Bet on Yourself: A Founder's Guide to "Thinking in Bets" by Annie Duke

TL;DR

Good decisions don't guarantee good outcomes. Annie Duke's "Thinking in Bets" teaches you to separate process from results, embrace uncertainty, and make smarter wagers in business and life. #VentureStep #BookReview #DecisionMaking

INTRODUCTION

In the high-stakes world of entrepreneurship, every choice is a calculated risk. Founders and investors constantly make critical decisions with incomplete information, where the line between a brilliant move and a costly mistake is razor-thin. The pressure to be certain is immense, but what if certainty is the wrong goal? What if the key to better outcomes is embracing uncertainty and thinking like a professional poker player?

This is the core premise of

Thinking in Bets, the groundbreaking book by Annie Duke, a former professional poker champion turned decision-making expert. ¹¹Drawing from two decades at the poker table, Duke provides a powerful framework for making smarter choices when the facts are fuzzy and the future is unknown. ²²²² She argues that by shifting our mindset from a search for certainty to an assessment of probabilities, we can radically improve our long-term success.

In this episode of VentureStep, host Dalton dissects the essential strategies from Duke's book. He explores the critical difference between a good decision and a good outcome, the cognitive biases that sabotage our judgment, and the practical models we can use to build better feedback loops. This review is more than a summary; it's a playbook for anyone looking to sharpen their decision-making skills and bet on a better process. ³³³³

KEY TAKEAWAYS

• A good decision process can still lead to a bad outcome, and vice versa. Focus on improving your process, not just judging the results. ⁴
• Every decision is a bet on a probable future. Acknowledge uncertainty and weigh potential outcomes instead of seeking absolute certainty. ⁵⁵
• Actively fight cognitive biases like confirmation and anchoring by seeking out dissenting opinions and questioning your initial information. ^66666666
• Establish "truth-seeking" groups to get honest feedback on your decision process, but understand the "conversation contract" and don't force this on everyone. ⁷⁷⁷⁷
• Overcome short-term thinking (your "Night Jerry") by using frameworks like the 10-10-10 rule to consider the long-term consequences of your choices. ⁸⁸

FULL CONVERSATION

Who Is Annie Duke?

Dalton: Today we're reviewing Thinking in Bats by Annie Duke, a poker prodigy turned decision-making mastermind. ⁹Annie Duke is a professional poker player and a renowned author, speaker, and decision-making expert. ¹⁰She has two decades of experience sitting at the table and has won numerous championships, including the 2004 World Poker Series and the Tournament of Champions. ¹¹Her strategic approach has garnered respect and the nickname, the Duchess of Poker. ¹²

The Core Premise: Thinking in Bets vs. Certainties

Dalton: The main premise of her book embraces the unknown and uncertainties. ¹³You assess the probabilities and the unknown risks, try to avoid cognitive biases, and make informed choices under pressure. ¹⁴One of the key concepts is thinking in bets versus thinking in certainties. ¹⁵ Annie argues that many people think in certainties, meaning they're certain in the outcome, and if that's not what happens, then it's bad luck or something unfortunate. It's not related to their decision. ¹⁶

Dalton: Annie proposes that decisions aren't absolute, they're actually a probability. ¹⁷ You have a probability that these things will happen. It might be close to certain, but it can never be 100% of the time. ¹⁸

Dalton: Altering your mindset and recognizing that every decision is a wager with uncertain outcomes encourages you to consider multiple possibilities, weigh the odds, and prepare for these different scenarios. ¹⁹Thinking in bets helps make informed decisions when you don't have all the information. ²⁰

Understanding Probability and Avoiding Cognitive Bias

Dalton: Another thing that's talked about is understanding probability and risk. ²¹It's not about being a math genius; it's more of considering the possibility of different outcomes and how likely those things are. ²²When you're assessing probability and risks, you're also embracing uncertainties and avoiding cognitive biases like confirmation bias or anchoring bias. ²³You shouldn't only seek out information that confirms your decision is a good one, or anchor yourself in information you might have gotten years ago that is no longer true. ^24242424

