The Bregman Leadership Podcast
Episode 127

Annie Duke

Thinking in Bets

What makes a good decision? Annie Duke, former professional poker champion turned psychologist and author of Thinking in Bets, says the only poor decisions are uninformed ones. Discover a good decision-making process, how to deal with competing values, and an exercise for your team that will help the company align its goals and reduce actions that lead to failure.


“Action in the context of uncertainty is how we move powerfully in the world.” #quotes #podcast #decisionmaking #NewYearsResolutions



Peter: Welcome to the Bregman Leadership Podcast. I’m Peter Bregman, your host and CEO of Bregman Partners. This podcast is part of my mission to help you get massive traction on the things that matter most.

Joining us today on the podcast is Annie Duke. She wrote this terrific book called Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts. This is what it looks like if you’re looking on the video. Annie is interesting. Oftentimes on this podcast, we’re looking for people who have practical experience, as well as interesting theoretical backing. And Annie has both. She was a professional poker player, having won over four million dollars in tournaments. She earned the World Series of Poker bracelet, which I don’t really know anything about, but it sounds impressive.

And now she’s retired from poker and has done her graduate level research in psychology at the University of Pennsylvania. She’s authored a bunch of books, and she’s really an expert both in practice and in theory around making decisions large and small. So I’m really excited as someone who’s a little indecisive myself, to have her on the Bregman Leadership Podcast. Annie, welcome to the Bregman Leadership Podcast.

Annie: Thanks for having me.

Peter: Annie, give us big picture about why you wrote this book, what the general underlying important idea behind the book is.

Annie: Yeah. I would say that the important idea behind the book is that there’s a lot of uncertainty in what we do. We try to jam life decisions into the chess model. But it actually belongs much more at the poker table. That’s just because there’s a lot of uncertainty in first of all, how good our beliefs are, because there’s lots and lots of information that we don’t have, so no belief is informed by perfect information. And there’s a lot of uncertainty also just in how the future’s going to turn out, because there’s lots of luck involved.

So the simple thing is you can go through a red light and you can get through fine, you can go through a green light and you can get in a car accident. And you can imagine what happens when we complicate those decisions. That’s pretty simple decision.

Peter: Although, it wouldn’t lead us to a decision to say ignore lights, because there’s still a preponderance of the evidence that suggests that you’ll be safer going through green lights than red lights.

Annie: I really appreciate you saying that, because that’s actually where the problem lies. So in something like whether we go through green lights or red lights, that’s pretty settled, and the quality of that decision is pretty transparent. But when we get away from something like red lights and green lights and we get into things that are much more complicated like should I change careers, or what strategy should I implement, or that thing, the decision itself isn’t settled law.

So we actually end up when things aren’t transparent the traffic light decision is, we tend to make this mistake called resulting. Which is we take the quality of the outcome, whether it’s good or bad, and we use that as a signal to try to decide whether the decision quality itself was good or not. That does actually cause us to get confused about what lights we’re supposed to go through. That’s just because we could think about …

I can make a good decision and have a good result or a bad result, because of luck and hidden information. And I can make a bad decision and I can have a bad or a good result. But in chess, if I lose to you, we know why. It’s because I didn’t play as well as you did. That’s because you’re removing a lot of that luck and a lot of the hidden information piece, because I can see where all your chess pieces are.

So basically, what happens is that when we’re just confused about whether a decision is good or not, which is most of the complicated decisions that we make. If it doesn’t turn out well, what do we do? It must’ve been a bad decision, or I should’ve known that that was coming. If it turns out well, what do we do? We break our arms patting ourselves on the back for how incredibly smart we were. So it’s the equivalent of going to a green light, getting through safely and saying, “I’m a great driver.”

Peter: It’s interesting because I want to parse this out and I want to go slowly here because it’s really important. I think this is so important also for perfectionists, right? For the people who perseverate over making the right decision. That in the end, I want to make this distinction and tell me if I’m making the right distinction. That when I make a decision and the outcome doesn’t turn out the way it should have, in that particular case with that particular sets of circumstances, it might still be fair to call it a poor decision. But it wasn’t necessarily born out of poor decision making. Meaning I may have done everything right in terms of, and it was the right decision given what we know. But it turned out to be an outcome that we made a decision that ultimately 60 percent of the time would have borne successfully. So that means that it’s a right decision because the other decision would have been 40 percent of the time, and then the chances are that the decision would have been a poor outcome. But in the end in that situation if it didn’t pan out, maybe I’m just talking semantics here, but isn’t that still a poor decision?

