As someone who wants to make better decisions, I’m enjoying the book Thinking in Bets: Making smarter decisions when you don’t have all the facts. It’s written by Annie Duke, who was a successful professional poker player.

It turns out that poker has a lot to tell us about making good decisions.

Duke’s book maps on to a lot of my thoughts about uncertainty and luck (many of which I’ve discussed in this blog and collated into my book Luck), using poker as an engaging starting point.

She explains that a bet is, in essence, “a decision about an uncertain future”.

Duke introduces non-poker players (like me) to the word “resulting”, which poker players use to describe “our tendency to equate the quality of a decision with the quality of its outcome.” And of course, she talks about the importance of separating the quality of an outcome the quality of the decision.

She also describes how distinguishing between outcomes that result from luck and outcomes that result from good decisions can help us learn to make more effective decisions.

The chapter that really took my interest was about having a buddy system.

Duke says that it helps to have a group of people with whom you can get past the usual social niceties of assessing decisions.

The default position for many people (actually, all of us) is to attribute good outcomes to our own skill and bad outcomes to poor luck. When we look at other people, however, we tend to do the opposite – attribute good outcomes to luck and bad outcomes to poor decision makings or bad conduct.

If something good happens to us, it’s hard to admit that it might be dumb good luck. And if something bad happens to us, it’s hard to admit that we might have got what we deserved. If we’re competing with someone else and they end up ahead, there is a natural tendency to focus on ourselves rather than on what we could learn from them.

This tendency is so common that it has a psychological term – the fundamental attribution error.

Despite the universality of this error, and the fact we all think this way, it’s socially unacceptable to tell someone that they were lucky, or were responsible for some of the negative outcomes in their life.

Duke explains that working with others to get past these natural, unhelpful inclinations can be helpful. She talks about having a well-chartered group, operating to some fundamental precepts:

  1. A focus on accuracy (over confirmation), which includes rewarding truth-seeking, objectivity, and open-mindedness within the group;
  2. Accountability, for which members have advanced notice; and
  3. Openness to a diversity of ideas. 

Duke was lucky enough to have peers as she started her professional poker-playing career. This was thanks to her brother:

“My brother took a blunt approach with me. My instinct was to complain about my bad luck and to marvel at how poorly others played, decrying the injustice of any hand I might have lost. He wanted to talk about where I had questions about my strategic decisions, where I felt I might have made mistakes, and where I was confused on what to do in a hand. I recognised he was passing along the approach he learned with his friends, a group of smart, analytical… players, many of whom… were on their way to establishing themselves as legends of the game. In addition to introducing me to this approach, he also encouraged these phenomenal professionals to treat me as a peer when discussing poker.” 

She continues:

“if I wanted to engage that group about poker, I had to ask about my strategic decisions. I had to resist my urge to moan about my bad luck and focus instead on where I felt I might have made mistakes and where I was confused on what to do in a hand. Because I agreed to the group’s rules of engagement, I had to learn to focus on the things I could control (my own decision), let go of the things I couldn’t (luck), and work to be able to accurately tell the difference between the two.” 

Annie Duke learned “that thinking in bets was easier if [she] had other people to help [her]”.

The same is probably true for you.

Here are my questions for you:

  • Do you have people in your life, with whom you can discuss and assess decisions in this raw and unfiltered way?
  • Do you have, or can you create, a context where you can have these conversations, where you prioritise honesty and accuracy over whether your emotions or their emotions will be hurt?

Finding these people and creating this social charter is likely to be an extremely valuable exercise. If you haven’t done it already, create these expectations and standards among some of your friends. It will help you make better decisions and hold you to a higher standard.

Sonnie Bailey

Sonnie is an Authorised Financial Adviser (AFA) and former lawyer with experience in the financial services and trustee industries. Sonnie operates Fairhaven Wealth (www.fairhavenwealth.co.nz).

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