even believe that this was the call. Then the next day the headlines, they seem to be sort of having an argument about whether it was the worst call in Super Bowl history or the worst call in football history period.
What was interesting was there wasn’t a lot of, “Oh, well maybe the decision was pretty good, but they just got unlucky and had an interception.” There was a little bit of it, so there was a writer on Slate, who made that argument, also Benjamin Morris over on FiveThirtyEight made this argument. Subsequently, a couple years later, Bill Belichick even made the argument that it was actually a pretty good play, but nobody thought that.
Even today, really nobody thinks that and when I get up in front of audiences and I show the clip of this play, even after I explain some of that reasoning, which we can go into if you want to, I don’t know if you want to go into the reasoning, but even after I go into some of the reasoning, people still are arguing with me about it.
The main thing that is really important to know about that play call is that the chances of an interception there are only between 1% and 2%, so it’s tiny, so an interception there was a very unlucky result. It was a very, very low probability future to have occurred as a result of this pass play and they got a lot in return for that 1% or 2% interception rate that they might be paying, but it’s really low.
Now, once you know how low that interception rate is, one would think that the idea that it’s the worst play and call in Super Bowl history might go away because you know that clearly there’s a tremendous amount of luck in the way that that turned out, but it doesn’t. The reason that it doesn’t is because you know the outcome.
Let me do a thought experiment with you so that we can see how knowing the outcome really mucks up our ability to analyze these things. Let’s imagine that there’s 26 seconds left and the team is on the 1-yard line and Pete Carroll calls a pass play and it’s caught in the end zone for a touchdown and the Patriots fail to score in however many few seconds they have left and the Seahawks win the game. What do you think they headlines would’ve looked like the next day?
Brett McKay: Gutsy call, greatest call ever, amazing.
Annie Duke: Right and we kind of know that because if you watched the Super Bowl this year, what were the headlines about Doug Pederson and the Philly Special?
Brett McKay: Yeah, yeah, it was all that, yeah.
Annie Duke: Right, he was brilliant, so let’s do the reverse thought experiment there because remember, everybody was expecting them to go for the field go there, so now Philly, it’s the end of the second quarter and it’s fourth and one, last play of the quarter. Everybody’s expecting they’re going to go for a field goal. They do this crazy Philly Special situation, where Nick Foles, the quarterback, manages to catch a pass in the end zone. Imagine that that pass had been intercepted and that Philly had gone on to lose the game? What do you think people would have been saying about that play call that they did not go for the field goal?
Brett McKay: Worst call ever, shouldn’t have done it.
Annie Duke: Right, okay so when you ask me how is it that we’re supposed to figure out what’s due to luck and what’s due to skill and this is, again, counterintuitive, the first step is to isolate yourself from the outcome of the decision as much as possible because it just ends up distorting everything. It’s like a huge gravity well on your decision analysis, right? It’s like putting blinders on. You can’t see past it.
There’s two ways to do that. One is as much as possible, really analyze the decision in advance of the outcome. You could imagine, for example, if you’re doing strategic planning to really think through that strategic plan in a real way. Imagine what the possible outcomes are, all the possible outcomes are, assign probabilities to them, put action plans in place for trying to increase the probabilities of the good outcomes and decrease the probabilities of the bad outcomes and memorialize it.
Put it on a whiteboard, take a picture, pass it around, pin it to your whatever, make sure that you have that so that everybody can see it so that when the pass gets intercepted, you can look at that and you say, “Look, we took that into account. There’s the 1%,” so you know it’s there in advance. That’s one thing you can do is do as much as possible before the outcome.
But sometimes the outcome is already happened and in that case, go find some people who have been quarantined from the outcome, who don’t know the outcome and talk to them as if it’s a brand-new decision and don’t tell them what the outcome is. Just talk to them as if you’re talking to them about a brand-new decision and that’s going to be really the first step in terms of digging down into what’s a good decision, what’s not, what has to do with luck, what doesn’t, where can we change the decision process, what information could we have been seeking that maybe we didn’t know and start getting more into the skilled portion of the game and not getting so overshadowed by the luck portion of the game.
