A version of this article previously appeared Forbes.
When I saw World Series Poker Champion Annie Duke speak in 2017, I was inspired to write an article describing some of her recruiting techniques. Impressed with her wit and insights during her talk, I was excited to read her latest book, Thinking In Bets. I was not disappointed.
Business (And Life) Is Poker, Not Chess
Annie has previously written several well-received poker strategy books. However, Thinking In Bets is her first foray into the broader business strategy genre. Annie’s approach is a highly-readable balance between memorable, real-world analogies and hardcore behavioral science studies. Annie is well positioned to write a book on decision analysis, combining her decades as a professional poker player with her graduate psychology research at the University of Pennsylvania.
As she notes in the books Introduction, “…a bet really is: a decision about an unknown future.” Unlike chess, in which there is no hidden info and very little luck, each poker hand mimics real life. Resources must be committed before information is fully known. Even as additional cards are dealt and more information is evident, no player has absolute command of all the facts until the hand is completed. In many hands, the information is never completely known, as players do not show their cards when they fold.
Real-world decisions are similarly fraught with incomplete information, which leads to a degree of uncertainty. Thus, it’s ironic that many executives think of their strategic decisions as chess moves – nothing could be further from the truth.
I was fortunate enough to interview Annie for my UCTV Innovator Stories series, filmed at UC Santa Barbara. We spoke extensively about her career and Thinking In Bets. You can watch our talk below or download an audio version from iTunes.
The book is packed with insights, of which I have pulled out a few that were particularly impactful to me.
Separate Outcomes From Decision Quality – It is possible to have a 98% probability of winning a poker hand and still lose. The same is true in life. If you lose with a strong hand, the decision to play the hand is still a good one, irrespective of the outcome. If you win, the decision to continue betting with a poor hand remains a bad one, even though you won. It is equivalent to driving home drunk without mishap and concluding the next day that driving while intoxicated is a wise choice.
A key to making better decisions is to parse outcomes from decision quality. For instance, if you fire an underperforming CEO and their replacement also fails, it doesn’t mean that the initial decision to remove the first CEO was erroneous. Instead, you should focus on the recruiting process that led you to select their successor.
Don’t Confuse Luck With Skill – Most people who win with a weak poker hand attribute the outcome to skill, saying, “I knew that card would come up!” In fact, they knew no such thing. Confusing luck and skill makes it nearly impossible to improve from your experiences – bad decisions are reinforced by the occasional lucky break.
Annie describes luck in the decision-making process as “… an outcome (which) occurs because of things we can’t control.” Knowing what is and isn’t controllable is the key to parsing luck from skill.
The Power Of “I’m Not Sure” – Successful, serial entrepreneurs tend to be self-reflective and not dogmatic. As Annie makes clear, there are very few consequential decisions in life, or in business, in which the outcomes are 100% known.
Annie notes that once you admit that you do not have a lock on the future, you can begin to map potential outcomes via pragmatic tools, such scenario planning and premortems.
You Can Be Too Smart – Annie cites studies which indicate that the higher someone’s intelligence, the more likely they are to suffer from mental blind spots, such as confirmation bias. According to Annie, “… the smarter you are, the better you are at constructing a narrative that supports your beliefs…”
Join A Truth-seeking Pod – Annie was mentored by several veteran poker players. This group discussed poker strategy with a ruthless focus on calling out bias in its members’ thinking and seeing the world factually and objectively.
Truth seeking requires a modification of the typical social contract because the interactions can often be uncomfortable. For instance, if you vent to a friend about a contentious work-place situation, they are likely to be sympathetic. This will make you feel better, but it can also make it more difficult for you to solve the underlying the conflict, as your friend’s empathy affirms your one-sided and inherently biased view of the situation.
A fellow truth-seeker will challenge your actions, interpretations of the facts and cause you to view the situation through the eyes of your adversary. Such conversations can be unpleasant, but they are crucial when trying to excise luck, emotion and biases from the decision-making process.
The Book’s Promise
In the Introduction, Annie notes, “The promise of this book is that thinking in bets will improve decision making throughout our lives.” For me, the book fulfilled this promise. I’ve shared it with some of the CEOs with whom I work, as I know it will help them craft more thoughtful decisions.
In addition, I loaned Annie’s book to my best friend, who shares a political mindset that is very different from mine. In her discussion of battling our innate biases, Annie outlines various strategies for bringing together people of diverse opinions. I’m looking forward to my friend completing the book, as I’m confident it will make our political debates more thoughtful, informative and a bit less rancorous.
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