Annie: No, it’s not a poor decision. I think the idea is that on one single trial of any decision, we don’t really know. And what you’re just trying to do is have a really good decision process. And the only poor decision is one that doesn’t have a good process behind it, one that doesn’t have really good thinking behind it. One that where you weren’t trying to be really informed by the information that’s at hand. What I would say is if I have a coin that’s gonna flip heads 90 percent of the time, and tails 10 percent of the time. And you say, “Hey, let’s bet a dollar,” and you get to call the coin. If I call heads and it happens to flip tails which is only going to happen 10 percent of the time. It was a great decision, right? I did something that was going to turn out 90 percent of the time.

So I think particularly for perfectionists, getting rid of that idea that it’s poor because it happened not to work out, or that it’s good because it happens to have worked out actually frees us up to be much more decisive because we aren’t standing there afraid of the way it’s going to happen. That somehow after the fact, we’re going to have all this self recrimination, that we should have spent longer on the decision or that decision was bad just because it turned out poorly. If we’d been thoughtful in our process, that’s it. And then you assume it will play out over time.

Peter: Annie. This is why I was so excited to have you on the show because I really love it and I think everybody’s talks about accepting failure and pivoting. This is the theoretical underpinning that allows people to do that, which is to say you … And also when people talk about focusing on the process and not the outcome, it’s like you’re saying that to the nth degree, which is that if you’re going to make a decision, it’s all about process. And ultimately the accumulation of a number of good decision making over time should pan out that you’re making better bets and you’re getting to the outcome more often, more frequently than you would if you were making a bunch of poor decisions. But good decisions produce poor outcomes. Some of the time.

Annie: Of course, some of the time they do. And I also want to emphasize the other side of that coin because I think that it’s in an equally large problem for people in how they figure out what should they be repeating, what things were good about a decision or a bad about a decision. So yes, a very, very good decision can have a very bad outcome. I can drive through that red light, totally sober, following the speed limit, looking ahead of me and everything. And someone can just come through that intersection and hit me. And that does not make it in any way, shape, or form a poor decision. Right? But I also just want to emphasize that you could make a really bad decision and have it turn out well. I think that people don’t think about the problem of that side of the coin as much, which is that we can end up reinforcing a lot of behaviors and think that we’re really good decision makers because life just happened to hand us a good outcome.

So it’s the equivalent of I say, you could think about the disaster of thinking I’m going to be really afraid of green lights now. Right? So that’s really bad if you happen to get in an accident. But isn’t it really bad if I’ve heard this before, “I drive better when I’m drunk,” right? What a disaster. So the thing is that you not only want to avoid being afraid of green lights, but you also want to avoid thinking that you drive better when you’re drunk

Peter: Because that’s just going to produce a bad decision. That’s a misconception that’s going to produce a bad decision.

Annie: And then trust me, you do that enough times and it’s going to turn out-

Peter: The statistics are going to play in.

Annie: Right. They’re going to play out either way.

Peter: So let’s take one step back. Define a good decision. Because it seems clear to me now given what you’ve said, but I think it’s useful to give us a sentence of here’s what makes a good decision.

Annie: I’m really happy you asked that and I want to take a step back in terms of thinking about what’s a good decision. Because I think that a lot of times as we’re evaluating other people’s decisions, we’re thinking about what our own values are. So if somebody chooses a career that pays less money and we’re people who value a high salary, we might look at them and think that they made a poor decision. But that’s not taking into account what their values are. So I think that’s the first thing that we need to do is understand that people have different values, people have different resources that they can invest. People have different attitudes about risk, right? So you might be somebody who’s super entrepreneurial and totally willing to take a lot of risk and understand that there might be a lot of downside. But then you also get a lot of upside that, and those are your values and you’re happy doing that and other people might want that slow and steady wins the race.

So this is the first part of what makes a good decision is really identifying what are your values, what is it that you’re trying to accomplish, and what are your goals. And that actually is something that people don’t do very much by the way, surprisingly. As they’re making decisions, they aren’t thinking ahead to what’s the end point that I’m trying to get to and what are the things that I really value for myself. So that’s the first piece is to identify your values. Then to figure out what your own tolerance is for bad and good, right? Which is just risk. How much do you want things to swing around on you? Think about what your resources are that you have to invest. Think about your risk of ruin. And once you’ve figured out all that stuff which are the component parts of the nuts and bolts of what you are deciding about, now what you do is you think about what your options are.

What things are you deciding among? And then imagine what the futures are that could turn out from those options. Now think about given what you’re trying to get in return and what resources that you have to invest, what future is more likely to make you happy or sad. So I’ll do this. That was obviously very abstract. Let me give you a super simple example. So you’re in a restaurant, and you’re looking at a menu. So we have all sorts of value things, right? Are you looking for like short term happiness? So you would be willing to eat something that might be unhealthy because that’s just what you want that day. That’s a value question, right? Or are you someone who really values longterm health?

