Thinking in Bets

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. (Location 132)

Pete Carroll was a victim of our tendency to equate the quality of a decision with the quality of its outcome. Poker players have a word for this: “resulting.” When I started playing poker, more experienced players warned me about the dangers of resulting, cautioning me to resist the temptation to change my strategy just because a few hands didn’t turn out well in the short run. (Location 163)

In addition to everything else he accomplished, John von Neumann is also the father of game theory. After finishing his day job on the Manhattan Project, he collaborated with Oskar Morgenstern to publish Theory of Games and Economic Behavior in 1944. (Location 319)

Chess, for all its strategic complexity, isn’t a great model for decision-making in life, where most of our decisions involve hidden information and a much greater influence of luck. This creates a challenge that doesn’t exist in chess: identifying the relative contributions of the decisions we make versus luck in how things turn out. Poker, in contrast, is a game of incomplete information. (Location 350)

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.” (Location 434)

It was the same video, carefully edited to blur or avoid giving away the subject of the actual protest. Researchers, after gathering information about the worldviews of the subjects, asked them about facts and conclusions from what they saw. The results mirrored those found by Hastorf and Cantril nearly sixty years before: “Our subjects all viewed the same video. But what they saw—earnest voicing of dissent intended only to persuade, or physical intimidation calculated to interfere with the freedom of others—depended on the congruence of the protestors’ positions with the subjects’ own cultural values.” Whether it is a football game, a protest, or just about anything else, our pre-existing beliefs influence the way we experience the world. (Location 857)

Flaws in forming and updating beliefs have the potential to snowball. Once a belief is lodged, it becomes difficult to dislodge. It takes on a life of its own, leading us to notice and seek out evidence confirming our belief, rarely challenge the validity of confirming evidence, and ignore or work hard to actively discredit information contradicting the belief. This irrational, circular information-processing pattern is called motivated reasoning. The way we process new information is driven by the beliefs we hold, strengthening them. Those strengthened beliefs then drive how we process further information, and so on. (Location 865)