Thinking in Bets

by Annie Duke

  While the workers were in the tunnel, the bin exploded, severely injuring the West Side employees. Those injured sued ConAgra and West Side. The jury awarded $180 million in compensatory and punitive damages. In addressing the punitive damages against West Side, Judge Easterbrook, writing for the court, pointed out that Illinois law required a “gross deviation” from the standard of care to award punitive damages. Finding no evidence in the record of any foreseeable likelihood of explosion at the time the foreman ordered the workers to remove tools from the tunnel, he concluded, “The verdict appears to be a consequence of hindsight bias—the human tendency to believe that whatever happened was bound to happen, and that everyone must have known it. If [the foreman] believed that an explosion was imminent, then he is a monster; but of that there is no evidence. Hindsight bias is not enough to support a verdict.”

  Once we know there was an explosion, it’s difficult to imagine the actions of the parties when the explosion was only one of several possible futures. The members of the jury had a conflict of interest. When they heard the story of the men entering the tunnel to retrieve the tools, they knew the outcome. The jury lopped off the other branches of the tree, all the other ways things could have turned out given the situation in the grain-storage bin and, in hindsight, all they could see was a confluence of circumstances with an inevitable tragedy at the end.

  Imagine how things would be different for the protagonists throughout this book if more of us acted like Judge Easterbrook.

  Steve Bartman could have used a stadium full of Cubs fans with Judge Easterbrook’s perspective. They would have recognized that the Cubs losing the game was only one of many ways it could have turned out. At the moment Bartman and others around him reached for the foul ball, the branch of the future where Steve Bartman touches the ball was a small one, and the chance of the Cubs losing after that was the tiniest of twigs, requiring a number of unlikely on-field developments (like the pitching ace giving up hit after hit, and the great-fielding shortstop committing a rare error on an inning-ending double play). Just as the foreman ordering workers into the tunnel didn’t cause the explosion, Bartman touching the ball didn’t cause the loss. He just got an unlucky result, based on all the things that happened over which he had no control after the foul ball touched his hands.

  Pete Carroll and the world of Monday Morning Quarterbacks could have used the judge’s reminder that we tend to assume that, once something happens, it was bound to happen. If we don’t try to hold all the potential futures in mind before one of them happens, it becomes almost impossible to realistically evaluate decisions or probabilities after.

  This turned out to be a big part of the problem for the CEO in the wake of firing his president. Although he had initially characterized the decision as one of his worst, when we reconstructed the tree, essentially picking the branches up off the ground and reattaching them, it was clear that he and his company had made a series of careful, deliberative decisions. Because they led to a negative result, however, the CEO had been consumed with regret. When he looked back at his decisions, he couldn’t see all those branches and their likelihoods. He could only see the trunk. All he saw was a bad result.

  The CEO removed all those other branches with a chainsaw and ran them through a wood-chipper. They disappeared and he acted as if they never existed. That’s what hindsight bias is, and we’re all running amok through the forest with a chainsaw once we get an outcome. Once something occurs, we no longer think of it as probabilistic—or as ever having been probabilistic. This is how we get into the frame of mind where we say, “I should have known” or “I told you so.” This is where unproductive regret comes from.

  By keeping an accurate representation of what could have happened (and not a version edited by hindsight), memorializing the scenario plans and decision trees we create through good planning process, we can be better calibrators going forward. We can also be happier by recognizing and getting comfortable with the uncertainty of the world. Instead of living at extremes, we can find contentment with doing our best under uncertain circumstances, and being committed to improving from our experience.

  Reaction to the 2016 election provides another strong demonstration of what happens when we lop branches off the tree. Hillary Clinton had been favored going into the election, and her probability of winning, based on an accumulation of the polls, was somewhere between 60% and 70%, according to FiveThirtyEight.com. When Donald Trump won, pollsters got the Pete Carroll treatment, maybe no one more than Nate Silver, founder of FiveThirtyEight.com and a thoughtful analyzer of polling data. (“Nate Silver was wrong.” “The pollsters missed it.” “Just like Brexit, the bookies blew it.” Etc.) The press spun this as a certain win for Clinton, despite the Trump branch of the tree being no mere twig at 30%–40%. By the day after the election, the Clinton branch had been severed, only the Trump branch remained, and how could pollsters and the polling process have been so blind?

  One of the things poker teaches is that 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. With the constant stream of decisions and outcomes under uncertain conditions, you get used to losing a lot. To some degree, we’re all outcome junkies, but the more we wean ourselves from that addiction, the happier we’ll be. None of us is guaranteed a favorable outcome, and we’re all going to experience plenty of unfavorable ones. We can always, however, make a good bet. And even when we make a bad bet, we usually get a second chance because we can learn from the experience and make a better bet the next time.

  Life, like poker, is one long game, and there are going to be a lot of losses, even after making the best possible bets. We are going to do better, and be happier, if we start by recognizing that we’ll never be sure of the future. That changes our task from trying to be right every time, an impossible job, to navigating our way through the uncertainty by calibrating our beliefs to move toward, little by little, a more accurate and objective representation of the world. With strategic foresight and perspective, that’s manageable work. If we keep learning and calibrating, we might even get good at it.