Peter: So let me pause an already complicated example, which is that I think the biggest challenge that we always have, is competing values, right? So I really care about my health, and I really like eating tasty food. So now I’m in that restaurant and I’ve got two values. Both of those values, and let’s just say there’s a pumpkin sesame quiche and a kale tempeh salad. People might be listening to this and say, “Wow, both of those sound gross.” But to me they both actually sound good. And one of them will taste better than the other and one of them’s going to be healthier than the other. And I care about both.

Annie: Right. So in that particular case, what you’re describing is actually a competition between what your present self would enjoy and what your longterm self wants. So this is actually a place where we very often have competition between our short term self and our longterm self. So what’s actually really helpful in making decisions there is to do what’s called pre deciding. So in that particular case when I wasn’t around the food, I would say what are my longterm goals? Because this is what we’re trying to get to is realize the best version of ourselves. So let’s say that I said that my longterm goal was … So I’ll make this black and white first. My longterm goal is that I want to be the healthiest version of me. And so therefore when I’m presented with difficult choices, I want to choose the kale.

So you make a commitment in advance. The best way to do that is to either, there’s a variety of ways you can make that commitment for the future you that’s going to be sitting in the restaurant. One is to go to restaurants that only offer healthy foods. That’s one way that you could do it. That takes the decision out of your hands because you’re only going to places that aren’t gonna tempt to you. Another is to make a rule for yourself so that each time you’re presented with that decision, you’re not making a new decision. So for example in my case, I’m a vegan. That’s a rule. So therefore-

Peter: So both of my choices sounded very good to you. It was a vegan quiche with cashew butter.

Annie: Okay, there you go. See I would like that. So in this particular case I’m a vegan means that every time I’m presented with a steak on the menu, it’s not a brand new decision for me.

Peter: It’s not a decision at all.

Annie: It’s not a decision at all. Exactly. You can do things in the moment. For example let’s say you’re trying not to eat bread. You can say to the waiter, “Don’t put bread on the table.” You can tell your friends, “This is a commitment that I’m making, so please don’t do that.” So that would be a black and white way to deal with those competing values is to take some time when you’re away from the decision to figure out how you weight those to use the one who’s in the middle of eating ice cream and the one who in the long run has eaten more kale. Figuring out which you is the goal for you, and then set up what are called pre-commitment contracts or Ulysses contracts around that.

Now sometimes you might say I mostly want to eat kale, but sometimes I want to eat ice cream. And you can still set a pre-commitment up around that because what you can do is say I eat kale every day, but Sunday. And on Sundays I eat ice cream. And again, you’re just making it so you can’t fall down as much because you’ve set a rule around it.

Peter: Right. Got it. Okay perfect. I love it. Okay. So I interrupted you. So the first thing you do is you think about what your values are.

Annie: Right. So what are my values? Am I trying to eat healthy or not healthy? Whatever it might be. That’s obviously going to narrow down the menu items for you. How much money do I have to be able to order? How much space in my stomach do I have in terms of the number of things I could order? Because obviously it could be that you like 10 things on the menu. But if you order all 10, you have neither the money nor the space in your stomach. So that’s a resource. The resources are limited.

Peter: And that actually might be a pre-decision also, which is to say if you wait until you’re looking at the dessert menu to make that decision, it’s gonna be too late. So you say I’m going to go, and I know from history that if I order an appetizer, an entrée, and a dessert, that’s more than I would eat at home and it’s more than I’m going to leave comfortably with.

Annie: Exactly.

Peter: And it’s this distinction between instead of eating what I want to eat, I want to eat what I want to have eaten, right? Which is that future self. So then you look back and you go, “Okay, so I’m going to go to this restaurant and I’m going to have one entree and I’m going to have no dessert because it’s not Sunday.” So now I can just look at the entrees. I don’t even have to look at the others. And then I can make my decision. If I’m vegan, I’m going to have two choices.

Annie: Right, exactly. So you have the influence of limited resources. So in this case you could say money, space in your stomach, time is also a limited resource. So I assume you can’t sit in the restaurant for two hours trying to decide, and you don’t have time to eat every single thing on the menu, a variety of things. So you could set a time limit. “I’m only going to take two minutes to decide off this menu.” Because some people have trouble, they spend more time than they need to [inaudible]. So now you do is you look and you say given my past experiences with these menu items and given maybe given my past experience with this restaurant, if you happen to have been in this restaurant before, I’m going to take a moment and say which Annie is going to be happier? The Annie that’s having the kale salad, or the anime that’s having the Quiche. So you just ask yourself that question, you imagine which Annie-

Peter: I think the timeframe in which you’re asking yourself that question I’m hearing from you makes the biggest difference. So if you’re asking that question from the Annie who’s sitting in the restaurant versus the Annie who’s just finished eating, you might have different answers. You have to make a decision as to which Annie I’m going to ask.

