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

First, the world is a pretty random place. The influence of luck makes it impossible to predict exactly how things will turn out, and all the hidden information makes it even worse. If we don’t change our mindset, we’re going to have to deal with being wrong a lot. It’s built into the equation. Poker teaches that lesson. A great poker player who ha

Hindsight bias is the tendency, after an outcome is known, to see the outcome as having been inevitable. When we say, “I should have known that would happen,” or, “I should have seen it coming,” we are succumbing to hindsight bias.

To reach our long-term goals, we have to improve at sorting out when the unfolding future has something to teach us, when to close the feedback loop.

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.

What makes a decision great is not that it has a great outcome. A great decision is the result of a good process, and that process must include an attempt to accurately represent our own state of knowledge. That state of knowledge, in turn, is some variation of “I’m not sure.”

We can work to change the bell we ring, substituting what makes us salivate. We can work to get the reward of feeling good about ourselves from being a good credit-giver, a good mistake-admitter, a good finder-of-mistakes-in-good-outcomes, a good learner, and (as a result) a good decision-maker. Instead of feeling bad when we have to admit a mistak

Our problem is that we’re ticker watchers of our own lives. Happiness (however we individually define it) is not best measured by looking at the ticker, zooming in and magnifying moment-by-moment or day-by-day movements. We would be better off thinking about our happiness as a long-term stock holding. We would do well to view our happiness through

Thinking about the future is remembering the future, putting memories together in a creative way to imagine a possible way things might turn out. Those brain pathways include the hippocampus (a key structure for memory) and the prefrontal cortex, which controls System 2, deliberative decision-making. It is our cognitive control center.* By engaging

The key to a successful premortem is that everyone feels free to look for those reasons, and they are motivated to scour everything—personal experience, company experience, historical precedent, episodes of The Hills, sports analogies, etc.—to come up with ways a decision or plan can go bad, so the team can anticipate and account for them.

There are emotional and physiological signs of tilt. In poker, you can hear a poker player on tilt from several tables away. Every several hands, you hear a raised voice in an incredulous tone: “Seriously? Again?” or “I don’t know why I bother playing. I should just hand over all my money.” (Imagine the inflection of exasperation and a lot of swear