🤔🧠🎲Why Thinking in Bets
Embracing Bets, Not Regrets
Dear Why Team member,
I hope this week’s message finds you well and making better bets - better trades.
I’m surprised I didn’t read her book sooner; ‘Thinking in Bets’ by Annie Duke, is an absolute must read, or hear. I very much enjoyed the audio version read by her. There is something a bit special when an author reads their own book as the tone and intonation of their voice can bring much more meaning to the text than a professional audiobook narrator. [Link to Steve’s Recommended Reading List here]
In her book, Annie references many books that have influenced my own thinking over the years. I built my career as an early student and adopter of Behavioral Finance, developing many of my own ideas while being significantly illuminated by the ideas of others. I even had the pleasure of having lunch on the campus of Princeton University with Dr. Daniel Kahneman the year he won the Nobel Prize. Oh, the places you’ll go, said Dr. Seuss.
A powerful life-changing understanding I gained over the years, is to not believe everything you think, so much so, I made it the title of my first book. We humans are a bundle of biases and one of the most destructive biases to a happy life is our hindsight bias. We often misuse our own hindsight to hurt ourselves rather than to help ourselves.
In the game of life, we make bets with every decision we make. However, we waste valuable time in self-abuse and incrimination when an unexpected outcome appears - we cannot help but think with our 20/20 hindsight vision that we ‘should’ have known better. Probability is the measure of a good decision, a good bet, not possibility.
This is why I often say outcome does not define the quality of a choice. Why? Because outcome was not available when we made the choice. And while this progress in my thinking has significantly served me and I hope many others, Annie Duke takes these insights to the next level - and with significant authority as a World Champion Poker player
In her book, she shares that her and her poker player colleagues refer to hindsight bias as ‘resulting’, the misuse of results to argue the quality of a past decision. The classic armchair quarterback who is all-knowing after the play has gone wrong, no matter how good the odds were that it could have gone right, he proclaims AFTER the play, he would have made a better decision. Professional athletes must develop thick skin with their fans as they can go from zero to hero and then back to zero, sometimes, in a single game.
However, when we put our full effort in and we begin focusing more on the quality, the probability, of the choices we make, the trades we make, the bets we make - and not using hindsight to berate ourselves or others - life becomes easier and has less regret. When we embrace more that we can’t know for certain most outcomes and that even the best bets can lose, we can applaud ourselves more for the trying, remembering “nothing ventured, nothing gained.”
This week, consider how all our decisions are a bet, a bet the car will start, a bet we’ll reach our destination, a bet the party will be fun, a bet our child will enjoy the activity, and on and on - not ever forgetting there is still a probability for a different outcome. It may be a very low probability, but it can still happen - and if that very unlikely outcome should happen, it did not make our decision wrong, or bad. While there certainly are bad decisions, bad results are not evidence of them. Even the best made plans are not certain to give us what we want.
Thinking in bets and less in regrets can significantly improve the quality of our life. Improving significantly how we respond to life, reducing our anxiety, improving our health, and empowering us to be a role model for those we love.
The first hour, alone, is worth the purchase of the audio book.
I highly encourage you to make the bet, download it, and begin listening today. You’ll be so glad you did. The ideas, insights, and deeper understanding will absolutely fuel greater freedom in your life. Empowering you to become even more for yourself and others. Here’s to better bets and better trades to fuel a better life.
Make it a great week!
Steve Luckenbach