Multi-Disciplinary Reading – Book Reviews

Thinking in Bets, Annie Duke, 2018 – Poker has helped me tremendously with my decision-making and I could relate to this book a lot. It covers everything from decisions vs outcomes, skill vs luck, resulting and hindsight bias, game theory, truthseeking, motivated reasoning and self-serving bias, regret from decision theory, temporal discounting, backcasting and premortems. Some of these topics have books of their own so don’t expect a lot of depth. It is sufficient and flows well as a quick read.

My Notes –

• A poker hand lasts 2 mins but involves 20 decisions and each hand ends with a result of win / lose (immediate feedback)

• A decision is a bet about an uncertain future

• Poker hand outcomes aren’t an indicator of decision quality and its hard to leverage it for learning (good decisions may have bad outcomes)

• We must get better at separating outcome quality from decision quality

• Two things that determine how our lives turn out: quality of decisions and luck

• Resulting – Our tendency to equate the quality of a decision with quality of its outcome

• When asked to think about good and bad decision from last year, most will choose a decision with good and a bad outcome

• Hindsight bias is a companion of Resulting (Should have seen it coming)

• Our brains are evolved to create certainty and order and its uncomfortable for it to think luck plays a significant role

• Type I (false-positive) and Type II (false-negative) errors – Hearing rustling and thinking its a lion when its not (non-fatal) vs thinking its not when it is (fatal)

• Most decisions are made by reflexive mind vs deliberative mind (Kahneman’s System I vs System 2)

• Interpolating deliberative and reflexive systems is what making a living out of poker requires (Harmonize otherwise irresolvable conflicts)

• Game theory – study of math models of conflict and co-operation between intelligent, rational decision makers (addresses changing conditions, hidden info, chance and multiple people involved in decisions)

• John Von Neumann is the father was game theory (worked on it after Manhattan project. Nuclear disarmament and prisoner’s dilemma probably played a large part in the inspiration for “Theory of Games and Economic Behavior”)

• Chess is not a game. Its just a well-defined form of computation. There’s always a right solution. Real games aren’t like that (Neumann)

• Decisions of business, personal finance (saving, spending), health and lifestyle choices, raising our children and relationships are “real games”

• Chess is not a great model for decision-making in life, Poker is (hidden/incomplete information, uncertainty, luck)

• Uncertainty gives us a lot of room of deceive ourselves

• Our lives are too short to collect enough data from own exp. to understand decision quality

• Being comfortable with “I’m not sure” is a vital step to being a better decision-maker (make peace with not knowing)

• “I don’t know” is not a failure but a necessary step toward enlightenment

• Thoroughly conscious ignorance is a prelude to every real advance in science (Maxwell)

• If we misrepresent the world at the extremes of right and wrong, our decision-making suffers

• The world is structured to give us lots of opportunities to feel bad about being wrong if we measure ourselves by outcomes

• Being wrong hurts more than being right feels good (Kahneman)

• You have to backup your belief by putting a price on it (money where your mouth is)

• Not placing a bet is itself a bet (every decision commits us to a course and eliminates the alternatives)

• When we make a decision we are betting against all the future versions of ourselves we are not choosing

• More accurate our beliefs (using experience and information to update it), the better our decisions

• People find it easier to believe and harder to doubt (Taking info at face value and updating their beliefs)

• How we form our beliefs is shapes by evolutionary push for efficiency at the cost of accuracy

• Truthseeking – habit of seeking truth even when it doesn’t align with your beliefs

• Beliefs once formed are hard to dislodge. It strengthens itself by actively seeking confirming evidence. This circular information-processing is motivated reasoning (Internet these days is doing the motivated reasoning for us through filter bubbles)

• Fake news vs disinformation. Fake news suits particular narrative and might not be backed by facts while disinformation is made of real, verifiable facts but pushes a narrative that feels vetted

• The smarter you are, the better you are at building narratives that support your beliefs (blind-spot bias)

• Confidence in your beliefs should reflect how confident you are (not on/off but fuzzy)

• Experience is not what happens to a man, it is what a man does with what happens to him (Aldous Huxley). Experience doesn’t make experts

• Belief → Bet → Outcome → Separate Luck and Skill → Update beliefs → Bet again (Learning loop)

• Snackwell’s phenomenon – People increase their consumption of something that has less of a bad ingredient (Low fat, low sugar)

• A fixed reward schedule is easily extinguished when reward goes away (rats pushing lever for food stopping pushing when food stopped). When uncertainty is introduced (Reward 1/10 times), the lever pushing went far longer

• Taking credit for good stuff and blaming luck for bad (self-serving bias) makes sure we learn nothing

• Motivated reasoning and self-serving bias distort reality a lot based on outcomes

• Engaging the world through a lens of competitiveness is deeply embedded in our animal brains. While a comfortable income, good health, supportive marriage and lack of tragedy or trauma ought to keep us very happy, it only accounts for 8-15% variance of happiness. What matters most if how we are doing comparatively

• Cue → Routine → Reward (Habit loop). To change a habit, you must keep the old cue, deliver the old reward but insert a new routine (The Power of Habit)

• Give yourself credit for being a good mistake-admitter, good finder of mistakes in good outcomes, a good learner and good decision maker (To avoid motivated reasoning and self-serving bias and envy)

• Develop habits around accurate self-critique

• Euphoria or misery with no choices in between, is not a self-compassionate way to live

• Truthseeking works in groups but intellectual and ideological diversity is important within group and focus on accuracy, accountability and openness a must (otherwise it can quickly become a useless echo chamber)

• If we are in love with our opinions, it can cost us in a bet

• A predetermined loss limit acts as a check against irrationally chasing losses (stop-loss)

• When discussing decisions, discuss the hand upto the decision point and no further (How the hand turned out doesn’t matter)

• Skepticism – approaching the world by asking why things might not be true rather than why they are true

• As decision-makers we must collide with past and future versions of ourselves

• Improving decision-quality is about increasing our chances of good outcomes, not guaranteeing them

• Temporal discounting – The tendency to favor our present-self at the expense of future self. Night Jerry wants to stay up and Morning Jerry has no say in that decision (Seinfeld reference)

• We discount temporally by an irrational lot by going for a small reward now instead of waiting for a large reward later

• Large temporal discounting can be avoided by giving a voice to our future selves (by imagining future, or recounting similar past) and thus altering the brain pathways by altering the hippocampus and prefrontal cortex (still works only sometimes and only when deliberating)

• If Night Jerry isn’t thinking about Morning Jerry, he is definitely isn’t thinking about saving for retirement decades away

• Regret is an useless emotion except when moved prior to decision. Use your future-regret to make better decisions (Minimizing maximum regret is a model I use extensively)

• Tilt – poker jargon for blowing some recent event out of proportion and reacting in a drastic way (comes from pinball machines which had sensor to disable flippers when violently jostled). We aren’t decision-fit when on tilt

• Ulysses contract – Ulysses told his crew ahead not to free him if upon the Sirens’ song he asked them to. (A monthly SIP is a Ulysses contract)

• The expert the player, the further into the future they plan

• Backcasting – working backward from a goal figuring out what got us there

• Premortem – Check your positive attitude at the door and imagine not achieving your goals and why

• Backcasting imagines a positive future and premortem a negative one (cheerleader and heckler)

• None of us are guaranteed a favourable outcome but we can always make a good bet

There’s nothing new here though that’s not already on Kahneman’s Thinking Fast and Slow but that book can be a daunting read for most people and this can be a good substitute if concerned only with decision-making under uncertainty. 8/10