Brett McKay: Got ya, so detach yourself, avoid resulting. I think that’s what they call it in poker, where you just look on the results.
Annie Duke: Right, so and the best way to avoid resulting is to not know the result. That’s a really good way to avoid resulting. If I don’t know the result, it’s very hard for me to be a resulter.
Brett McKay: You mentioned an interesting point. When you’re trying to figure out whether your decision process is a sound one, a good one, one of the things you suggest is to assign probabilities of different outcomes. From what I understand, humans are really bad at probability. We’re absolutely terrible at it, so how do you go about assigning probabilities to things you don’t know. Basically, I’m trying to think of a life decision like, “Should I go to this college?” There’s a lot of unknown factors going on, so how do you assign probabilities to that.
Annie Duke: Step one is stop worrying about whether you have the right answer. What I feel like is a lot of people don’t want to assign probabilities to things because they’re afraid they’re going to get it wrong. I like to think about it from the frame of the only way to get it wrong is to not try because here’s the thing. Let’s agree that if you choose a particular college, the probability of you liking that college is not 0% or 100%. Does that seem fair to you, for me to make that assertion?
Brett McKay: Yeah, that seems fair, yeah, I think so.
Annie Duke: Okay, so if it’s not 0% or 100%, it’s definitely some probability in between, so take your best guess because your best guess is better than the default because there’s only two ways that the default can go. The default is either you’re acting like you’re 100% 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 that is? Maybe you’re thinking everything’s a 50/50 shot or something like that?
The fact is that it’s none of those things. There is some probability that you’re going to like it. We know it’s not 0% or 100%, so just take a stab. Try to get somewhere in the middle because that’s better than nothing at all. It’s more right than not trying to do it at all. Even if it’s a range, even if you say, “This is really hard for me. I really don’t know. There’s just a lot of factors, so I’m between 30% and 70% of the time. I think I’m going to like this college.” That’s still better. You narrowed it down. You’re doing better than 0% or 100%.
That’s the first thing is don’t be afraid to try because what happens is that as you try there are some really wonderful things that come from taking those stabs at it. Number one is that you’re motivated to figure out how to get better at it. That’s the first thing, so that you’re really thinking about as your life is unfolding how is my experience informing the way that I’m thinking about these probabilities, so that you can start to narrow those ranges down. You now have a motivation to try to improve.
Number two – you become super, super information hungry because in order for me to narrow those probabilities down, obviously, the more information that I have the better off I am. If you’re thinking about the college decision, you’re much more likely to be going through, “What are my values? What are the things that I think I’m going to like? Let me try to make some sort of ordered list from most important to less important of the things that I think are really important to have in a college and then let me really research the college,” instead of just going and visiting and it happens to be a sunny day, so I liked it.
Let me actually think about, “Where does the college fit with what my values are,” and you’re going to be more likely to talk to other people who have experience that college. You might actually seek out people who didn’t like the college to try to talk to them, which is something that you normally wouldn’t do because you’re really 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 to like this?” So you become information hungry.
The third thing that happens that I think is really good is that when you start to express yourself this way, you invite other people to tell you what they know, what their opinions are about it. Why they think that maybe your perspective needs to be calibrated? Information that they might have, that they otherwise wouldn’t share with you?
Think about it this way, if you’re like, “I want to go to this college. I’m 100% sure. This is definitely where I want to go,” and you know somebody who really didn’t like that college, you’re probably not going to tell me that because I already told you I made my decision. I already told you I’m 100% sure. Why would you want to make me sad by telling the story about your friend who really hated it and dropped out after six months? You’re now not sharing relevant information that would help me with my decision.
