Thinking in Bets: Making Smarter Decisions When You Don't Have All the Facts Paperback – May 7, 2019

About a quarter of the way into this latest missive from Annie Duke I found myself wondering if she's writing for the business community but in a way that regular folks, you know ones like you and me who make decisions all the time, would get something out of or written for us but in a way that those in the corporate world would be well-advised to read. At about the one-third mark I realized (duh) that it's both and it's written with such charm and insightfulness (and humor) that it succeeds splendidly on both agendas.Duke is a rare trifecta: she has a solid academic background in cognitive psychology, she was a world-class professional poker player, and is currently a corporate and business consultant. All three of these "Dukes" are poured into the book in compelling and unique ways. I'm a cognitive psychologist and have played a lot of poker (not in her league I can assure you) and so I'm intrigued by the way she lays out the lessons we need to learn.First: in science, poker, and business you rarely, if ever, have all the information. In poker you don't know your opponents cards and you don't know what they're thinking -- including what they're thinking about what they think you're thinking. In scientific research you only know what's been discovered so far. You're ignorant about the unknown and are trying to extrapolate from current knowledge. In business and finance you unsure of the future, only know some things about markets, and work with incomplete models. In these partial information settings decision-making becomes difficult, tricky, and often contaminated by bias.Second: virtually all the interesting things we do in life are bets. Every even mildly complex task we confront or decision we make is, in effect, a bet. And bets have consequences. We take an umbrella because we're betting it will rain. We hire a new manager and are betting on her skills. We chose college A over B and bet that we'll get better education. And in these and the myriad other bets we make every day, we don't have all the facts and, because of the ways in which our minds tend to work, we often run afoul of biases and misunderstandings that lead us to make poor decisions.And Duke lays out for us the roots of these biases and trenchant advice on how to circumvent them -- with sometimes jarring effectiveness designed to force the reader to suddenly confront what they think they know but don't. Some examples: a) Try asking someone "want to bet?" when they claim something to be true. It puts them in a totally different place than when they were simply stating what they believed to be true. b) Look at decisions on the basis of how they were made rather than how they turned out -- you can win with a poor decision and lose with a good one but in the long run, it's the decision-making process that counts. c) Emphasize the need to stop thinking in certainties and recognize probabilities. d) Stop imagining situations as either-or and acknowledge that most things lie along continuums. e) Recognize when you're in an "echo-chamber" where only viewpoints you're currently comfortable with are expressed. Quoting Mill, she reminds us that truth only emerges when all sides are heard.Along the way we're treated to stories of gamblers, pain and triumph in poker games, the noodling of philosophers, judicial habits of Supreme Court Justices, corporate CEO's, betting markets, biases of social psychologists, a short but penetrating exegesis on skepticism, some advice on child rearing, and a discourse on mental time travel -- and no, I'm not going to tell you what that is. Read the damn book.Duke makes her living now as a writer and presenter of her approach to decision-making, a corporate speaker, and a business consultant. I can just imagine jaws dropping when she tells a group of high powered corporate execs that one sure way to succeed is to make sure they have naysayers in corporate headquarters, ensure that they ask for dissenting views and voices before making major (or minor) decisions.Oh, and in passing, she's an engaging writer with a sense of humor who can turn a simple setting into a hilarious little psychodrama, especially when revealing some of the weird and wonderful things that happened to her during her days as a professional poker player.

I thought a very nice overview of decision theory and its many principles. I would have appreciated more examples and practical illustrations (like the expected value of grants for a nonprofit) to be present through the text.