  ACKNOWLEDGMENTS

  The list of people who made it possible for me to write this book is long. It starts, of course, with my family: my father Richard, and my late mother Deedy, who inspired in me a love of games, a love of teaching, and a love of writing—a good brew for creating this book; my brother Howard, for being a great brother and for his obvious influence in my poker career and my dedication to treating the art of decision-making as a science, and vice versa—many of the ideas in this book originated from conversations with him; and my sister Katy, for being a supportive sister, an inspiring writer and poet who I hope to impress the littlest bit, and for doing a careful read and edit of the book, encouraging me every step of the way.

  Levine Greenberg Rostan Literary Agency and Portfolio collaborated on the business of getting this book published. It took a lot to get me into this project, and a lot more to get this book out of me. Wonderful people in both organizations did so much to help me and enhance the final product:

  Jim Levine, my literary agent and hand-holder, who got me through the proposal writing and has been there every step of the way. Jim believed in the project from the beginning, helped me work through many different ways to attack the material, and patiently guided me through many iterations of the proposal. His enthusiasm for this book never wavered, and kept me sane through my own periods of self-doubt. And to Matthew Huff, Jim’s assistant, who has been there since the very first meeting and offered invaluable help in the proposal-writing process.

  Niki Papadopoulos, my editor and therapist, who made this book immeasurably better in so many ways, not the least of which by suggesting a format that forced an organization of ideas that I could not have achieved otherwise. I’m forever grateful. And to Leah Trouwborst for, along with Niki, providing encourageme
nt, editorial guidance, and occasional therapy. And to Vivian Roberson for keeping the production trains running on time.

  Everyone in these acknowledgments (and many others) encouraged me to write this book. I’d like to single out, for specific contributions in this regard, Dan Ariely, who also introduced me to Jim Levine, and Charles Duhigg, who also kindly shared his book proposal for The Power of Habit, which was an invaluable guide to writing my own proposal. Dan and Charles played significant roles from the time this project was in its infancy. Both gave generously of their time and attention, and encouraged me to believe that poker provided valuable insight into decision-making.

  Glen Clarkson’s encouragement has also been remarkable. He has tried to get me to write this book forever. I insisted on writing about poker strategy first. He was a noodge in the most positive sense of the term, and he was right.

  Among the people who inspired me in my education, several stand out:

  Lila Gleitman, my advisor at Penn, who inspired in me a love of the study of learning and has been a role model for scientific endeavor—intrepid, funny, smart, insightful, and passionate about her work. She taught me to think like a scientist and, at eighty-eight, is still the most inspiring person I know. She has also been incredibly generous in the time since she was my advisor, especially given that I left the program before getting my PhD. She was happy for the life I created after leaving and never once made me feel bad for not finishing. And to the memory of her husband Henry, who was also my mentor, a master of experimental design, and a character who looms so large in my intellectual development.

  Barbara Landau, who got me interested in and excited about psychology at Columbia. I am grateful for the four years I was able to spend as her research assistant while an undergrad. She also pushed me to continue my studies at Penn, where she had studied with Lila and Henry Gleitman.

  Jon Baron, who taught my first seminar on decision-making. Bob Rescorla, for sharing his fascination with conditioning and guiding me in the depths of learning about learning. And all the professors at Columbia and Penn that taught me and nurtured in me the interest and curiosity to explore science, psychology, behavior, learning, and decision-making.

  Even after I took a leave of absence from school to play poker—for twenty years—I never left the subjects that captivated me: how we learn and what we do with the product of our learning. I am grateful to so many people I met along the way in poker. I appreciate the poker community for welcoming a young girl into the game, and helping me find mentors, friends, and unforgettable characters who enriched my time in the game. And I am grateful to the game of poker itself, which offered me something to be passionate about, rewarding me for discoveries about its complexity, at the same time reminding me that, for every layer I peeled off, there were always more layers beneath it.

  My appreciation for poker would not be complete without especially thanking Erik Seidel for innumerable reasons, including showing me what it means to really strive to be a rational thinker.

  Particular thanks to David Grey, for sharing his story about Ira the Whale; Phil Hellmuth, for uttering one of the best quotes in poker history; and John Hennigan, for sharing his story about moving to Des Moines on a bet. These superlative players and many others also bestowed their expertise and friendship, a truly wonderful gift. I was lucky to watch and learn from, in addition, remarkable players including Chris Ferguson, Doyle Brunson, Chip Reese, Gus Hansen, Huckleberry Seed, Ted Forrest, Andy Bloch, Mori Eskandani, Phil Ivey, Bobby Buckler, Allen Cunningham, Danny Robison, and Chau Giang. (These and so many other wonderful players I encountered over the years weren’t just remarkable in their skills: they were remarkable in their variety of approaches toward the similar goal of making good decisions.)

