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Thinking in bets starts with recognizing that there are exactly two things that determine how our lives turn out: the quality of our decisions and luck. Learning to recognize the difference between the two is what thinking in bets is all about.” -Annie Duke
To illustrate this point, Annie claims that “Life is like poker, not chess”.
In chess, while the number of possible moves is enormous, there is no element of chance or uncertainty involved. Theoretically, you can re-trace any of your moves in any game and find out exactly where you went wrong. Furthermore, all the information required to make a decision is available on the board the entire game.
In contrast, in poker, your opponent’s cards are hidden, so you must learn to make decisions without having a complete picture of the situation. In addition, there is always an element of luck in the cards that are flipped from the deck. Due to this element of chance, you can calculate the probability of outcomes in each hand, but it is impossible to know with certainty how each hand will play out, even when you know exactly which cards each player holds.
When assessing outcomes, such as with investments, you need to recognize that both of these factors – skill and luck – will influence your results.
Even if you make the right decision, you may get a bad outcome due to luck.
On the contrary, it is possible to make a bad decision but get a good outcome.
About the Author
Annie is the co-founder of The Alliance for Decision Education, a non-profit whose mission is to improve lives by empowering students through decision skills education. She is also a member of the National Board of After-School All-Stars and the Board of Directors of the Franklin Institute. In 2020, she joined the board of the Renew Democracy Initiative.
“In most of our decisions, we are not betting against another person. Rather, we are betting against all the future versions of ourselves that we are not choosing.”