Annie: Right. So now you’re just doing some scenario planning, which Peter is going to be happier? And then before you make the decision just to always ask, and doesn’t matter what decision it is. Always ask yourself the following question. Is there some piece of information that would change my mind so that I could find out in the timeframe that I have? So you set yourself say three minutes to decide. You’ve decided that the Peter who eats the quiche is going to be happier. So now just stop and say, is there some piece of information that I could find out that would significantly change the decision that I’m going to make? If the answer is no, go ahead and do it. And guess what? Sometimes the quiche is going to suck. That’s okay. You did your job. You made a good decision. You made your process. Sometimes the answer is yes. When the waitress comes over, the waiter comes over, you can say to them, “Can I ask you a question? I’m trying to decide between the kale and the quiche. Is there a clear choice here?” Because maybe the waiter or waitress-

Peter: So let me ask you. I want to ask you about this. Because this is something that I’ve thought a lot about, and I’ve done, right? I go to the waiter or waitress and I go, “What should I order, this or that?” That seems like, and this is a challenge that we face in, in an age where everybody has a review about everything. Which is the waitress and I are two totally different people with two totally different values and totally different perspectives. So I’m asking some random person, who’s not totally random because she works in the restaurant or he works in the restaurant. But they’re going to make a decision that’s right for them. And I’m taking all of this stuff I know about myself and none of it matters anymore.

Annie: Right. So you can reframe the question so that it’s not about what they like. You can say in like, in general I think I have a decision, but all I’d like to know from you is do people really complain a lot about one of these items?

Peter: And even then it’s a little dangerous because you’re finding out what other people are thinking about it. If you look around at the restaurant and you say, “There’s a lot of people who seem like me,” then that might be a more valid question to ask than if like everyone around you is looking very, very different than you and you’re thinking they may not make the same decision that I would make.

Annie: So that’s true. So this goes back to that question that I said. This goes back to this question I said. Is there a piece of information that I could uncover that would significantly change my mind? So what I’m hearing from you is that what the waiter or waitress’ opinion is not a significant enough piece of information for you as an individual to change your mind, but it might be for me. So that’s why you always ask yourself that. Is there something in particular that I could find out, that would actually significantly change my mind that I could discover within the timeframe that I can decide? And here’s the big kicker, is to go into the decision process without the goal of being certain about your choice, but with the goal of having one choice be a little bit more than the other one at minimum. So your goal isn’t to go into that and say, “My goal is I want to be 100 percent sure that I’m picking the right item on the menu.” It’s I’m deciding between these two things and I’d like to be 55/45.

Peter: Well, and you’re also narrowing it down. Because when you just described that as to say I want to pick the right thing on the menu, there’s a million things that can represent the right thing. But if you go in with that predetermined self that says I want to pick something that’s tasty enough and that’s healthy. Then you go well now I’m not just looking at the right thing, I’m looking at the right thing that fits these criteria and it becomes an easier decision.

Annie: Right. And then what we can think about is this. So you’re sitting there and you’re trying to decide between the kale and the quiche, and you get the quiche and it’s growth
And kale eating Peter is now in your head yelling at quiche Peter saying, “Why didn’t you choose me?” And the answer is because 55 percent of the time, quiche Peter was going to be happier. But I knew that 45 percent of the time kale eating Peter was going to be happier. So shut up because I already thought about you in advance. It’s this idea of don’t recriminate what it happens not to work out well. Because you’re going into that decision already knowing that 45 percent of the time, you think you might be happier with the other choice. So therefore if it turns out that the quiche isn’t as good as you thought, you aren’t sitting there beating yourself up. The other thing you’re not doing is if it turns out the quiche is really excellent. You’re not thinking, “Look at me. I’m so smart. I knew it for sure.” Because no, you thought that 55 percent of the time that was what was gonna happen.

Peter: So you’re taking a tremendous amount of stress off of the decision making process, which was super useful.

Annie: And it makes you more decisive. So people say to me all the time, they’re like, “If you’re talking about all this uncertainty, doesn’t that make you uncertain about your decisions?” And I said, “No, it actually makes you much more decisive.” Because a lot of what stops us from being able to actually bank a decision, from being able to actually do it is that we think we need to be 100 percent sure. So there’s people who are trying to maximize every little piece of information. They’re shopping for a gift for their partner and they’re looking at 17,000 shoes trying to find just the right one. Because they think that they need to be 100 percent sure and know for sure that they have the very best one, and it makes you incredibly indecisive. It’s what gets you into this analysis paralysis and this inability to decide. When you say, “I can never be sure of how the future is going to turn out. All I can do is make my best guess.” It actually completely frees you up to be a much more decisive decision maker.

Peter: Right. And actually, you’re reducing the bar from perfect to satisfied. And there’s a lot of research that shows that people who go for satisfied are a lot happier than people who go for perfect.

