After Reading 'Thinking in Bets'

I heard from Anne Duke recently on a Tyler Cowen podcast. Couple of comments she made there got me interested in learning more about her works. She founded a non-profit to teach young people to make better decisions, which I found worthy to check-out. A couple of weeks ago, I randomly saw a tweet about her book “Thinking in Bets” and decided to read it.

She writes about our thinking patterns and strategies to safeguard against common mistakes during decision making. One key idea she presented is to separate the quality of decision making from the quality of result. There could be times when the decision making job was done correctly but the result was poor due to factors that were beyond our control. Isolating those can help us to keep the focus on the decision making process and improve it.

Most of the decisions that we make are based on incomplete information. For getting better at decision making, we will have to accept it and look for strategies that complement the incomplete information.

For most of us, when we look back at our past decisions and outcomes, we tend to take credit for the success and blame our luck for the failures. While luck plays a role in outcome, each outcome is a combination of skill and luck. Being able to objectively identify the contributions from skill and luck will improve the quality of decision making. This is also applicable when we are analyzing others’ performance; we should give proper attribution to others' skill and luck.

One idea she mentioned that I also agree with is relative happiness. We tend to measure our happiness/misery relative to others. Also, time dilutes a lot of our feelings. Events from the distant past do not evoke a similar emotional reaction as compared with a similar event happening at present. Similar things happen when we over-evaluate our present-self against our future self. Knowing how to account for relativity in our feelings and the temporal discounting of our emotions can help us make better decisions. A way to safeguard against temporal discounting is to think in 10-10-10. Any time we are making a decision, we can think of its impact in the next 10 minutes, next 10 months and next 10 years and then it helps to calibrate the impact of the decision against temporal discounting. Also, any time we are evaluating our happiness or distress, we tend to do that in the moment, instead of averaging over a reasonable interval. This instantaneous response does not reflect reality and keeping that in mind helps.

In the book, Anne recommended some strategies that improved her quality of decision making. One of them is forming a ‘decision pod’, whose member, by a social contract, will objectively look at the decision making process. The members will adhere to the norms of CUDOS. She also presents the idea of confirmatory and exploratory thoughts. She stresses on the necessity to avoid the confirmatory thoughts and strive for the exploratory thoughts while objectively evaluating the decision making process. One way to achieve this is to allow members to have diverse viewpoints or admitting members with diverse viewpoints.

One jaw-dropping thing was to find out how in 1967, the sugar industry in the USA influenced a research study that ultimately shaped the eating habits of generations of people, and contributed to obesity rates and diabetes.

Once we get comfortable with the idea of using our decision pod, the next challenge is to figure out how to communicate in a similar fashion with the outside world. Anne points out an effective strategy, “Leading with assent”. First, listen for the things that we agree with and then supplement our arguments with an “and”, not a “but”.

Anne also points out some of the biases that we face when we evaluate our decisions and outcomes. We are prone to evaluate outcomes based on the path. For example, losing a lot of money at the start and then recovering most of it makes us happy, even though we incur a small loss. On the other side, winning a lot of money at the beginning and losing most of it makes us unhappy, even though we make a small gain. If we consider temporal discounting, this instantaneous path dependence vanishes in the long run. So, this is an important thing to watch out for.

When we inspect our past decisions, we may face hindsight bias. As we look back at our decisions and outcomes, instead of looking at myriads of paths and possibilities, we only see a trimmed down version of the path that we took. This sometimes makes us wonder why we choose a wrong path instead of all these obvious signs. In reality, when we were navigating these paths, we had more options than what we remember at present looking back. So, it is a good thing to keep in mind when looking back at our past decisions. Perhaps, documenting things as we make decisions might make things easier for our future self.

Overall, I enjoyed the book. There were things that I already came across and also the book has it’s fair share of fluff. Yet, it managed to teach me some new things and I will recommend people to check it out.

Published at: 10/07/2020