Thinking in Bets

chapter 1

... he treated that result as if it were an inevitable consequence rather than a probabilistic one.

We are uncomfortable with the idea that luck plays a significant role in our lives. We recognize the existence of luck, but we resist the idea that, despite our best efforts, things might not work out the way we want. It feels better for us to imagine the world as an orderly place, where randomness does not wreak havoc and things are perfectly predictable. We evolved to see the world that way. Creating order out of chaos has been necessary for our survival.

When we work backward from results to figure out why those things happened, we are susceptible to a variety of cognitive traps, like assuming causation when there is only a correlation, or cherry-picking data to confirm the narrative we prefer.
The big decisions about what we want to accomplish recruit the deliberative system. Most of the decisions we execute on the way to achieving those goals, however, occur in reflexive mind.
The challenge is not to change the way our brains operate but to figure out how to work within the limitations of the brains we already have.

Our goal is to get our reflexive minds to execute on our deliberative minds’ best intentions.

We have to make peace with not knowing.

The accuracy of those guesses will depend on how much information they have and how experienced they are at making such guesses. This is part of the basis of all bets.

Any prediction that is not 0% or 100% can’t be wrong solely because the most likely future doesn’t unfold.

When we think probabilistically, we are less likely to use adverse results alone as proof that we made a decision error, because we recognize the possibility that the decision might have been good but luck and/or incomplete information (and a sample size of one) intervened.

chapter 2

Not placing a bet on something is, itself, a bet.

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.
... how we form beliefs was shaped by the evolutionary push toward efficiency rather than accuracy. Abstract belief formation (that is, beliefs outside our direct experience, conveyed through language) is likely among the few things that are uniquely human, making it relatively new in the scope of evolutionary time.
For survival-essential skills, type I errors (false positives) were less costly than type II errors (false negatives). In other words, better to be safe than sorry, especially when considering whether to believe that the rustling in the grass is a lion. We didn’t develop a high degree of skepticism when our beliefs were about things we directly experienced, especially when our lives were at stake.

We form beliefs without vetting most of them, and maintain them even after receiving clear, corrective information.

Truthseeking, the desire to know the truth regardless of whether the truth aligns with the beliefs we currently hold, is not naturally supported by the way we process information. We might think of ourselves as open-minded and capable of updating our beliefs based on new information, but the research conclusively shows otherwise. Instead of altering our beliefs to fit new information, we do the opposite, altering our interpretation of that information to fit our beliefs.

We do not simply ‘react to’ a happening. . . . We behave according to what we bring to the occasion.

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.

It doesn’t take much for any of us to believe something. And once we believe it, protecting that belief guides how we treat further information relevant to the belief.

Disinformation is different than fake news in that the story has some true elements, embellished to spin a particular narrative. Fake news works because people who already hold beliefs consistent with the story generally won’t question the evidence. Disinformation is even more powerful because the confirmable facts in the story make it feel like the information has been vetted, adding to the power of the narrative being pushed.

Fake news isn’t meant to change minds. As we know, beliefs are hard to change. The potency of fake news is that it entrenches beliefs its intended audience already has, and then amplifies them.

The Internet, which gives us access to a diversity of viewpoints with unimaginable ease, in fact speeds our retreat into a confirmatory bubble.

As Daniel Kahneman pointed out, we just want to think well of ourselves and feel that the narrative of our life story is a positive one. Being wrong doesn’t fit into that narrative.

... the smarter you are, the better you are at constructing a narrative that supports your beliefs, rationalizing and framing the data to fit your argument or point of view.

The surprise, though, was Kahan’s finding about subjects with differing math skills and the same political beliefs. He discovered that the more numerate people (whether pro- or anti-gun) made more mistakes interpreting the data on the emotionally charged topic than the less numerate subjects sharing those same beliefs. “This pattern of polarization . . . does not abate among high-Numeracy subjects. Indeed, it increases.”

We are in a perpetual state of learning, and that can make any prior fact obsolete.

chapter 3

Aldous Huxley recognized, “Experience is not what happens to a man; it is what a man does with what happens to him.”

The bets we make on when and how to close the feedback loop are part of the execution, all those in-the-moment decisions about whether something is a learning opportunity.

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.

Chalk up an outcome to skill, and we take credit for the result. Chalk up an outcome to luck, and it wasn’t in our control. For any outcome, we are faced with this initial sorting decision. That decision is a bet on whether the outcome belongs in the “luck” bucket or the “skill” bucket. ... We make similar bets about where to “throw” an outcome: into the “skill bucket” (in our control) or the “luck bucket” (outside of our control). This initial fielding of outcomes, if done well, allows us to focus on experiences that have something to teach us (skill) and ignore those that don’t (luck). Get this right and, with experience, we get closer to whatever “-ER” we are striving for: better, smarter, healthier, happier, wealthier, etc.

He kept betting on a losing future.

As artist and writer Jean Cocteau said, “We must believe in luck. For how else can we explain the success of those we don’t like?”

We all want to feel good about ourselves in the moment, even if it’s at the expense of our long-term goals.

As Richard Dawkins points out, natural selection proceeds by competition among the phenotypes of genes so we literally evolved to compete, a drive that allowed our species to survive.

To change a habit, you must keep the old cue, and deliver the old reward, but insert a new routine.