Annie: Right. Exactly.

Peter: So I’m curious about how this plays out with a bigger decision. So something like investing in stocks or meals. Those are decisions we’re making multiple times a day with meals. And so we could be wrong here or there. It doesn’t make a difference. The biggest thing we’re risking is a 20 buck entree. But if I’m thinking about my business and I’m thinking I have to decide if I’m going to frame what we do and plunk down tens of thousands of dollars on marketing to identify ourselves as a strategy execution firm or an executive coaching firm. It’s not a decision I’m making everyday three times a day. It’s a decision I’m making once every couple of years, and we’re gonna throw a bunch of resources behind this decision. Suddenly, the stakes are much higher. The 55 percent, 45 percent consequences are much more dire. And the drive for perfection suddenly gets in the way of the drive for satisfaction because it could mean the success or failure of the business.

Annie: Yeah. So I think that that’s because you’re feeling like it’s the success or failure of the business, and that actually makes it much harder to decide. Which increases the chance that you fail at the decision process. So I think first of all, try to think about all these decisions is the same. There’s nothing fundamentally different about trying to choose between the quiche and the kale as there is between choosing between two decision strategies. It’s just that because it’s higher stake, you probably want to make sure more that you’re going through a really good process, right? Because we want to think about what’s the downside consequences of missing something. So you’re right. If you happen to not think it through very well and you get the wrong menu item, it’s not such a big deal. So. So you don’t have to go through a specific process in order to get to where you are.

Peter: Yeah. And the distinction between a 55/45 percent, a high stakes decision I’d like it to be 70/30 or 75/25.

Annie: Why? If it’s an either or, if those are the the two strategies that you have. And you’ve gone through your process, you think that one is 55 percent and one is 45 percent, that’s the much better strategy. It’s gonna win much more in the long run.

Peter: But there’s not a long run. Meaning there’s a long run in terms of how it plays out, but there’s not a long run in terms of making 100 of those decisions. Meaning if I’m making 100 of those decisions, then the long run makes a big difference. If I’m talking about who I get married to, a 55 percent to 45 percent. I’m not going to get married 100 times. So maybe, hopefully I’m not gonna get mad 100 times. So that five percent or 10 percent delta between a good decision, a bad decision. Suddenly I’m feeling very insecure about those kinds of odds. Help me out.

Annie: Okay. So I’m going to hopefully help you out. Don’t think about any of those decisions as individual decisions. Think that over the course of your life, you’re making lots and lots and lots of those decisions. And if across all of those decisions you’re always 55/45, you are going to be really great at the end of your life. That’s number one. Number two, don’t forget that not making a decision is a decision in and of itself. So when you’re sitting there and you’re trying to think am I going to be this or that as a business, you’re already something. So by not actually being willing to go through the process and say that if I think that this is 55 and this is 45 … let’s take this as an example. Let’s say that you’re thinking about, what were the two choices that you had again?

Peter: I’m pulling it out of a hat, but let’s say strategy execution versus executive coaching.

Annie: Okay, great. So let’s say it’s strategy execution versus executive coaching. And let’s say that you are already a strategy execution company. What you’re trying to do is say maybe we should be focusing more on executive coaching. Well, you’re already every single day that you continue being a strategy execution company is a day that you’re continuing to decide to do that. I think that we forget that. We think that the thing we’re already doing is not a decision in and of itself, and we’re only afraid of the bad outcome if we make a new choice. Right? But the thing is that if you just never get, let’s say that you say, “Well I need to be 70 percent instead of 55 percent in order to switch to a leadership company,” and an executive coach and a coach coaching company. But you never get to 70 percent. And so you just continue down the status quo path and your business fails because of that. You’re not as sad, because you don’t feel like you actually made a decision.

Peter: You didn’t take a risk, but you did.

Annie: But you did make a decision, every single day. So when you’re in those moments where you’re trying to decide between two paths, you need to view what you’re already doing as a new decision. And the thing is that if I presented you with a new decision and I said one’s 55 and one’s 45, you would always take the 55. But somehow because you set a bar for yourself and the thing you’re already doing, you’re only at 45 percent. But you think to switch courses, you have to be 70. Now you’ve had to down this thing that’s only going to work 45 percent of the time. And the only reason why you’re doing it is because you feel like if you fail as a result of it, it doesn’t feel as bad. Because you didn’t change course. So what we want to do is treat it as a new decision, and then what we want to say is we have option A, option B.