  This book would not exist without the input and feedback I received from all the companies, conferences, professional groups, and executives who have hired me over the years, giving me an opportunity to workshop my ideas through keynotes, retreats, consulting, and coaching. That started with Roger Lowe, who took a chance on inviting a poker player to speak to options traders about how poker could inform decision-making. Without his outside-the-box request back in 2002, this book might never have happened. Those nascent ideas I expressed at that retreat were the small beginnings of what bloomed over time into this book.

  During the time it took to write this book, countless friends in publishing, academics, and business shared their expertise, knowledge, and passion, engaging me in discussions, answering my questions, and leading me to further information:

  Colin Camerer, who took time out to talk to a stranger.

  Stuart Firestein, for reminding me as I wavered about whether to write this book that uncertainty is an interesting, exciting topic. He continues to be an inspiration to me and a great friend. His joyfulness and enthusiasm are contagious, even if they are impossible to duplicate.

  Olivia Fox Cabane, for encouraging me and enthusiastically believing uncertainty is an interesting topic to write about.

  Victoria Gray, for introducing me to so many brilliant scholars through Adventures of the Mind (including George Dyson and Stuart Firestein) and for being such a great friend.

  Jon Haidt, whom I first met when we were first-year graduate students at Penn, for taking time out after being swamped after the 2016 election to get on the phone with me, and for reminding me to delve back into John Stuart Mill.

  Maria Konnikova, who helped me through the process of writing this book and has shown me a fresh perspective on how poker can inspire. We both share a crush on Erik Seidel’s intellect.

  Dave Lenowitz, for his intellectual curiosity and willingness to share ideas.

  Robert MacCoun, for several great conversations on the topic of outcome blindness.

  Gary Marcus, for engaging me in some long conversations on subjects that helped form the ideas of the book. I first met Gary when we were in grad school, when I was a student of Lila’s and he was a student of Steven Pinker’s. We reconnected years later after I started working on this book, and the conversations I have been lucky to have with him about memory and time were invaluable.

  Gabriele Oettingen and her husband Peter Gollwitzer, psychology professors at NYU, who were kind enough to have a very long lunch with me to talk about mental contrasting. That conversation was invaluable to this book.

  Gerry Ohrstrom, for reintroducing me to Gary Marcus, who in turn introduced me to Gabriele Oettingen and Peter Gollwitzer.

  Joseph Sweeney, whose love of learning and devouring of material in this space led to many long lunch conversations that informed this book and made it better in so many ways.

  Philip Tetlock, for a conversation that became three of the most informative hours of my life; also for encouraging me to reacquaint myself with Robert Merton’s scientific norms.

  Joseph Kable, for kindly having lunch with me to talk about the brain circuitry recruited in imagining the future.

  Thank you to all my friends and colleagues at How I Decide, an educational nonprofit foundation I cofounded with the mission to equip youth with better decision-making and critical thinking skills (www.howidecide.org). Thanks to the all the dedicated folks who do the heavy lifting, executive director Dave Lenowitz and all the staff: Dan Donaldson, Dylan Gordon, Jillian Hardgrove, Adriana Massara, Ramin Mohajer, and Joseph Sweeney. And thank you to all the members of the board and advisory council. In addition to so many individual contributions from these wonderful people to the book, their hard work and dedication have been a constant inspiration for me to do my best at understanding and teaching decision-making skills.

  Thanks to the following people who read early portions or drafts of this material and offered their comments: Jim Doughan, Paul Schoemaker, T. C. Scornavacchi, Todd Simkin, and Joseph Sweeney.

  A special thanks to Michael Craig—who gave me extraordinary and invaluable editorial help. Without him this book would nev
er have happened. I am grateful to him for his professional help and for being a good friend.

  I am indebted for the help of Jenifer Sarver, who literally runs my professional life and keeps the trains running on time; I’d fall apart without her. I’m also thankful for Luz Stable’s vital role in helping me juggle my business responsibilities while writing this book.

  I appreciate that my friends graciously put up with my being in a black hole during the writing of this book and patiently waited for me to stick my head back up. I canceled plans more times than I can count and the understanding I got back will not be forgotten.

  This book truly would not have happened without Eric, who puts up with me and inspires me, both in the writing of this book and in every other way. Thank you to my stepchildren, who have made my life so much fuller, and have always been patient and understanding.

  Just as I benefited greatly from the foundation and continuous help provided by my parents and my siblings, my most important influence continues to be my wonderful, exceptional children. They put up with me. They put up with this book. Teaching them has been the goal of my life, and yet it’s impossible to even contemplate all the things they’ve taught me. They are awesome and inspire me every day.

  NOTES

  INTRODUCTION : WHY THIS ISN’T A POKER BOOK

  On several occasions in the book, I refer to tournament poker results. In addition to cash games, poker can be played in a tournament format. In tournaments, players pay an entry fee and receive tournament chips, good only within the competition. They play at assigned tables, at stakes designed to rise on a pre-established schedule, and are eliminated when they lose all their chips. The tournament winner ends up with all the chips, but prize money is awarded based on order of finish. My source for tournament titles and earnings is the Hendon Mob Database (pokerdb.thehendonmob.com), which includes results from over 300,000 events going back to the first World Series of Poker in 1970.