Article: Decision making by Thinking in Bets: Annie Duke

Annie Duke: American poker player and author of the book, Thinking In Bets

Shane Parrish: Host of The Knowledge Project

If you have two hours, above-average patience, and don’t mind a lot of pauses for notetaking, the conversation between Annie Duke and Shane Parrish is compelling for three reasons:

  1. You will realize that you can become good at decision making
  2. You will find a lot of values that you can incorporate as a part of your culture if you are starting an organization
  3. You will appreciate the importance of having a good group that keeps you accountable

Annie, who is an American poker player, wanted to get a Ph.D. in Syntactic Bootstrapping, which is a theory that essentially states that children have an in-built grammar that helps them in learning a language. Short on money, she started playing Poker. Annie’s brother helped her initially with Poker, she decided not to pursue the Ph.D. to play Poker full-time, and unsurprisingly she was repeatedly asked to consider joining Gamblers Anonymous.

Thoughts on the morality of gambling: Same as the morality of being an options trader. Nobody is forced to enter that market, and people get different things out of the activity.

What did she learn, share, and what other stuff I found fascinating?

  1. Poker: Poker teaches you to deal with uncertainty and that outcomes and decisions are very loosely linked. Besides, the more you play the game, the more you realize that less you know about Poker.
  2. What every basic psychology textbook gets wrong: We learn by feedback and pain/reward. In reality, it is not as simple as that, and that’s what Annie learned at the poker table. Pain is a double-edged sword.

Pain is required for learning, but it also activates our limbic system and that is what hinders learning. Failure or loss actually attacks our identity because we think we are losing because of our own decisions. When you encounter a failure, how many times do you immediately think of it as a learning?

3. We, as humans, are always MODELING the world so that we act better.

4. After a bad-beat on the poker table, she narrated the story to Erik Seidel, another legendary poker player, who later mentored her. Upon hearing Annie, Erik got annoyed and asked her what was the point of that bad-beat story, and why did she tell him that she lost because of luck?

Attributing failure to luck hinders learning. Changed her life.

5. As Individuals, we are biased, and smart people who know about these biases are good at fooling themselves because they become overconfident (as they know about biases). So, what do you do? You need to be in an excellent group to overcome biases. Having an excellent, accountable group makes a world of difference to your decision making.

Exploratory Groups: Our goal is to construct better mental models of the world; disagreement is ok

vs

Confirmatory Groups: We like interacting with a bunch of clones

6. Try to be accurate and not right.There is a difference between the two, and being right can involve YOUR judgment.

7. Tribes make you feel you are different from other people around you. Context: Think Politics, Sports, Poker. Disagreements are attacks to identity and our mental models of the world and our beliefs. Disagree without being disagreeable.

8. Risk: Play inside your bankroll.

9. When you are being examined (TV, public, etc.), RESULTING matters to YOU.

Resulting = excessive focus on outcomes

10. Resulting happens when decisions are exposed to critique but not the decision-making process. You start thinking about how to make decisions bulletproof to criticism. Innovation killer. Apple, by definition, does not operate under a culture of RESULTING.

11. Everybody expects you to do _ _ _ _ _ is the wrong process to make decisions.

Keynes: It is better to fail conventionally than succeed unconventionally

12. Many decisions have massive downsides and not high enough upsides.

13. Get people to feel like they should not be afraid of the outcome.

How to make decisions under uncertainty? Generate as many post decison scenarios + Assign probabilities to them. At-least TRY. The desire to make the guess will make you INFORMATION HUNGRY.

Do it in a group. Get dissenting voices. E.G. Red team and Blue team. Argue and make people switch sides. Memorialize this process of decisions & probabilities. Don’t be resulting, BE PROBABILISTIC.

Great decisions come from great alternatives and great alternatives come from having a large set of alternatives

14. Do a pre-mortem and capture it to analyze the decision-making process later.

15. Annie: I do not keep a decision journal. I learn through conversations.

16. People don’t ask themselves enough questions before making a decision.

17. If you know the outcome, it can infect the process of analysis of the decision makingDo not reveal the outcome to anyone if you are asking them for retrospective advice.

18. Do not surround yourself with a yes man whose boss has not changed in a long time.

19. It is a lot harder to spot your mistakes when you win.

Have a personal DECISION SWEAR jar. Put money in it when you say ahhh I knew this was not going to work or I knew I should have done it.

20. Three learnings about decision making from the book Thinking In Bets

a. Say I am not sure more. Do not conflate confidence with certainty — you will close people off to telling you more. Reveal your process of decision making and your sources of information. When you say I’m not sure, you acknowledge that your beliefs are under construction

b. It is really hard to do it on your own. GET AN AMAZING GROUP

c. Start being a really good time-traveler.Let the hindsight of your future self become the foresight to today’s self = Getting the future version of you to be involved in the present version of you in the decision making. Absorb pain if it is great in the long run

WRITTEN BY

Rohan Manchanda