What are the scenarios that are likely to occur from that, and how do we figure that out? What is prospectively? We just think what are the scenarios that we think are likely to occur from A versus B? Obviously taking into account the resources that you have, right? You don’t want to think about a scenario that could occur if you had unlimited resources to be able to invest. You have to be realistic about that. And then when you figure out what those scenarios are, actually take a stab at putting likelihoods on those. How likely do I think that this great outcome is going to occur? Can be a range, right? It could be I think that the best outcome is going to occur 25 to 35 percent of the time. I think that a pretty good outcome is going to occur 40 to 60 percent of the time. You figure that out and just try to put likelihoods on those things.

Now before you go any further, do this. Define for yourself what success for your company is at the end of whatever that strategic planning period is, say three years. Pretend like you’re holding up a newspaper and it’s three years from now, and it’s our company has achieved our goal. Have everybody in the room independently write down five reasons they think they achieved that goal. But now this is really important. You have to do a different thing. So that’s called a backcast. It’s called backcasting. Working backwards from a really good result. But now you have to do this other thing. Imagine that you’re holding up the newspaper and it’s our company has failed to achieve our goal, and have everybody do the exact same thing. What that does is two things.

It reveals to you different ways that you could fail, that you hadn’t even thought of. While that might feel uncomfortable to people, how great is that because it hasn’t happened yet. So it gives you a chance to set up some of those rules and contracts that we talked about when we were just talking about restaurants, about how you can actually reduce the likelihood of those particular paths that might lead to failure or those particular actions that might lead to failure. It allows you to anticipate some things that aren’t in your control. Like for example, if you make a pivot and you’re doing executive coaching, and the stock market happens to crash. That’s obviously going to have a big effect on your executive coaching business. And it wasn’t anything that had to do with your decisions that you made. But because you’ve thought about that in advance, you can have a plan, a pivot already ready so that you’re not just being reactive and saying, “Now what do I do because the market just crashed?” You’re like, “I thought about this in advance. And here’s my plan. I already considered it.”

Peter: And there’s good reason to think about it because part of your decision making process, I guess would be to look at the stock market and say we’ve had a bull market for six years and it continues to go up. And it seems like things are overvalued. It’s volatile. So even if it’s not a determining factor, maybe it’s not a 70 percent chance. Even if it was a 40 percent chance that the stock market would crash, that goes into your decision making process.

Annie: That now goes into your decision making. So the first thing that … So people are really uncomfortable imagining that they failed because they think that means they’re not being a team player. They’re not [inaudible] the enterprise. But it’s the actual imagining of the failure that helps you avoid failure. It helps you to see the landscape ahead of you more clearly. Things that you might have missed that might be hiding behind barriers and barricades. Generally the barriers are your own biases. The things that you personally can’t see because your mind doesn’t really want to imagine them. Now you can see those, and you can actually put plans in place in advance in order to reduce the probability of those happening. Or if you don’t have any control over whether those happen, it helps me put plans in place to actually be nimble as opposed to reactive.

And then the other thing it does is after you’ve done that process, go back and think about the likelihood of the good and bad results that happen from each decision. Because you’re probably going to change your probabilities after you’ve done that. And now you’ve got this great view of the landscape, and what’s included in that landscape is that when I go and I do this pivot in my business, or if I stay the course, I now know because I’ve done the work that sometimes it won’t turn out well. And that’s okay, because nothing ever turns out well 100 percent of the time. That’s totally impossible. I just need to do my best to really map out what that future looks like as best as I can.

Peter: And is there a rule of thumb, and it probably relates to the size of the decision. But is there a rule of thumb as to when you say I’ve got enough information at this point to make a call as to the 55, 45 percent? Meaning I imagine I know that I might get to the 55/45 and then I might say okay, let me see if I could find more information that might change those numbers a little bit, that might nudge the 55 up to a 65 or 60 or might inform, might say actually we’re really 50/50 and then we’re stuck. How do you know, is there a rule of thumb as to when you might decide you have enough information and you’ve got the percentages that you make your decision based on those?

Annie: Yeah. So I think it actually goes back to what I said about maybe you ask the waiter, right? So there’s a couple of things. First of all, you always want to ask yourself if this doesn’t work out, do I get another crack at it? Because if you can get another crack at it, you don’t need to go as deep into the process. So it’s the idea of if I’m ordering in a restaurant, if it doesn’t work out I get another crack at it. you want to think about things that really take you out of the game completely so that you won’t actually get another try at it. And those obviously you want to have a much more in depth process. You want to be much more making sure that you’re really poking the nest to make sure that you understand what you can do and maybe what you can do to protect yourself against that downside where you actually get taken out of the game. Can you hedge against it? You want to be asking yourself those stuff.

Whereas taking your whole life to order something on a menu is silly, because if it doesn’t work out, you get another try at it in a few hours. So first of all, always ask yourself that question. And then now ask yourself the next question when you’ve got yourself in a situation where you seem to be having a favorite develop, a relatively clear favorite developed because 55/45 is a pretty clear favorite. And ask yourself that question. Is there some piece of information that I could uncover in the time period that I have to make this decision? So if we’re talking about strategic shift in a company that time period isn’t infinity. Because you’re already executing a particular strategy, right? So whatever it might be, let’s say that you’ve given yourself a month to decide or three months for the planning process or whatever it is.

