Book-review: Thinking in Bets by Annie Duke

I got to know about Thinking in bets from Annie Duke when reading Howard Marks’ books. As many of my readers will know by now, I love poker, but …

I love (very useful) comparisons between investing and poker due to striking similarities like skill, luck, and hidden information (read more here). Thus, I wrote the book on my reading list. Within the first pages I read that it’s not a book about poker! Nonetheless, the book emphasizes the importance of evaluationg your decision quality even after knowing its result (a problem successful poker players have to master). I read about many useful concepts …

  • mitigating emotional biases and
  • focusing on the long-term instead of short-term issues
  • questioning beliefs
  • how to behave inside/outside of a truth-seeking group
  • hindsight bias

Mitigation of emotional biases is very important for long-term investing success. Oftentimes, taking a different or alternative perspective can be very useful. Zooming out of the present situation to take a longer-term perspective often helps to un-focus. We might think otherwise, but many recent emotional events as unimportant when considering a longer-term perspective. Imagine: You are at the casino and lose $100 during the first 30 minutes and then winning back your $100 in the next 30 min, you are probably very happy after a total of 60 min. Imagine you took another path (winning $100 and loosing $100) resulting in the same outcome (breakeven) after 60 min but you would probably be sad. A broken tire works the same way. We might think why that always happens to us and we are the unluckiest folks on earth, but: in ten years time, will todays broken tire have any effect on our overall situation/happiness? Probably not!

Timetravelling is a useful concept. It can help us to take the long view. Ticker watching is the opposite and primes us to focus on the present and very short term. Imagining ourselves in ten years time and simply asking What helped us get here? might do a lot to see clearer: What were the important decisions, trade-offs, regrets and actions not taken? Will the broken tire ten years ago have any meaningful effect on your todays (ten years in the future from todays today) overall happiness or financial situation? – Most likely not. Timetravelling might help you to mitigate future regrets. Most decisions in live can be understood as some form of betting, and most of the time we bet against ourselves. As Annie writes

» … we are betting against all the future versions of ourselves that we are not choosing.« – Annie Duke

Annie Duke in Thinking in Bets

Wanna bet? is a very helpful question – it often reveals how sure other people really are when making a (bold) statement about the future, often expressed as an undeniable truth instead with some caution or underlying probabilistic thinking in mind. Betting (and investing) is about beliefs which have to be updated and verified.

Truthseeking can be done in like-minded groups but is very hard to do outside of such a group. Most people implicitly assume some social contracts and bahavioral norms when interacting. Some friend telling you about a lost poker hand is mostly not interested in truthseeking (reviewing decision quality and ultimately improving his game) but might just want to hear some form of approval and/or commiseration.

Hindsight bias

Hindsight bias is hard to overcome. I am quite sure, many people (novice investors) currently fall prey to hindsight bias in the past investing year 2020: Many will (falsely) conclude that there was no other possibility than a quick market rebound from the March low. Governments and central banks around the world just had to print money which had to find its way into the financial markets and many digital businesses had to thrive (or so their conclusions will likely read). But nothing is 100% right or 100% wrong*. Of course there was a non-zero chance that the future (Q2-Q4) unfolds differently. Hindsight bias is hard to overcome but can is crucial for evaluating investors’ (or poker players’) decision quality and for probabilistic thinking — itself an important skill for investors and poker players alike. Annie Duke makes use of analogy that might help us with (the mitigation of) hindsight bias:

A tree is made of a trunk and branches. The present is the place where the trunk (past) descends into branches (future scenarios) which end in smaller branches and endless leaves (more granular future paths). When time passes, the trunk grows and some branches (prior possible scenarios) are chopped off. Now, it is very hard to imagine any scenarios which were possible in the past but did not happen (also known as alternative histories).

»Once something occurs, we no longer think of it as probabilistic – or as ever having been probabilistic. This is how we get into the frame of mind where we say, ‘I should have know’ or ‘I told you so’. This is where unproductive regret comes from.« – Annie Duke

Annie Duke in Thinking in Bets

In general: The sections about truthseeking was a bit too long for my personal taste including some repetitions. Annie’s style of writing did not exactly meet my personal taste either. Anyway, the book helps a great deal to better understand some biases.


I hope you spend nice holidays with your loved ones and I wish a good start into the new year 2021 – a new annual period for performance measurement. Remember, it is only a short period within the very long-term 😉

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