Thinking in Bets | Book Review

"I realized pretty quickly that I hadn't really
left academics so much as moved to a new kind of lab
for studying how people learn and make decisions. (p. 2)

Annie Duke offers a fascinating, unique and engrossing comparison between leadership decision-making and poker playing in her work subtitled Making Smarter Decisions When You Don't Have All The Facts. In our Academy Leadership Effective Decision-Makingworkshops (see Vroom) we distinguish between time-based and developmental-based decision making noticing how several decision-making criteria differ between the two. Both methods require effective Decision Quality, and Duke's laser focus on self-improved decision quality over a successful poker playing career offer vital lessons for all leaders.

Many of us struggle with daily distractions, and the pressure of making decisions with imperfect or incomplete information. Duke informs us that is the normal state in poker, where over the course of a hand of poker, [one] could be involved in up to twenty decisions. And each hand ends with a concrete result: Win money or lose money (p. 2).

This review highlights key terms and tendencies both poker players and leaders encounter, highlighted in bold along with great takeaway quotes.

Poker and Life | Imperfect Information

Duke shares a poker player term for our tendency to equate the quality of a decision with the quality of its outcome: "resulting" (p. 7). This habit is likely worse when a favorable result occurs and we don't take the time to understand why. Ask yourself how frequently an After Action Review (AAR) or other form of evaluation takes place when everything seems to work out just fine? Keep in mind the difference between a wrong decision and a bad decision; Wrong decisions are part of life (bad outcome) and bad decisions (bad process) are essentially unforced errors.

When we don't review or assess our decisions, our minds are likely to create blind spots, such as hindsight bias, or the tendency, after an outcome is known, to see the outcome as having been inevitable (p. 10). Duke cites Colin Camerer as to why this happens: "We have this thin layer of prefrontal cortex made just for us, sitting on top of this big animal brain. Getting this thin little layer to handle more is unrealistic." (p. 13).

Duke offers a key insight: Chess, for all its strategic complexity, isn't a great model for decision-making in life, where most of our decisions involve hidden information and a much greater influence of luck. Poker, in contrast, is a game of incomplete information (p. 21). It's very natural to wish for more, or perfect, information, just like a chess Grandmaster. But our real world is much more like poker.

On pages 23-24, Duke shares the story about Vizzini (from The Princess Bride), demonstrating the peril of making decisions with incomplete information (p. 23). Vizzini, perhaps like us, made assumptions when additional facts (both cups were actually poisoned) were not available. That poor decision-making process (unforced error) cost his life.

Accepting uncertainty, or that life is indeed like poker, is a great start. The more we move away from a world where there are only two opposing and discrete boxes that decisions can be put in -- right or wrong -- we start living in the continuum between the extremes (p. 34). 

Beliefs | Truthseeking | Motivated Reasoning

Let's presume we've accepted uncertainty. Now it's time to examine how we form our beliefs, or how we base our bets on what we believe about the world (p. 48). Duke shares this is how we think we form abstract beliefs (p. 50):

1) We hear something;
2) We think about it and vet it, determining whether it is true or false; only after that
3) We form our belief.

In fact, we actually form abstract beliefs this way:

1) We hear something;
2) We believe it to be true;
3) Only sometimes, later, if we have the time or the inclination, we think about it and vet it, determining whether it is, in fact, true or false.

Duke introduces a term to help us guard against this tendency. Truthseeking is the desire to know the truth regardless of whether the truth aligns with the beliefs we currently hold (p. 55). We can consider this a form of self-coaching, such as Marshall Goldsmith's realizations in Triggers. It's a vital habit and skill. This is because once a belief is lodged, it becomes difficult to dislodge (p. 59), and this irrational circular information-processing pattern is called motivated reasoning.

Rather than jumping to right/wrong or yes/no judgements, we can imagine gradients or percentages indicating levels of confidence or certainty. Or, as Richard Feynman (p. 72) put it: "Statements of science are not of what is true and what is not true, but statements of what is known to different degrees of certainty..."

Learning | Self-Serving Bias | Outcomes

Duke stresses the importance of curiosity, or continuous learning: The people who learn from experience improve, advance, and (with a little bit of luck) become experts and leaders in their fields (p. 78). But uncertainty, or chaos, may trip us up. Jeff Boss likewise describes this in Navigating Chaos. "Self-serving bias" is the term for the pattern of fielding outcomes (see Fritz Heider) - or our capacity for self-deception has few boundaries (p. 89). Duke cites an amazing and hilarious array of excuses auto insurers have encountered on claims. Where does this bias come from? Just as with motivated reasoning, self-serving arises from our drive to create a positive self-narrative (p. 94). It's simply natural to do. Remember, losing feels about twice as bad as winning feels good; being wrong feels about twice as bad as being right feels good (p. 114).

