Wharton management professor Philip Tetlock explores this approach in his book Superforecasters (Test your own probability calibration with this assessment tool inspired by Tetlock’s work).ĭuke next turns to assessing outcomes after the fact, through “outcome fielding.” Was an outcome driven by luck or skill? Duke offers guidance: Focus on objectivity and seeking out the truth, avoid extremes, preserve a positive self-narrative, and use a betting context to shift the psychology. This redefines right and wrong, since degrees of difference are not the same as absolutes. The solution is to embrace uncertainty by calibrating our confidence: Rather than expressing 100 percent certainty, we can be 75 percent confident. We tend towards absolutes, and indulge in “motivated reasoning,” seeking out confirmation while ignoring contradictory evidence.
#Thinking in bets update
We are quick to form, and slow to update our beliefs. Yet our strategy is often based on beliefs that can be biased or wrong. When everything is a bet, our betting strategy can optimize our decision-making. Ordering the chicken instead of the steak is a bet. Sales negotiations and contracts are bets. Duke explains, “Job and relocation decisions are bets. While poker involves explicit bets, our lives involve implicit bets. This is a probabilistic approach to interpreting outcomes, as with betting in poker. When we fail, however, it does not always mean we chose wrong-it could have been bad luck. Poker is an ideal context for exploring decision-making, since players make bets with limited information, and get feedback through money won or lost.ĭuke begins with a discussion of our tendency to judge decisions based on how they turn out, known in poker as “resulting.” If we succeed, it was a good decision, but if we fail, it was a bad one. She pursued a PhD in cognitive linguistics at Penn, and then embarked on a career in poker, becoming one of the leading female money winners in history. If you are a Wharton graduate seeking to build on these foundations, you should read Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts by Annie Duke GR92.ĭuke’s background provides fertile ground for an exploration of decision-making.
The science of decision-making is deeply embedded in Wharton’s DNA.
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