But when I say to you, “I’m thinking about this college,” and I’m like, “I don’t know? Maybe I’m 60% sure that I’m going to like it,” now, you’re going to tell me all the people who like it and why they liked it and all the people who didn’t because I have invited you into this process in a way where the way that I express myself ensures that you know that I’m not going to be defensive about the information that you’re giving me. That I’m not going to think that you’re attacking my beliefs or attacking my viewpoint. I am signaling to you that I am open-minded.
If we know that a lot of the problem with decision-making that makes it different than chess and more like poker is that there are all these facedown cards. There’s all this information that we don’t have. There’s all this stuff that I don’t know that you don’t know because you’ve had different experiences than I have. You have different hypotheses and I have. You think about the world in a different way than I do, so you have all this stuff that might be really valuable to me.
I need to start to get those cards to narrow down what’s in those cards and that means that I have to be getting as much information as I can. I have to reveal the unknown to myself as much as I can and I can do that in the way that I express these kinds of probabilistic guesses to you. That in turn, is going to help me refine those guesses and is going to invite you in the process to work through it with me, so that I now have collaborators and helpers in the process.
Brett McKay: That’s awesome, so admitting your uncertainty from the get-go allows you to get more information, which allows you to refine your uncertainty and become more certain, increase the probability. That’s sounding kind of counterintuitive.
Annie Duke: Right, I just want to say look, I think that this is a big problem for leadership, like leaders of teams. I think that a lot of people think, “Well, in order to really be believable to my team, in order for them to believe that I have the right to be leading them that I need to be expressing things so certainly.” When you do that, a few things happen. One is that you end up actually creating a version of resulting, which is that once the leader has expressed their belief, people will reason toward that in the same way that they reason toward making an outcome make sense. You’ve created another kind of resulting, which is people will start to reason toward what the leader has stated as the absolute truth, number one.
Number two – when they stayed things with certainty, people in the room are much, much less likely to share information that might be contrary to whatever the opinion that’s been expressed is and there’s two reasons why they might not do that. One is that they might feel like that they’re wrong. If they’re not 100% certain of their own beliefs, if they have any uncertainty themselves, if they think maybe we should be going a different way, but I’m only 40% on that, they’re not going to speak up for fear that it’s going to be, “You’re wrong,” or “You’re disagreeable. Why are you disagreeing? You’re wrong.” Or they’re afraid of telling the leader that they’re wrong. They’re afraid of saying, “No, I don’t agree with you.” That they’re going to get in trouble for that and so they tend to keep their mouth shut.
If the leader actually expresses thing with some sort of modulation on the belief, they’re much more likely to get people to speak up because then the person doesn’t feel like they’re not being a team player. When the leader themselves said, “I really believe that this is the best possible way to go, when I think about all of the things that could happen, I think this has a 70% chance of succeeding sort of compared to all the other ways that things could go.” Just by saying that, now if you have some belief that you’re 40% on, you no longer feel bad about maybe disagreeing or going against what the tide is because I haven’t expressed the tide is certain.
Brett McKay: Yeah, I’ve definitely been in meetings where a leader will say, “Here’s what I think,” and then say, “What do you all think?” and no one says anything because, of course, you want to disagree with that guy.
Annie Duke: Yes, would it be great if the leader started with, “Hey, here’s the problem. What do you guys think?” and they kept their mouth shut. It’s sort of that same thing of how do you actually get good decision process? Well, quarantine yourself from the outcomes. As a leader, how do you get the best opinions in the room to express themselves? Quarantine the room from your beliefs.
Brett McKay: I love that.
Annie Duke: You say what you believe last.
Brett McKay: No, that’s a fantastic brass tacks to people to start implementing today. One of the most profound things I got from this book that really hit me was, particularly in this day and age there’s this extreme polarization that we have. One way we can probably moderate some of that is treating our opinions like bets. How can that help moderate our opinions?
Annie Duke: Well, there’s lots of opinions that people might have and, particularly in this day and age and particularly when you can type it out in I guess 280 characters now in about three seconds without really thinking about it. People seem very free to express their opinions with absolute certainty, so they just say, “I know this is true.” Let’s think about what the framework of thinking about decisions as bets does. What is a bet? A bet is a decision that’s informed by your beliefs about the way that you think the future might turn out.
