Thinking in Bets

Key takeaways:

- Stop thinking of ‘I don't know,' as a negative, meaning, ‘I have no idea,' or ‘I am not smart enough.' Start thinking of it as, ‘I don't have all the facts yet,' or ‘there are some unknowns'
- An expert will be better than a rookie, but neither can know for sure what the outcome will be. The expert will have seen more scenarios and as such will be able to better predict the outcomes given the facts, but both are still making guesses.
- Make peace with the fact that in many things, we cannot be sure–and that is okay.
- Redefine what it means to be wrong. If you have a 10% chance of your strategy failing, then your strategy fails, you were not wrong. Your bet just didn't work out. That was always a possibility.
- Sometimes long shots land. Blaming the bookie misses the point.
- Beware of resulting-second guessing your decision if it ends badly. If you analyzed the data available and made a sound decision, then the outcome was bad, it doesn't mean you made a bad decision. Luck and/or incomplete data may change the outcome. The decision may still have been sound.
- All decisions are bets.
- We have a predisposition to believe things we hear are true, even if they are not.
- Motivated reasoning is interpreting new information based on your existing beliefs. This is dangerous, but it is our default. It is very hard not to do.
- The purpose of fake news is not to change views or opinions. It's to entrench already held beliefs.
- We are rarely 100% or 0% confident in our beliefs. Thinking in probabilities or percentages brings this to mind. Saying you are 70% confident on a decision reminds us of this and makes it easier change our minds in light of new information. It feels bad to go from, ‘I am 100% convinced,' to ‘I am wrong.' It's much easier to go from, ‘I am 65% confident,' to ‘I am 40%' or ‘There was a always a 35% chance this was going to work out differently than I anticipated.' This way conflicting information isn't a threat.
- Calculate the expected value of new ventures/customers. If there is a 75% chance of landing a $1 million account, that account is worth $750,000. If there is a 5% chance of landing a $25 million account, that account is worth $1.25 million.
- Do a ‘pre-mortem'. Before embarking on a project, imagine you are at the end. What could have gone wrong? This allows you to spot pitfalls but also makes it much easier for people to share dissenting views.