Author: J.D. Roth / Source: Get Rich Slowly
I read a lot of books. Nearly every book has some nugget of wisdom I can take from it, but it’s rare indeed when I read a book and feel like I’ve hit the mother lode. In 2018, I’ve been fortunate enough to read two books that I’ll be mining for years to come.
The first was Sapiens, the 2015 “brief history of mankind” from Yuval Noah Harari. I finished the second book yesterday: Thinking in Bets by Annie Duke. Duke is a professional poker player; Thinking in Bets is her attempt to take lessons from the world of poker and apply them to making smarter decisions in all aspects of life.
“Thinking in bets starts with recognizing that there are exactly two things that determine how our lives turn out,” Duke writes in the book’s introduction. Those two things? The quality of our decisions and luck. “Learning to recognize the difference between the two is what thinking in bets is all about.”
We have complete control over the quality of our decisions but we have little (or no) control over luck.
The Quality of Our Decisions
The first (and greatest) variable in how our lives turn out is the quality of our decisions.
People have a natural tendency to conflate the quality of a decision with the quality of its outcome. They’re not the same thing. You can make a smart, rational choice but still get poor results. That doesn’t mean you should have made a different choice; it simply means that other factors (such as luck) influenced the results.
Driving home drunk, for instance, is a poor decision. Just because you make arrive home without killing yourself or anyone else does not mean you made a good choice. It merely means you got a good result.
Duke gives an example from professional football. At the end of Super Bowl XLIX, the Seattle Seahawks were down by four points with 26 seconds left in the game. They had the ball with second down at the New England Patriots’ one-yard line. While everbody expected them to run the ball, they threw a pass. and the Seawhawks lost the game.
Armchair quarterbacks around the world complained that this was the worst play-call in NFL history. (I’ve linked to just four stories there. They’re all brutal. You can find many more online.)
Duke argues, though, that the call was fine. In fact, she believes it was a smart call. It was a quality decision. There was only a 2% chance that the ball would be intercepted. There was a high percentage chance of winning the game with a touchdown. Most importantly, if the pass was incomplete, the Seahawks would have two more plays to try again. But if the team opted to run instead? Because they only had one time-out remaining, they’d only get one more chance to score if they failed.
The call wasn’t bad. The result was bad. There’s a big difference between these two things, but humans generally fail to differentiate between actions and results. Duke says that poker players have a term for this logical fallacy: “resulting”. Resulting is assuming your decision-making is good or bad based on a small set of outcomes.
If you play your cards correctly but still lose a hand, you’re “resulting” when you focus on the outcome instead of the quality of your decisions. You cannot control outcomes; you can only control your actions.
Note: As long-time readers know, I grew up Mormon. One of the songs we were taught as children has this terrific lyric: “Do what is right, let the consequence follow.” This has become something of a mantra for me as an adult. If I do the right thing — whatever that might be in a given context — then I cannot feel guilty if I get a poor result. It’s my job to do my best. Beyond that, I cannot control what happens.
Luck and Incomplete Information
Why don’t smart decisions always lead to good results? Because we don’t have complete control over our lives — and we don’t have all of the information. Fundamentally, Duke says, results are influenced by luck. Randomness. Chance. Happenstance. She writes:
“We are uncomfortable with the idea that luck plays a significant role in our lives. We recognize the existence of luck, but we resist the idea that, despite our best efforts, things might not work out the way we want. It feels better to imagine the world as an orderly place, where randomness does not wreak havoc and things are perfectly predictable.”
Duke contrasts poker (and life) with chess. Chess is a game of complete information, a game of pure skill. There’s no luck involved. At all times, all of the pieces are available for both players to see. There are no dice rolls, nothing to randomize the game. As a result, the better player almost always wins. (When the better player doesn’t win, it’s because of easily identifiable mistakes.) Because chess is a game of complete information, luck isn’t a factor — the outcome is only a matter of the quality of your decisions.
In poker, however, there’s a lot you don’t know. What cards do your opponents hold? What cards remain in the deck? How likely are your opponents to bluff? And so on. Experienced poker players learn to think in terms of odds. “With this hand, I have a 74% chance of winning.” “I should fold. These cards only give me a 18% chance of coming out ahead.”
It’s because our decisions are made with incomplete information that life sometimes seems so difficult. You can do the right thing and still get poor results. You can opt not to drink on New Year’s Eve, for instance, but still get blindsided by somebody who did to drink and drive. You made a quality decision, but happenstance hit you upside the head anyhow.
Duke cites a scene from The Princess Bride as an example of how incomplete information affects the outcomes of our…
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