If I’m in a restaurant and I’m trying to decide between do I want to order the chicken or the fish, I have beliefs about what things I like in my past experiences and what I know about the restaurant and what their specialties might be and such. My beliefs inform which future I think is going to be better for me. The future where I’m eating chicken or the future where I’m eating fish and when I make a decision, I’m betting on … Let’s say I decide to order the chicken. I’m betting that Annie eating chicken will be happier than Annie eating fish. That’s what a bet is and that’s what all decisions are. I just put decisions into the frameworks of bets. When we’re making decisions, we are actually betting. We just don’t think about it explicitly.
What would happen if we started to think about that explicitly? Well, let’s think about what happens when you express an opinion and someone actually challenges you to a bet. For example, let’s say it’s a couple weeks ago and the stock market took a dive, an 1100 point dive and you announce over the weekend, “Wow, I think on Monday the stock market is going to be at 400 points,” so now I have just expressed this with certainty, right? What happens when someone says to me, “Well, do you want to bet on that?” What would happen to you if I said to you, “Do you want to bet on that in that spot?”
Brett McKay: I’d be like, “I’d do some hemming and hawing.”
Annie Duke: Right, you would back off, so why would you back off? Let’s say that I did that and I said, “I think it’s going to go up 400 points.” I just made a declaration, right? I just expressed something with total certainty and if you say, “Want to bet?” to me, all of a sudden I’m like, “Well actually, I didn’t really mean that I’m sure that it’s going to go up 400 points. It could do a lot.” Now all of a sudden, I’m completely backtracking and why am I backtracking?
Because what your question has done to me by saying, “Want to bet?” is it’s reminded me that there’s risk in every decision that we make. That’ when I make the decision to order the chicken versus the fish there’s risk in that because when I ordered the chicken, I’m forgoing all the other options that I have and I’m investing in this case some money, time, happiness, health, enjoyment, all sorts of limited resources in that decision on the future that I have now directed myself towards, so it’s risky.
When you say, “Want to bet?” to me, you’ve reminded me of that and now what happens is I go through this inventory where I think, “Well, why do I really think that? What is my overall knowledge of the way that the stock market goes? How much do I really know about this that I just declared this? Maybe I should find some more information? Why might I be wrong?” That’s a really important question that makes you ask, “Why might I be wrong?”
Here’s another one, “What does Brett know that I don’t know? Why is he challenge me to this bet?” Now it forces me to think about your perspective and think about what you might know that I don’t know. I have to think about why would you be arguing against me because that’s really what you’re declaring.
All of those things, actually, cause me to do a lot of vetting of this belief or prediction that I just declared with such certainty. It backs me off and basically, moves me into a place where I acknowledge the uncertainty in my beliefs. I acknowledge the inherent uncertainty in any prediction that I make about the future and that’s a good place to be because we can’t be certain. Our beliefs are rarely certain. Our predictions about the future can’t be certain because luck intervenes and so it actually puts us in a place where we are more accurately represented the beliefs that we have. We’re more accurately representing the predictions that we might have. Now think about how wonderful that would be for Twitter? If before you posted anything on Twitter someone said to you, “Well, do you want to bet on that opinion?” I think that people would start saying, “Well, you know what? I was thinking about this and I sort of 60% believe this.”
Brett McKay: Right, now when I was reading I was like, “That would be cool if someone made some sort of Twitter plug in where for every opinion you spouted off, you had to put a few bucks on the line.” I don’t know, a crazy idea that I got.
Annie Duke: I think that would be great. Listen, I think you should do that.
Brett McKay: Okay
Annie Duke: Create an app-
Brett McKay: I will.
Annie Duke: Which is literally, it just stops and says, “Would you be willing to bet on this belief?”
Brett McKay: Yeah.