Instead of feeling bad when we have to admit a mistake, what if the bad feeling came from the thought that we might be missing a learning opportunity just to avoid blame?

Euphoria or misery, with no choices in between, is not a very self-compassionate way to live.

chapter 4

Without an explicit charter for exploratory thought and accountability to that charter, our tendency when we interact with others follows our individual tendency, which is toward confirmation.

chapter 5

Merton argued that, in academics, an individual researcher’s data must eventually be shared with the scientific community at large for knowledge to advance. “Secrecy is the antithesis of this norm; full and open communication its enactment.” In science, this means that the community has an agreement that research results cannot properly be reviewed without access to the data and a detailed description of the experimental design and methods.
As a rule of thumb, if we have an urge to leave out a detail because it makes us uncomfortable or requires even more clarification to explain away, those are exactly the details we must share.
... incompleteness is a tool for bias.
Whether the situation involves facts, ideas, beliefs, opinions, or predictions, the substance of the information has merit (or lack of merit) separate from where it came from.
We are not naturally disinterested.

The measurements might be objective, but slicing and dicing the data is vulnerable to bias, even unconsciously. ... Outcome blindness enforces disinterestedness.

Yet true skepticism is consistent with good manners, civil discourse, and friendly communications. ... Skepticism is about approaching the world by asking why things might not be true rather than why they are true.

It’s harder to get defensive about something that hasn’t happened yet. ... When we validate the other person’s experience of the past and refocus on exploration of the future, they can get to their past decisions on their own.

chapter 6

When making decisions, isolating ourselves from thinking about similar decisions in the past and possible future consequences is frequently the very thing that turns us into a blob, mired by in-the-moment thinking where the scope of time is distorted.

... no strategy can turn us into perfectly rational actors. In addition, we can make the best possible decisions and still not get the result we want. Improving decision quality is about increasing our chances of good outcomes, not guaranteeing them.
Even when that effort makes a small difference—more rational thinking and fewer emotional decisions, translated into an increased probability of better outcomes—it can have a significant impact on how our lives turn out. Good results compound. Good processes become habits, and make possible future calibration and improvement.
Thinking about the future is remembering the future, putting memories together in a creative way to imagine a possible way things might turn out.

We’re not perfectly rational when we ponder the past or the future and engage deliberative mind, but we are more likely to make choices consistent with our long-term goals when we can get out of the moment and engage our past- and future-selves.

Philosophers agree that regret is one of the most intense emotions we feel, but they have argued about whether it is productive or useful. Nietzsche said that remorse was “adding to the first act of stupidity a second.” Thoreau, on the other hand, praised the power of regret: “Make the most of your regrets; never smother your sorrow, but tend and cherish it till it comes to have a separate and integral interest. To regret deeply is to live afresh.”

When we view these upticks and downticks under the magnification of that in-the-moment zoom lens, our emotional responses are, similarly, amplified.

The way we field outcomes is path dependent. It doesn’t so much matter where we end up as how we got there. What has happened in the recent past drives our emotional response much more than how we are doing overall.

... our in-the-moment emotions affect the quality of the decisions we make in those moments, and we are very willing to make decisions when we are not emotionally fit to do so.

... past-us preventing present-us from doing something stupid.
From the vantage point of the present, it’s hard to see past the next step. We end up over-planning for addressing problems we have right now. Implicit in that approach is the assumption that conditions will remain the same, facts won’t change, and the paradigm will remain stable.
... our decision-making improves when we can more vividly imagine the future, free of the distortions of the present.

Backcasting makes it possible to identify when there are low-probability events that must occur to reach the goal. That could lead to developing strategies to increase the chances those events occur or to recognizing the goal is too ambitious.

... including responses to developments that can interfere with reaching the goal and identifying inflection points for re-evaluating the plan as the future unfolds.

Backcasting and premortems complement each other. Backcasting imagines a positive future; a premortem imagines a negative future. We can’t create a complete picture without representing both the positive space and the negative space. Backcasting reveals the positive space. Premortems reveal the negative space. Backcasting is the cheerleader; a premortem is the heckler in the audience.
A premortem is an implementation of the Mertonian norm of organized skepticism, changing the rules of the game to give permission for dissent.
Conducting a premortem creates a path to act as our own red team. Once we frame the exercise as “Okay, we failed. Why did we fail?” that frees everyone to identify potential points of failure they otherwise might not see or might not bring up for fear of being viewed as a naysayer.

Once we recognize the things that can go wrong, we can protect against the bad outcomes, prepare plans of action, enable nimble responses to a wider range of future developments, and assimilate a negative reaction in advance so we aren’t so surprised by it or reactive to it.

When we see how much negative space there really is, we shrink down the positive space to a size that more accurately reflects reality and less reflects our naturally optimistic nature.

Once we make a decision and one of those possible futures actually happens, we can’t discard all that work, even—or especially—if it included work on futures that did not occur. Forgetting about an unrealized future can be dangerous to good decision-making.

That 2%–3%, in hindsight, becomes 100%, and all the other branches, no matter how thick they were, disappear from view.
Once something occurs, we no longer think of it as probabilistic—or as ever having been probabilistic.
... we have to take satisfaction in assessing the probabilities of different outcomes given the decisions under consideration and in executing the bet we think is best.