So within the time that we have to complete this planning process, is there any information? It could be more than one piece of information. That we feel like we could uncover that would fundamentally change our minds about this? Now obviously if you’re 52/48, it’s much more likely there’s going to be information that might change your mind than if you’re 70/30. 70/30 is a much bigger hurdle to overcome. It would have to be a pretty world shattering thing that you would find out that would cause you then to flip to the thing that used to be 30 percent. If it’s 52/48, yeah there might be some stuff and you might want to think about what haven’t we thought of yet. Can we talk to somebody who really thinks that the other way is important and actually have a really deep discussion with them? Because I think that that might be really valuable information for us to understand why they’re a naysayer on this, for example. What is the information that they’re thinking about that’s causing them to think differently about this than us? So if you’re like 52/48 and there’s somebody else who’s 70/30 the other way, what a valuable person to go talk to because they might be able to reveal information to you that you haven’t even thought about.

Peter: Which is why you really want to talk to people who are certain, but you don’t necessarily want to just do what they say. You want to explore what makes them certain so you can figure out what valuing and the percentages that they’re, what’s feeding their percentages.

Annie: Yeah. So here’s the extreme example of that. Even if you think that somebody is wrong, it’s still really good to talk to them. And the reason is that it helps you understand your own truth better so that you really understand. So if I use the example of I believe that the earth is round, but it’s still okay for me to talk to somebody who’s a flat earther because even though I think they’re wrong, it forces me to be able to defend my position. And if I can’t defend that position, it’s not really truth anymore, it’s just dogma that’s been passed down to me, right? So I want to be able to think about when I’m talking to a flat earther, someone who really has conviction that the earth is flat, I want to now be able to defend my argument. I want to be able to tell them why that’s not true. So it’s really good. It’s much more valuable to talk to somebody who disagrees with you than talk to somebody agrees with you. Because if we both agree that the earth is round, we’re not making each other defend that position. At least not in any real way. But if we can talk to somebody who thinks that the earth is flat, now we have to.

Peter: Which we need a lot more of because everybody’s used to talking to each other. And everyone who agrees with them. There’s so much amazing stuff here Annie, and I’m so appreciative that you’re on the show. And one of the gifts as you even just frame this in terms of choices in the context of uncertainty is I think the way a lot of people make decisions is that they’ll look at both choices and they’ll lament what they have to give up by choosing one versus the other. Meaning yeah, I think this is the right choice. But I’m not going to get this or I’m not going to get that, or I’m not going to get that. And that’s what paralyzes us. And what you’re saying in clear terms is there is basically no decision you’re gonna make that doesn’t involve giving stuff up. So it’s not about the perfect choice. It’s about percentages and move on.

Annie: Yeah. Every single choice that we make has opportunity costs involved with it. And the reason is that like I said, let’s say that you’re trying to choose among movies, right? Well during that two hours, there’s only one movie I can see. But, even not choosing to go to a movie is giving up something. It’s giving up the opportunity to go to the movie. And going to the movie is giving up the opportunity … You’re forgoing all the other things you could be doing with those two hours. So there’s no way to get around that problem. We can’t duplicate ourselves like we’re living in a multiverse, where we get to exercise every single option that we ever have. At some point, you just have to exercise the option. And of course when you exercise the option, you’re giving up a lot of other options.

Peter: And I’m curious for you, this is a personal question now. I’m curious for you if you’re going through life and you’re making these decisions and literally there’s numbers in your head. And you’re going 45/55, and you’re very efficiently making decisions based on percentage chances of successes. Not the big decisions, but the everyday decisions. Whether you now the way an architect looks at a piece of paper and sees a building, whether you look at decisions and see the numbers behind them and make choices that way. Or do you have an instinctive feel of directions you’re going for most decisions?

Annie: So I think that a lot of this when you’ve been practicing this type of thinking, becomes automatic.

Peter: Second nature, unconsciously competent.

Annie: Yeah. So I don’t know that you’re necessarily explicitly executing on that. But the thing that I’m always willing to do is even when I make these decisions that are more automatic is allow somebody to challenge me on it. Because I have this big belief that it should never stop with your gut. In other words, if you ever say to me like, “How come you made that decision?” And my answer is, “Well my intuition told me to do that.” That that should not be an acceptable answer to you. That you should force me to actually be able to explain it in a way where you understand it, and maybe you could incorporate my thinking into your thinking. And that makes me hold my intuition. Wishing up back to a rational process.