There's a real human, leadership lesson here. Have you ever made snap judgements that a lucky outcome (poor process, good outcome) for you is because I am goodand an unlucky outcome (good process, bad outcome) for another is because they are bad? The systematic error in the way we field the outcomes of our peers comes at a real cost. It doesn't just come at the cost of reaching our goals but also at the cost of compassion for others (p. 102).

Feedback | Decision Pod

Throughout the book, Duke describes the importance of a group of world-class poker players who formed a decision pod. As leaders, we can generalize: Members of our decision pod could be our friends, or members of our family, or an informal pod of coworkers, or an enterprise strategy group, or a professional organization where members can talk about their decision-making (p. 125).

This coincides with the importance of feedback in our Personal Leadership Philosophy. Not just mentioning that we have an open door policy. Lerner and Tetlock (p. 129) offer an effective feedback process:

"Complex and open-minded thought is most likely to be
activated when decision makers learn prior to forming any
opinions that they will be accountable to an audience:

a) whose views are unknown,
b) who is interested in accuracy,
c) who is reasonably well-informed,
d) who has a legitimate reason for inquiring into the reasons behind participants' judgements/choices."

Again, this looks like an After Action Review type process. Duke offers a handy list of six questions on page 138 to examine the accuracy of our beliefs, useful to ask ourselves or to have others ask of us.

Truthseeking Rules | Sharing Information

Duke references Robert K. Merton's twelve-page paper (part of a 1973 book) as an excellent manual for developing rules of engagement for any truthseeking group (p. 155). Duke's observations appear aligned with an approach for crossing the Knowing-Doing Gap. Recall Pfeffer & Sutton's The Knowing-Doing Gap, where the authors discovered that the few breakthrough organizations crossing the gap all embraced knowledge sharing throughout their organizations as a systematic process.

With courage and humility, Duke shares how rapidly her poker performance improved when she embraced this practice:

Admitting that the people I played against had
things to teach me was hard, and my group helped
me feel proud of myself when I resisted the urge to
just complain about how lucky my opponents were
. (p. 162)

Duke has gone a bit further with this approach, finding the best way is to deconstruct decisions beforean outcome is known (p. 167). It's a terrific self-evaluation or self-coaching idea.

In general, the truthseeking approach reminds us of Crucial Conversations techniques, in particular probing with humility and looking for early signs of agreement with the long view in mind. Duke lists several ways to communicate to maximize our ability to engage in a truthseeking way with anyone (pp. 172-175):

• First, express uncertainty
• Second, lead with assent
• Third, ask for a temporary agreement to engage in truthseeking
• Finally, focus on the future

Strategic Thinking | Tilt | Backcasting

We've all heard about publicly traded companies making poor decisions to satisfy the next quarterly investor call. Well, as individuals, we're no better. Away from the poker table, we don't feel or experience the consequences of most of the decisions we make right away (p. 179). 

Duke shares the poker player's worst enemy is tilt, when a decision is made while emotionally unhinged, and in a way visible to other poker players (p. 197). It's a great term we as leaders should adopt. We've all had this experience in our personal and professional lives: blowing out of proportion a momentary event because of an in-the-moment emotional reaction (p. 199).

Imagine a strategic planning session, where the team starts with a written future goal. Then work backwards to identify critical milestones. Backcasting makes it possible to identify when there are low-probability events that must occur to reach the goal (p. 220). This allows introduction and discussion of negative outcomes if the low-probability event does not occur. One of the reasons why this is effective is because we are more likely to execute on those goals if we think about the negative futures (p. 224), according to Gabriele Oettinger.

Think about your next strategy session. A planning process that includes a premortem, or backcasting, creates a much healthier organization because it means that people who do have dissenting options are represented in the planning (p. 225).

Summary

This is much, much more than a book about poker. Duke has deeply researched this work, with a considerable selected bibliography and recommendations for further reading (pp. 253-266). It will change how you consider decisions and improve your effectiveness as a leader.

Note: Annie Duke generously provided a copy of her book for review.


JE | April 2018

 
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