Dalton: This also entails accepting that your beliefs could change with new information. ²⁵It’s important with fake news and everything else going on. ²⁶You want to be thinking in bets versus in certainties because your outcomes aren't absolute. ²⁷You want to understand the probability and risk of these possible outcomes and embrace that you don't have all the information. ^28282828

The Critical Mistake of "Resulting"

Dalton: When you combine all of those things, you get to a key concept called resulting, which is something you don't want to do. ²⁹One of the good takeaways is that you need to separate your decision and your outcome. ³⁰They are separate things. ³¹

Dalton: Just because you have a good outcome doesn't necessarily mean you have a good decision. And just because you made good decisions doesn't mean you had a good outcome. ³²

Dalton: I think that takes a little bit of rewiring for people because everything in society is built on results. ³³Academics are built on results, the workplace is built on results, financial reporting is built on results, but they don't necessarily account for the decisions that were made along the way. ³⁴An example of a good result from a bad decision is if you drove home after drinking at a bar and didn't injure yourself or anyone else. ³⁵That's a good result, but it was not a good decision. ³⁶

Case Study: Pete Carroll's Infamous Super Bowl Call

Dalton: One crazy example is what the Washington Post called the worst play in Super Bowl history. ³⁷Pete Carroll was the person who called for a pass on the one-yard line against the Patriots in the Super Bowl. ³⁸The Seahawks were up by four points with a couple of minutes left. ³⁹ They're on the one-yard line and the pass gets intercepted. They lose the game. ⁴⁰

Dalton: The news is killing Pete. The public perception was that this was a horrible thing. It should have been a run; you've got one of the best running backs in history on the team. 41414141And that is a bad result, not necessarily a bad decision. 42When the decision was explained, the thought process was the Patriots knew we were probably going to run the ball, so they were going to blitz. 43Passing would improve our time management. 44With those things combined, plus the risk of interception on the one-yard line is only 2%. 45

Dalton: With all those things combined, that is a bad outcome, good decision. ⁴⁶

Case Study: The CEO Who Fired His President

Dalton: There's another story about this separation of decisions and outcomes. Annie Duke was doing a work session and asked everyone to talk about their worst business decision. ⁴⁷One CEO said, "By far my worst decision is firing the president of the company." ⁴⁸ He explained that after they fired the president, it was difficult to find a replacement, revenues fell, and they fell behind competitors. He deeply regretted the decision. ⁴⁹

Dalton: Then Annie Duke asked about the decision process. The CEO said the board of directors met for several months, did a comparison analysis of competitors, and determined they should be at a higher revenue. 50They did an exploratory analysis and discovered the presidents at competing companies had a different set of skills than their current president, and it would take too much time for him to acquire them. 51So they decided it would be best to go external. 52Annie then asked the group if that was a well-thought-out decision process, and everyone agreed it was a bad outcome, not a bad decision. 53

Are You Fielding for Luck or for Skill?

Dalton: There's a story in the book about a player named Nick the Greek. He didn't win much and he fell into the path of resulting, where you are fielding luck versus skill. ^54545454He had a learning loop of belief, luck, bet, outcome. ⁵⁵What you really need is belief, a bet, an outcome, and then skill. ⁵⁶

Dalton: You want to have a learning loop of belief, bet, outcome, skill, and then that keeps going like a water cycle. ⁵⁷

Dalton: Nick the Greek was really stubborn in his beliefs and believed in luck versus skill because he didn't improve his skill. ⁵⁸He believed that pocket aces are the worst hand in poker and would fold them face up, priding himself on being unpredictable. ⁵⁹The long story short is Nick the Greek never learned that he was relying on luck, not skill, and he became the sucker of the table. ⁶⁰

Would You Bet on What You're Saying?

