![]() Taking each opportunity as a chance to learn can yield significant benefits that compound over time. Hence, there is enormous value in learning to calibrate our beliefs effectively. Since our bets are only as good as our beliefs, Duke notes that an overuse of System 1 to make rational and complex decisions can lead to problems. Additionally, the more pressure we are under, the less likely we are to verify these beliefs. Only occasionally do we have the time and motivation to verify the facts that underly our beliefs. When we hear something new, System 1 has a tendency to either accept or reject the idea, almost instinctively. System 1 thinking is often responsible for the formation of beliefs. And System 2, by contrast, involves purposeful choice, concentration and expense of mental effort. System 1 thinking relies on reflex, instinct, impulse, intuition and automatic processes to make decisions. Systems, beliefs and bettingĭuke recommends we keep Daniel Kahneman‘s System 1 and 2 framework in mind when thinking about our own decision making processes. When we make a decision under uncertainty, we are betting against alternative future states that we haven’t chosen for ourselves. There is an opportunity cost associated with choosing one bet or decision over another. Incomplete information and unexpected events outside our control make our bets or investments uncertain. If we think about our bets and their properties carefully, we can make better trade-offs, learn more effectively, and minimise the impact of emotions on our decision making. Jump aheadĪ bet is a decision that we make with regards to an uncertain future and comprise of five properties: choices, probabilities, risks, decisions and beliefs. This post will cover the main lessons that I took from Duke’s work, from the way she thinks about uncertainty and betting, to common decision making traps, and the distinction between luck and skill. Once such book is Thinking in Bets, in which World Series poker champion Annie Duke shares her toolkit for making better decision making under uncertainty. There’s actually a lot to learn here from the strategies of experienced poker players. It’s critical also to watch for heuristics and intuitions that might impair our reasoning. When making decisions under uncertainty, it’s important to think in probabilities and scenarios.
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