Thinking in Bets

Thinking in Bets – the Novel Mental Paradigm

Because there are relatively few certainties in life, when we make choices, we take a chance. Whether it's deciding where to live, which job to apply for, or which automobile to purchase, the consequences of our choices are contingent on a variety of other circumstances. It is just impossible to know every single significant variable at the time of decision-making. Annie Duke shares advice on how to overcome your decision-making limitations and eventually make more intelligent choices.?

In the majority of situations, we are not betting against other people; rather, we are "betting against all the future possibilities of ourselves that we are unable to choose." We are continuously making choices between alternate worlds. Because our bets are predicated on our beliefs, their quality is dependent upon the quality of our beliefs. While making better choices does not ensure better results, they do raise their chance.?

Overpassing Absolutes?

Many individuals get into the trap of thinking in absolutes. We often conceive of choices as being either correct or incorrect. Which category the choice fits into is outcome dependent. As a result, complications develop when we assume our judgement before an incident was totally correct. Our confidence will be shaken if the result does not match our forecast.?

The advantage of approaching each choice as a bet is that you pause to acquire more information and consider more rationally. When you begin to see choices as bets, you get an appreciation for the range of potential outcomes and modify your degree of certainty appropriately. Additionally, thinking in terms of bets enables you to be more empathetic toward yourself. You are no longer associating your choices with an ego. These choices may result in a different conclusion than anticipated. It is freeing to detach your ego from these choices.?

Expected positive value?

Along with seeing choices as bets, we must also examine the potential benefits. The anticipated value of choice is derived by multiplying the probability of a certain result by the potential reward associated with that event. The following is the equation:?

Expected Value = Likelihood of Reward x Possibility of Reward?

Always choose a choice with a positive anticipated value. When the anticipated value exceeds your personal cost, it is said to have a positive expected value. Personal cost encompasses the time required to carry out your choice as well as the financial and emotional commitment required.?

Evaluating your choices?

The quality of a result is not synonymous with the decision's quality. In life, you may make horrible choices and yet have positive outcomes. However, if you do not evaluate that choice seriously and continue to make the same errors, you will face the consequences. You will encounter more negative consequences than positive ones.?

Bias Towards Self-Sufficiency?

One of the most common errors is to equate excellent results with your greatness. When things go wrong, you'll point the blame to circumstances you believe are beyond your control. This self-serving prejudice must be eradicated. By eliminating this prejudice, we may arrive at an objective truth.?

If we do not embrace our poor choices as a contributing factor to poor results, we will never learn. Each time we blame external forces, we deny ourselves the chance to improve. Rather than seeing confidence as an all-or-nothing proposition, we should acknowledge that uncertainty is a natural aspect of life.?

Backcasting: Projecting a Positive Future?

We will make better life choices if we start with a goal and move backwards. This technique enables us to see the effect of tiny positive choices as well as the effect of low-probability occurrences impacted by chance. This should assist us in accepting that even the most audacious aims are not excessive. A mix of low-probability circumstances and sound judgement may assist you in achieving any objective.?

The Rule of 10-10-10?

The 10-10-10 Rule states that you should constantly consider your future self. Attempt to keep your attention off of what is occurring right now. Rather than that, concentrate on what will occur in the future. We should examine how a choice will affect us in ten minutes, ten months, and ten years.?

If you have the opportunity of making a choice that will likely benefit you in the future, you should take it. If the present cost is less than the anticipated value of the future result, you should proceed.?What should guide us is what Ayn Rand defined as the "long term rational self-interest", although in this context, "rational" may be defined differently by different people. Being myself an Orthodox Jew, I will define my "long term rational self-interest" differently than, say, a secular Westerner such as Ayn Rand (although she was Jewish herself), but this does not change the argument per se.

Confidence Redefined?

Annie Duke teaches us how to reframe our trust in our beliefs. Motivated reasoning is a phenomenon in which emotionally charged reasoning is utilized to provide reasons that favor desired outcomes over rational ones. The more intellectual individuals do not always choose the logical choice; rather, they are more adept at constructing supporting justifications for their erroneous ideas. Rather than seeing confidence as all-or-nothing, our confidence should include all shades of grey in between.?

Bottom Line?

Rather than relying only on data and facts to make our decisions, we're better off focused on developing a robust process. By establishing a robust procedure inside our businesses, we are hedging our chances, since sometimes it's all about the fortunate draw. I learned when I was working in Bank Hapoalim that the *process* is what matters as good processes will, on average, give better results. At the end of the day, every decision we make is a bet. With each choice, we jeopardize our resources, whether they be energy, money, or other living necessities. When we grasp the nature of our options and the techniques that might assist us in making the optimal choices, we raise our game and increase our chances of happiness and success. Understanding the principles provided in Thinking in Bets empowers individuals to take calculated risks and accept their consequences with less negativity and more realism. This mentality will guarantee that you maintain the upper hand.?