So I think you practice these really rational, probabilistic ways of thinking that really embrace the uncertainty in the world that gets put into these more, it becomes part of your more intuitive processes. But then what you have to do is be willing to bring your intuitive processes back up to the light of day sometimes. And then there’s certain ways that you can make sure that that’s getting reinforced all the time. So just as an example, somebody asked me if I could come speak in California. I was looking at my schedule, and the schedule had a hole in it. So it looked like I could. And it was something that I really wanted to do. But it was also close to the holidays, so I wanted to take that into account.

So I wrote them back and I said, “Well right now I’m 87 percent, let me know when you need me to be more.” The thing is that that’s just a way to reinforce this thinking. And, aren’t I doing a nice thing for him? Because I’m not giving him a yes or no. He didn’t need one at that point. I’m actually allowing him to plan better because he understands how likely I actually am to do it. Because how many times has someone committed to you and then they just flake out on you? So it’d be nice if instead of that they said, “Well right now, I’m 87 percent to do that ask. But let me know when you need me to tell you for sure yes or no.” And now you can actually plan accordingly around that.

So I make these markets all the time around things. It’ll be silly things like if you’re reading an opinion piece and I’m talking to my husband. I’ll say something about I really agree with that. And he’ll say, “What’s your price?” And what he’s saying to me is how often do you really think that what they said is true? And then I have to just offer a price back. It just is constantly reminding you that when you speak in this language that’s about being sure that’s absolute or that’s very black and white, that that’s not actually the way the world works.

Peter: And it’s funny because we look at leaders sometimes who seem so sure, and people are attracted to those leaders because they see the world in black and white. And we also sometimes look at people, I think of the Carter presidency. You’re probably too young to remember it, but the Carter presidency where there was a real sense of him as a waffler and etc. And seeing too much nuance and then preventing action. I think one of the things that you’re saying that I really, really love. Uncertainty is not inaction. That action takes place in the context of uncertainty. And in fact, action in certainty is a little scary because it means that you’re not seeing a whole lot of things. But an inaction, an uncertainty is bland and leads us to stick with the old choices, and forget that they’re even choices. But action in the context of uncertainty is how we move powerfully in the world.

Annie: Yeah. So I think that’s such a good summary. And what I would say to put it in one sentence is don’t conflate confidence and certainty. And I think this is where we have a problem, right? We think that if we acknowledge uncertainty, that somehow we’ll be perceived as not confident. And that just happens to be because a lot of people who are confident out in the world express things as sure things. And a lot of people who are wafflers don’t seem very confident in their decisions. So what you want to do is actually come in the middle. So an example would be if I say to you, “We’ve been considering strategy A and strategy B. Strategy A is 70 percent. Here’s why I think strategy A 70 percent to work. Here’s why I think strategy B is 30 percent to work. So it’s very clear we should go with strategy A, and this is my strong recommendation.” Did I say anything without confidence?

Peter: No. You were very confident. We don’t have certainty, but very confident.

Annie: And the thing is that exactly as you just said. If you think that confidence and certainty are the same thing so that you express things in a black and white way, I don’t want you as a leader because it means that you have a very poor model of the world. I think that the people who make the best decisions are people who have a really accurate model of the world. It’s that thing. I can’t remember who said it, but it’s that … maybe it was Charlie Munger or Warren Buffett who said, “We have strong convictions, weakly held.” So what that means is that in the moment that we’re deciding, we’re very, very sure of our decision based on our knowledge right then. But if you tell me something new that would fundamentally change my mind, okay. I’m open minded to that.

Peter: Annie, I cannot tell you what a pleasure it has been to have this conversation with you. I know it will directly impact my life and my stress levels in terms of making decisions, right? Because I can make these decisions now with less stress knowing that the outcomes are uncertain, but I’m making still good and strong decisions. Annie Duke. Her book is Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts. It has been such a tremendous pleasure to talk with you. Evidence of that, and I’m sorry is that I doubled the length of our normal podcast. I promised you I’d get you out in 25 minutes and I couldn’t stop talking with you. So it’s been a total joy, and thank you so much for being on the Bregman Leadership Podcast.

Annie: All right, well thank you.

Peter: I hope you enjoyed this episode of the Bregman Leadership Podcast. If you did, it would really help us if you subscribe on iTunes and leave a review. A common problem that I see in companies is a lot of business, a lot of hard work that fails to move the organization as a whole forward. That’s the problem that we solve with our big arrow process. For more information about that or to access all of my articles, videos, and podcasts, visit Thank you Clare Marshall for producing this episode, and thank you for listening.


  1. Pamela Moore says:

    Episode 127 one of the best ever. Sooo interesting and relevant to me right now. Can’t wait to buy the book. Apart from me, the information would be useful to everyone. Should be taught to kids from early age. What a difference that would make.

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