How to Make Decisions Like a Poker Champ

 

We’ve talked before about how uncertainty in life is an uncomfortable inevitability, but one that provides us with valuable feedback if we understand how to pay attention to what it’s trying to tell us. Properly applied, it can guide our decisions if we can just get comfortable with the discomfort of acknowledging it and putting it to use.

In this episode, we’re joined by Annie Duke, World Series poker champion and author of Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts. She’ll explain how poker strategies bring this uncertainty to light and help us understand the relationship between outcomes, decision quality, and luck. Listen, learn, and enjoy!

In an episode featuring World Series poker champion and Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts author Annie Duke, you’d be forgiven for thinking this conversation is going to revolve around poker.

“This isn’t a poker book — simply in the sense that you’re not going to learn poker from reading it,” explains Annie. “What poker is mainly used for is a way to inform some of the ways that we can think about life’s decisions — particularly understanding what a problem is in a relationship between outcomes and decision quality that I think poker exposes in a really nice way in terms of really bringing the uncertainty in most of our decisions to light.

“And then what I’m really trying to get across, using poker as kind of a trampoline to get there, are some of the real solutions that you can implement in order to become a better decision maker — to kind of embrace the uncertainty and handle it. What people really understand from poker is that there’s a lot of uncertainty in the decisions that we make, and if we don’t acknowledge that uncertainty, that our decision quality is not going to get a lot better. And poker can really give us a lot of good lessons for that.”

Quality of Decisions vs. Luck

Outcomes and the decisions that take us to them don’t always align as expected. Good decisions don’t always result in good outcomes, and bad decisions don’t always result in bad outcomes. When the right thing happens for the wrong reason, we often attribute the outcome to the quality of our decision-making process — not realizing (or maybe just not acknowledging) how much luck played into the end result. But, like it or not, life is more a game of poker than a game of chess. Annie explains:

“In the abstract, it seems very clear that you have your decisions and luck — and you can’t really control luck, so you should focus on the quality of your decisions. But what ends up happening is people generally way too tightly link the quality of outcomes with the quality of decisions; they will often ignore the presence of luck when they’re evaluating, particularly, the outcomes of others. They act like we’re playing a game of chess when we’re dealing with life’s outcomes as opposed to playing a game of poker.

“In chess, the outcome is really just determined mainly by the quality of your decisions, right? The luck element is reduced. If I lose a game of chess to you, it’s because you made better decisions than I did, and I made poor decisions.”

The Trouble with Resulting

Annie uses two key decisions by Super Bowl head coaches to illustrate how luck influences us to believe that poor outcomes are the result of poor decisions when in reality good decisions can still lead to poor outcomes, and poor decisions can lead to good outcomes.

In 2015, Seattle Seahawks coach Pete Carroll made a decision to pass while on the goal line, rather than hand off to his Pro Bowl running back. That pass was intercepted, leading many sports pundits to argue it was a poor decision rather than bad luck.

In 2018, faced with a fourth down on the goal line at the end of the half, rather than kicking a field goal, Philadelphia coach Doug Pederson chose to run a trick play where the ball was thrown to the Quarterback, resulting in a touchdown. This decision was lauded as “smart” because of the result.

In both of the above situations, the outcome was the measurement for the quality of the decision — and this is referred to as “resulting,” which discounts the luck element in a decision’s outcome.

Annie gives an example of the real estate market in the early 2000s leading people to use resulting as an inaccurate measure of their skill in flipping houses. In reality, almost any real estate purchase made during that time was benefitting from an ever-expanding bubble that inflated the market as a whole — but this also led these same individuals to believe they were the victims of bad luck rather than poor decision making.

Listen to this episode in its entirety to learn more about our evolution-instilled favor toward false positives, the persuasive power of cognitive illusions to take us down the wrong path even when we know it’s the wrong path, how motivated reasoning leads us toward a conclusion as opposed to reasoning toward the truth, why we should think of any decision we make as a bet with our desired outcome as the payoff — informed by the information we have with an acknowledgment to uncertainty having the final say, how we can be better belief calibrators to ensure we’re taking in as much information as we need to make the best bets rather than just the information that reinforces what we already believe, and lots more.