In early 2018, Annie Duke – a champion poker player turned author – wrote a wonderful book called ‘Thinking in Bets‘. But it wasn’t until early 2021 before I managed to read it, thanks to Michael Covel’s excellent podcast.
To sum the book up in one sentence:
Separating decision quality from outcome quality is critical for enduring success in an uncertain environment.
Let’s break this down!
Based on the information available with you at any given point in time, you could make an excellent decision but end up having a poor outcome. In the same vein, a poor decision could produce an excellent outcome.
Assuming that you have a well-thought-out process in place for winning, it’s the process that nets you a winner, not an individual decision, which may or may not produce a great outcome.
This is what the book tells you, by using Ms. Duke’s own experience as a champion poker player.
Meanwhile, I’ve had a similar experience dealing with uncertainty.
Let me explain.
My day job involves running CarToq, a car and motorcycle website that sees over 5 million readers each month. We’ve been in business for over 9 years but still find it challenging to accurately pinpoint what’ll sell, and what won’t.
Among other things, I also handle digital strategy at CarToq. Now, am I absolutely stupid that I still can’t figure what the audience wants? Or is it just randomness playing out, in a forever-evolving medium. I’d bet on the latter.
While we still don’t know the exact formula that will make a story a super hit, years of catering to ever-changing audiences has given us a framework we can work with.
This framework or process, gives us the best chance of success. However, it doesn’t guarantee success, and we at CarToq often find ourselves producing more stories that flop rather than those that turn out to be hits. Yet, we manage to remain a high-traffic website. What gives?
Well, we think in bets. We simply follow a process/framework, and produce a story that gives us the maximum chance of success based on historic audience behaviour.
Our formula is simple.
Check 1: Is it fun?
Check 2: Is the angle wide enough? (Does it appeal to a wide section of people)
If a story satisfies these checks, we simply run it. We’re just laying out a bet, one among 100s of bets we lay out every month.
Bet small, but bet often, and let your edge play out.
What’s the edge here? Human behavior, and that it repeats!
As our edge plays out, three out of ten stories – on average – become superhits, and bring us solid traffic. The seven flop stories don’t matter. You don’t need to win every battle to win the war.
Decision quality? What’s that!
Laying out bets, and letting probabilities play out. This is what ‘thinking in bets’ looks like, when put into practice.
You can apply this to nearly any discipline of life, and end up on the winning side. The key to this is experimenting (by betting small, but often), and figuring what works, and pushing more resources into what works.
Of course, you’re going to have a lot of losers but as long as you know what a loser looks like, and quickly cut your losses, winning is guaranteed over the longer term. It’s just a matter of time before you hit that elusive home run. And when you do, keep the gas pedal pressed. It’s also called ‘following the trend’.
Where else have I applied ‘thinking in bets’?
Aside from my day job at CarToq, I run an app called Streatu, and also trade index derivatives. Like you’d have guessed by now, I think in bets in both these endeavors, and it’s been working out just fine.
If you’re not much of a reader, I encourage you to listen to this podcast. It’ll give you deeper insights on ‘Thinking in Bets’.