Making Better Decisions by Thinking in Bets

- [Interviewer] Well, so, I'm really intrigued by your book called Thinking in Bets: Making Smarter Decisions When You Don't Have All the Facts. That sounds perfect for what we're about here, sharpening universal skills for professionals. That's a big thing that comes up a lot. So tell us, what's sort of the main idea behind the book and what led you to write it here and now? - [Annie Duke] Yes, thanks for asking me that. So the main idea of the book is that we act like the result of our decisions and the quality of our decisions are really closely linked. So we think that the world is a much more predictable place than it actually is and we aren't really acknowledging how much uncertainty there is. That how much it's the case that you could make really good decisions and have very bad outcomes because of them. You could make very, very bad decisions and have really good outcomes because of them. And not only do we not acknowledge how much uncertainty there is in that, which really stems from sort of two places. One is luck, that even if you make a perfect decision, there's still luck involved in how the future unfolds. But also in hidden information is another place where there's a lot of uncertainty, meaning there's lots of information that's hidden from you. There's just lots and lots of things that we don't know or can't know as we're trying to make decisions. So decision quality is really dependent on how much are we taking into account luck, but also, what do we know? What do we know as we're trying to make that decision? And we don't acknowledge, or kind of admit to, how much uncertainty there is. We're much more sure of the things that we believe than we probably should be. And we're much more sure about how the future will turn out than it should be. One of the ways that I think about that is to say, "Let's start thinking about things through the frame "of thinking in bet." Because when we're challenged to a bet, what it does is really exposes the uncertainty in whatever it is that we've just been challenged to a bet on. Even something really simple, like if I were to say Citizen Kane won Best Picture and you said, "Want to bet?" All of a sudden I would step back and say, "Hold on a second! "Maybe I'm not so sure of that." It exposes the uncertainty. And if we can expose the uncertainty more, we'll be better decision makers, 'cause it's just more accurate to how the world is. We sort of know when we talk about it in the abstract. That you can have a bad outcome as a result of a good decision and a good outcome as the result of a bad decision. So I mean, just sort of in the abstract, if I say to you, "When you run red lights do you "sometimes get through safely?" You say yes, which is obviously a good outcome. And if I ask you if that was a good decision you would agree, "No." And if you run green lights you can get into an accident. So just because you've been at a bar and you choose to drive after you've had one too many and you get home safely, which is a good outcome, I imagine that you'll agree with me that that doesn't necessarily mean it was a good decision. So in the abstract, we kind of get this. But the problem is that our behavior doesn't really get this. We don't act like that. We act like once we know the outcome that we can see right into the quality of the decision and that those two things are very tightly linked.