Thinking in Bets
Making smarter decisions… like a poker player.
You wouldn’t think one might draw meaningful conclusions, much less life lessons, from a betting game such as poker. Yet Annie Duke, a fairly successful professional poker-player and a recognized author, has done just that and more with her book, “Thinking in Bets”. Through insightful reasoning and various practical examples, she offers a load of valuable advice on decision-making of all kinds, including in business, life, personal relationships and more. If you cannot possibly understand how all this would have to do with a card game like poker, I will do my best to explain.
Is life like poker or chess?
The answer to this question is quite obvious, if you think about it. You see, much like life itself, poker does neither solely rely on calculated strategy, like chess, or on pure chance, like playing the roulette or dice. The game of chess has no hidden information and luck plays practically no role in the outcome. All the pieces are visible for both players on the board and every piece can make a specific set of moves. No rolling dice, no random surprises, you just need to calculate a few moves further than your opponent in order to win. That is why even the best chess-player has no hope of winning against a modern computer, which can nowadays make unthinkable amounts of calculations in fractions of a second.
On the contrary in poker, you don’t know what your opponents’ cards are and the ones in the middle are only revealed step by step. Bets are placed with the possibility to bluff and one raises or calls by betting that the opponent does not have a better hand in combination with the gradually revealed cards in the middle. This includes both an element of calculating probabilities, as well as a very important element of luck. Your opponent might beat you with a pair of aces or have the perfect pair of cards, even just a measly 2 and 3, to form a royal flush, no matter how unlikely either scenario might have been from the start. It is thus possible to lose, despite having made calculated and correct decisions, just because your opponent happened to have an unlikely good or appropriate pair of cards. Well, think about it, isn’t that how most parts of life work?
In life, much like poker, you might win despite bad decisions, by simply standing lucky, or lose despite good decisions by being profoundly unlucky. If this sounds confusing, let’s illustrate this point with an analogy Annie Duke uses in the book: If life was like chess, nearly every time you ran a red light you would get in an accident (or at least receive a ticket). Wouldn’t that be nice and simple? But we all know that’s not how life works. You could run red lights frequently but still get through intersections without a scratch or follow all the traffic rules and still get in an accident. In poker, much like in life, the novice could, despite all odds, beat a very proficient poker player. That could never happen in chess. The chess champion will practically always see 20 steps ahead of any amateur, winning without fail. Of course, life is not that predictable, regardless of how experienced and wise one might be.
Success relies on luck
So, Annie Duke’s important first lesson in her book is dispelling the illusion that bad results come as a result of bad decisions or incompetence. Because this way of thinking applies very well in chess, but not in poker, or life as we know it. A sports team or a businessman might have great chances of achieving success by making good and informed decisions, but will sometimes lose and fail, despite all that. On the flip side, success in life is often decided by luck, even if it is supported by skill and good decisions. If you happen to be in the right place at the right time or are lucky to choose a field that suits you in ways you hadn’t ever imagined, this might make the difference between success and failure in the traditional sense.
I can definitely say that this is what happened to me. Do you think I knew at the age of 18 what practicing medicine was like or that I could calculate my way through med-school to eventually end up in a very distant but surprisingly suitable country for me? Sure, I have worked hard to get where I am now, but the fact that I love learning new languages or that I landed in the right place at the right time when I moved to Sweden looking for a job as a medical doctor, have nothing to do with my efforts and skills. In other words, luck has played a deciding factor in my life, most likely in yours too.
To most people however, this line of thinking feels instinctively false. We have trouble accepting that luck could often be the deciding factor in life, because our brains have evolved to look for patterns and order, to make sense of the complicated and chaotic world around us. The successful businessman must be self-made and the homeless man is probably a failure, so both somehow deserve what they’ve gotten in life.
Sadly, this is one of the areas where our instincts reliably betray us in this modern world. Ignoring the complexities and unknown factors (including pure luck) in various situations, seeing our life decisions like chess moves, only makes for worse decisions. It also makes for undeserved pride for the more “successful” in life and unfair feelings of unworthiness for those less so. This is how overflowing arrogance and crushing depression flourish.
As the title of her book betrays, Annie Duke argues that we are better off treating our decisions like bets in a game of poker.
Seeing life-decisions as bets
At first glance, this line of reasoning doesn’t seem applicable to neither every day nor big life decisions. I mean, what or who would we bet against when deciding what career path to choose or what car to buy? Well in poker, you would be betting against other players, winner takes all. This in known in game theory as a zero-sum game. In life, you would instead most often have to bet against different versions of your future self, calculating which future version might be best in one way or the other. There might be no clear winner or loser, but there are definitely better and worse outcomes. It may sound weird, but we all do it in some way very often, even if we don’t realize.
When choosing to wear a specific set of warm clothes before we go out on a walk, we are in fact betting that our future self will be more comfortable walking in these clothes (given the weather we are expecting and the level of activity we have planned) than in lighter clothes. The fact that the weather can quite reliably be predicted for the coming day, doesn’t prevent us from making the wrong bet sometimes and ending up freezing or sweating profusely in the clothes we decided to wear. Yet, it is always better to think it through and make a bet that is more likely to give us the desired outcome, right?
Thinking in bets, checking our beliefs
This applies to most big and small decisions in our lives, simply because the world is so complex that we can practically never be 100% certain of any outcome. So what it usually comes down to is the belief that something will happen or that something is true. It’s practically impossible to be certain about most things, no matter how much we would like to tell ourselves otherwise. We put on sunscreen when we are sunbathing at the beach because we believe that bare-skin exposure to the summer sun can in the long run damage our skin and increase our risk for skin cancer and premature death. There is compelling evidence to believe that, so making the decision to regularly use sunscreen is a good bet. Does this guarantee that you will not get skin-cancer, while someone who has instead been using sunbathing oil to aggressively tan every summer will? Sadly not. See, even a safe bet, a good decision, does not guarantee a good outcome.
Thinking this way might at first glance sound a bit hopeless, or nihilistic, but in reality it’s both smart and empowering. If, against all our ancient human instincts, we accept that certainty is only an illusion, we can start consciously measuring the odds of every outcome and every claim. We can try to reevaluate all our beliefs and update them as best we can. Because only then can we make the best decisions, take the safest bets, in life. The only certainty is that we will often make decisions that in retrospect won’t seem the best. But even that can be seen as a part of the process: the best we can do, is try and make better decisions with the facts we have, reevaluate based on the outcome, and try do better next time.
Can we distinguish the effect that luck has in our outcomes in life, from the effect of skill and sound beliefs? It is definitely not in our human nature to think this way, but we can only get better through effort, through trial and error. And Annie Duke gives us a very useful set of tools for pushing aside our human biases and illusions, in order to make better and better decisions. All this has made many of my intuitions about rational decision-making more concrete, but also opened my eyes to many false beliefs that traditionally govern our choices and make us deeply unhappy. I truly believe (even if I cannot be certain) that thinking in bets changes the game of decision-making in life, if we only try.