Annie Duke: And ask how much? I think here’s a really good example where I think the public would have been a lot better off if people were thinking through this frame. In November of 2016, you might recall that we had a presidential election. I thought that there was this really interesting divide between the people who were looking at the polls, so that the people who were actually doing these polls and sort of figuring out from that what different futures might occur and the pundits.
When you’re watching news programs on TV and the pundits are speaking, their job is to deliver you the answer with certainty, right? They’re supposed to express their certain opinion and they’re certainly not supposed to waffle. I think, sadly, a pundit who expressed things as, “Well, I’m kind of 60% …”
If you said, “What’s the solution to school shootings?” Wouldn’t it be great if instead of a declaration about what it was they were like, “Well, I think this strategy might be 20% and this strategy might help things.” Wouldn’t that be wonderful? But no pundit is ever going to do that.
Now, it’s the election November, 2016 and Nate Silver is looking at the numbers in the week before the election and it seems to be bouncing between about 70% Clinton – 30% Trump and 60% Clinton – 40% Trump. That’s what his analysis is because he’s looking across all the polls and he’s sort of running his analysis. He has a model and so that’s what he’s coming out with. That translates when you’re watching on TV to the pundits saying, “Hillary Clinton is going to win the election.”
Nate Silver was acting much more like someone had asked him, “Do you want to bet on this?” because notice, his opinion is quite modulated, whereas the pundits are not thinking about that. They’re just trying to tell you who is going to win and they have declared that it’s Clinton. Of course, the people you’re really hearing are the pundits.
What happens next day when Trump wins the election? Everybody is in shock and what are they saying? “The pollsters are wrong. They got it wrong. Boy, these people, they don’t know what they’re doing with their polls.” Even a year later, you’re still hearing that the people talk about, “Oh, such and such is polling at such and such a place. This election is polling this way,” people will still refer back to November and they’ll say, “Well, I don’t believe in polls. Polls are just wrong.”
Well, no, it’s not that the polls were wrong. It’s that the pundits were expressing what the data from the polls were telling them with certainty. They weren’t expressing it like someone was saying to them, “Do you want to bet on it?” Because here’s the deal. I bet if somebody had said to one of those pundits who declared, “Well, Hillary Clinton is going to win this election,” “Hey, do you want to bet on it?” I bet they would back off.
Because if you looked at Nate Silver’s data, it would be at the exact same question as saying, “Here, I have a gun and it has 10 chambers in it and I have filled three to four of them with bullets. Now, would you like to hold that to your head and pull the trigger?” I’m guessing that they would say, “Well actually, let me rephrase. I don’t think Hillary Clinton’s going to win. I think she’s favored. She’s going to win a lot of the time but not all the time,” which would have been the right reaction.
Had that been communicated in that probabilistic way, wrapping the uncertainty into it in an effective way to the public, the public’s reaction the next day would been much better because they would have said, “Oh, well, he was going to win 40% of the time. I guess that’s not that surprising,” and they would have stopped dismissing the expertise of the pollsters because pollsters really do have a lot of expertise. They’re statistically quite adept. They wouldn’t have been dismissing this group of experts as really not knowing what they’re doing.
The other thing I think that’s interesting is that if that had been communicated to the public, if any election were to get communicated to the public in that way, I think the public would be able to make much better choices about what their actions should be. Let’s take for example, a situation where people are just telling you that your preferred candidate is going to win. Then maybe you’re not really working hard to make sure that candidate wins or that your preferred candidate is going to definitely lose. Again, maybe you’re not working that hard to make sure that your preferred candidate doesn’t lose?
If you express it as 60%-40%, now all of a sudden that’s going to change the kinds of decisions that you make around how hard do you want to work on either side of the equation? You’re going to have a much better sense of what the actual odds are. “Is it really important for me to get out and canvas for my candidate? Do I think it’s really going to make a difference?” It’s going to change your decision structure in terms of what you do in front of the election as well if you think about those in a probabilistic way. I think that’s just a really good example where you can see how not thinking about things is a construct of want to bet. It really messed things up. I’m sure you have heard this even today, where you’ve heard people saying, “Oh, the polls were wrong.”
