Thinking in Bets: Making Smarter Decisions When You Don't Have All the Facts

Game theory was succinctly defined by economist Roger Myerson (one of the game-theory Nobel laureates) as “the study of mathematical models of conflict and cooperation between intelligent rational decision-makers.”

Over time, those world-class poker players taught me to understand what a bet really is: a decision about an uncertain future. The implications of treating decisions as bets made it possible for me to find learning opportunities in uncertain environments. Treating decisions as bets, I discovered, helped me avoid common decision traps, learn from re

Taking credit for a win lifts our personal narrative. So too does knocking down a peer by finding them at fault for a loss. That’s schadenfreude: deriving pleasure from someone else’s misfortune. Schadenfreude is basically the opposite of compassion.

We think we know the ingredients for happiness. Sonja Lyubomirsky, a psychology professor at the University of California, Riverside, and popular author on the subject of happiness, summarized several reviews of the literature on the elements we commonly consider: “a comfortable income, robust health, a supportive marriage, and lack of tragedy or t

Just as with motivated reasoning, our fielding errors aren’t random. They are, borrowing from psychologist and behavioral economist Dan Ariely,* “predictably irrational.” The way we field outcomes is predictably patterned: we take credit for the good stuff and blame the bad stuff on luck so it won’t be our fault. The result is that we don’t learn f

On rare occasions when we non-surfers need to be more specific, we just add a lot of extra words. Those extra words don’t cost us much because it doesn’t come up very often—maybe never. But for people involved in specialized activities, it’s worth it to be able to communicate a complex concept in a single word that laypeople would need lengthy phra

Hastorf and Cantril concluded, “We do not simply ‘react to’ a happening. . . . We behave according to what we bring to the occasion.” Our beliefs affect how we process all new things, “whether the ‘thing’ is a football game, a presidential candidate, Communism, or spinach.”

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.

But getting comfortable with “I’m not sure” is a vital step to being a better decision-maker. We have to make peace with not knowing.