Dalton: When you are speaking with people, maybe you should ask yourself if you would bet on what you're saying. ⁶¹ My friend Carter, he likes poker, and he'll ask me if I'm willing to wager on something I'm saying. He's basically checking me and asking how sure I am. ⁶² I try to check myself as well. If I'm talking about something, I ask myself if I would wager money on it. ⁶³If the answer is no, then I typically don't bring it up, or I'll say, "Hey, I'm not really sure on this." ⁶⁴This opens up the plane for people in your group to correct you and allows you to get new information. ^65656565

The Power of a Truth-Seeking Group

Dalton: Not all groups are created equal. In the book, Annie talks about truth-seeking groups, which are important for self-improvement and improving your feedback loop. ⁶⁶ A truth-seeking group wouldn't just let you vent about being unlucky. They would say, "Okay, let's walk through the scenario. What happened on your side? Were these bad decisions or was this a bad outcome?" ^67676767From there, you try to discover what issues went down and how to prevent them in the future. ⁶⁸

Dalton: Interestingly, Annie's poker group would focus on hands they won. ⁶⁹The person would explain the situation and the decisions they made, but the group didn't need to know the outcome. ⁷⁰⁷⁰⁷⁰The decision is what is important. ⁷¹

Dalton: Unless people explicitly sign up for a truth-seeking conversation, you shouldn't necessarily go that route. ⁷²

Dalton: You need to recognize who is in your truth-seeking group and who isn't. You might have surfer friends, work friends, and then a certain group of friends that are truth-seeking. 73You need to understand there's a place and a time for those conversations, and those conversations aren't with everyone. 74

Defeating Your "Night Jerry": A Framework for Long-Term Decisions

Dalton: Another concept is the Night Jerry versus Day Jerry, from a Seinfeld skit. ^75757575Night Jerry stays up all night and doesn't care about Day Jerry, who wakes up every day tired and groggy. ⁷⁶This relates to temporal discounting, where the "night you" isn't looking out for the "you of tomorrow." ^77777777

Dalton: An example was when the army offered a retirement fund early at 40% of its actual value. A lot of people took the offer, which saved the government a crazy amount of money. 787878787878787878 That was Night Jerry taking over Day Jerry. When you look at yourself 50 years from now, you would be feeling some regrets. 79797979

Dalton: If you're making a rash decision, think about the 10, 10 and 10 rule. 10 minutes, 10 months, 10 years. ⁸⁰

Dalton: You should think about the issues or thoughts about what you're going to do in 10 minutes, 10 months, and 10 years. ⁸¹If your decision in 10 minutes negatively affects your 10-month or 10-year self, you probably shouldn't make it. ⁸² You can also "force your hand" with things like automatic retirement contributions or taking an Uber to a bar so you can't drive home. You remove the choice. ⁸³

Final Thoughts and Takeaways

Dalton: My mother, Lisa, suggested this book, and I agree with her that this should be a mandatory read for high school students. ⁸⁴It allows people to think more independently, be more open-minded, and recognize their cognitive biases. ⁸⁵If you consistently make good decisions, you can have a good life, but if you rely on luck, you get lucky only so many times. ⁸⁶

Dalton: I really enjoyed the book. My only criticism is I wish it had more stories, because the stories were the most memorable parts. 87The poker stories, the CEO firing story, and the worst play in Super Bowl history were really good. 88I would definitely recommend you read the book. 89

RESOURCES MENTIONED

• Book: Thinking in Bets: Making Smarter Decisions When You Don't Have All the Facts by Annie Duke
• TV Show: Seinfeld
• Sports Teams: Seattle Seahawks, New England Patriots
• News Outlets: Washington Post, Fox Sports, Seattle Times, The New Yorker

INDEX OF CONCEPTS

Annie Duke, Thinking in Bets, World Poker Series, Cognitive Biases, Confirmation Bias, Anchoring Bias, Resulting, Pete Carroll, Seattle Seahawks, New England Patriots, Nick the Greek, Carter, Truth-Seeking Groups, CUDOS, Night Jerry vs. Day Jerry, Temporal Discounting, 10-10-10 Rule, Lisa