This book is about how to make better decisions, from the trivial to the most consequential,in all endeavors of life: personal, business, political/economic forecasting, gambling, etc.It explains how to think about potential decision options, given that most entail varyingdegrees of risky or uncertain outcomes. Without attempting to bog the reader down inthe mathematics of probability theory, the core of most textbook approachesto decision making, it clearly demonstrates how to incorporate probabilisticuncertainty into our decision-making thought processes. Since most decisionswe make lead to outcomes which have an element of probabilistic uncertainty,the book's approach is relevant to all walks of life.Although Duke does not frame it this way, I think a brief explanationof two fundamentally different types of situations captured by the tool ofprobabilistic reasoning may be helpful. This dichotomy leads to what havebeen termed Objective and Subjective probabilities.Objective probabilities are those associated with outcomes that are truly randomwith specific known numerical probabilities governing various occurrences.For these, no amount of thinking or information on the part of those of us observingthe situation can improve on understanding inherent randomness of the underlyingactivity leading to some outcome, i.e., the known probabilities are the best we cando in anticipating the ultimate outcome of the event. In other words, we can't improveon the odds of various outcomes however smart we may be. The best examples forthis type of probability are things happening in the world of quantum mechanics,e.g., predicting the time at which a radioactive element or a neutron will decay.A close second for most practical purposes would be the outcome of the spin of aroulette wheel or the outcome of a fair roll of a pair of dice. Objective probabilities are set bythe laws of nature, and, once known, the actual outcomes of a large number of repetitiveobservations of the same situation will lead to a predictable distribution of outcomes.Subjective probabilities, on the other hand, are probabilities we assign to variousoutcomes when faced with decisions leading to uncertain outcomes. They are notfixed or absolute numbers driven by the laws of nature. We may assigna numerical value to a particular outcome, e.g., a 70% chance the Patriots will winthe Super Bowl against the Eagles, or, they may be qualitative rankings of possibleoutcomes, e.g., highly likely, pretty likely, not sure, very unlikely, etc. Three key thingsabout Subjective probabilities are:1. Different people thinking about the same event will usually have differentestimates of the probabilistic outcomes. Subjective probabilities are not facts.They are opinions.2. The information/knowledge the decision maker has about the situation willaffect their probability estimates of different outcomes.3. Good decision makers in many particular endeavors like poker or investing will usually,i.e., more frequently but not always, have better success in predicting uncertain outcomesthan will poor decision makers.During the first couple of hundred years that mathematicians tried to develop thefield of probability, they were generally focused on thinking about things they believedwere governed by Objective probabilities. Even the game of poker was thought of in thisway for years. Early in the 20th century, thinkers began to crystallize the idea of Subjectiveprobabilities as distinctly different from Objective probabilities. John Maynard Keynesattempted to develop a full blown theory with his 1921 book "A Treatise On Probability".Although it had some excellent ideas, it did not succeed in laying out a firm mathematical basisfor Subjective probability. This took the Italian mathematician, Bruno de Finetti, to definea mathematically rigorous treatment of Subjective probability in his 1937 book. And,thinking in bets was core to his approach.By the 1950's, de Finetti's approach became the basis for aspects of economics , game theory,and decision making under uncertainty. The latter pertains to virtually all decision making weencounter in daily life.So, what does Subjective probability have to do with bets. In short, everything. When we make a bet, we do so with a view of the chances of winning, either a qualitative view, or a quantitative view, i.e., a probability. A bet is the manifestation of one's personal estimate of the Subjective probability of the outcome you are favoring.The beauty of Duke's book is that it explains with lots of examples of how to applySubjective probabilistic thinking in all sorts of situations without having to worry aboutthe sound basis of the underlying mathematics. Poker is a great example of a situation in which aSubjective probabilistic assessment is critical, since trying to gauge how others will behave in playing a hand is truly a subjective, rather than objective, assessment. Thus her poker and human psychology background really do mark her as expert in teaching smart decision making for a broad audience. Since information and knowledge are key to making sound estimates of Subjective probabilities, Duke spends a lot of time on how to build a broad information base pertaining to prospective decisions, and how to guard against biases we naturally have that can cause us to resist relevant information that may rub us wrong. She implies that for lots of decisions, one can do better simply by stepping back and thinking about the pro's and con's, rather than just going on an impulse. Oftentimes we have relevant information in our head, if only we would think about it. Get external inputs as well, e.g., friends or Google. Information is key and being open to inputs that may conflict with your beliefs will improve your decision quality in the long run.Thus,the book is suitable for both the mathematically inclined and the mathematically averse. Although the math is absent, some may find some of the concepts a bit difficult or, on the surface, repetitive, as evidenced by some of the reviews posted here on Amazon. Stated differently, it may be difficult sometimes to appreciate the applicability of the advice to settings that go beyond the specific example used preceding her current point, but a little thought brings it home. No doubt, a few readers of the book will 'get it' and some won't, though they may still find some of the stories entertaining. None-the-less, I highly recommend it as worthwhile for both personal improvement, as well as supplemental reading in almost any graduate school curriculum.

This book contains several important ideas with excellent examples, but it is rich with filler. Just one example, there's four pages giving background of some MTV reality TV drama.Buy the book to support the author but then find a synopsis or watch a TedTalk. You won't be missing anything other than a detailed walk through professional poker personalities.