Brett McKay: No, I love that and I’ve been doing that ever since I read that little insight about thinking of your opinions as decisions and your decisions as bets, giving probabilities to my opinions. “How sure am I about this opinion that I have?” Yeah, it causes you to realize, “Actually, I’m not as sure as I think,” and it forces you, as you said, to work a little bit harder so you get more information, so you can refine that opinion even more.
Annie Duke: Right, it makes you open Google up, right?
Brett McKay: Right, yeah and it makes having a conversation about polarizing topics easier. You can tell people, “I’m not 60% on this. I feel this.” It opens up people. They’re not going to lambast you. They’re going to modulate their opinion because they’re going to go, “Well, this guy isn’t completely decided. We can have a conversation.”
Annie Duke: And also, I imagine that it doesn’t feel to them that you’re attacking that identity.
Brett McKay: Right, you’re not saying you’re wrong.
Annie Duke: Right, exactly, yeah, you’re not saying you’re wrong, which I think is … I think that that’s really the key. You’re basically signaling to them, “Look, my belief is under construction. It’s in progress. Can you help me with the progress? I would like to move my belief forward. I would like to be able to calibrate it. I’d like to be able to get it right because it’s in progress because I don’t really know?”
The fact is that when we think about decisions, all of our decisions are informed by the beliefs that we have. The better the beliefs that we have in the sense of the more accurate our beliefs are as a representation of the objective truth, the better our bets are going to be, the better our decisions are going to be.
I think I say in the book, “The person who wins in a bet is not the one who just knows their belief with certainty and processes of the world to make sure that whatever their prior beliefs are our right, meaning I just want to be right as opposed to true,” which are two different things.
There’s a difference between right and accurate. Right is, “I believe this thing and everything is just to prove that thing that I believe.” That person’s going to do very poorly in a betting situation because they’re not viewing their beliefs as under construction, so their beliefs are never going to progress. Their beliefs are never going to be calibrated, better calibrated to what the objective truth is.
But the person who views their beliefs as in progress and has the goal of saying, “I want to process the world in a way that makes my belief more accurate,” that person actually is going to do really well. In order to do that, doing what you started doing, which is, “Well, this is what I think is right, but I’m 60% on it,” that’s the best step to making sure that you start to reason toward accuracy as opposed toward rightness.
Brett McKay: I love that. Well, Annie, this has been a great conversation and there’s so much more we could dig into. Where can people go to learn more about “Thinking in Bets?”
Annie Duke: Sure, thanks for asking. Obviously, you can go buy my book at your local bookstore or on Amazon or Barnesandnoble.com or Indy Books. You can go to AnnieDuke.com, which is my website and there you’ll find a few things. First of all, if you happen to want to hire me, you can hire me there. You can contact me there as well.
I also have a newsletter that I sent out every Friday, which actually takes things that are happening out in the world, a lot of current events, a lot of things that are in the news during that week and looks at them through the lens of “Thinking in Bets.” It’s a way for you to start seeing how you might apply the concepts of the book to things that are happening in the world and if you go to AnnieDuke.com, you can find archives of the newsletter to see if it’s something that you like and if you like it, you can subscribe there and it will hit your inboxes every Friday. You can also find me on a variety of social media. I’m pretty active on Twitter, so you can go to @Annieduke is my Twitter handle. I post stuff that I find interesting there, so you can find me in a bunch of places.
Brett McKay: Fantastic, well Annie Duke, thank you so much for your time. It’s been a pleasure.
Annie Duke: Well, thank you.
Brett McKay: My guest today was Annie Duke. Her book is “Thinking in Bets.” is available on Amazon.com and bookstores everywhere. Also, check out our show notes at AoM.is/thinkinginbets, where you can find links to resources where you can delve deeper into this topic. Well that wraps up another edition of The Art of Manliness Podcast. For more manly tips and advice, make sure to check out The Art of Manliness website at Artofmanliness.com.
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