Thinking in Bets: Use This Simple Framework to Vet Ideas And Avoid Misbeliefs

In his book Sapiens, Yuval Noah Harari talks about how our language has evolved as a way of gossiping. Even today the vast majority of human communication—whether in the form of emails, phone calls, or newspaper columns—is majorly gossip.

In the beginning, gossip gave us an advantage over apes, and thereby helped in the progress of Homo Sapiens. Later, gossip helped human beings form social groups and bands, and thereby helped in the progress of our civilisation. In practice, gossip is sometimes not very distinguishable from information, and most of the time hearsay becomes fact—that’s where lies the problem.

Let’s take an example. You are a cricket aficionado. You’re a big fan of Sachin Tendulkar. You know all about him—his centuries, his ducks, his nervous 90s—everything. While discussing the 2011 World Cup with your friend, and singing praises about the Indian team, MS Dhoni, and Sachin, you gush, “And of course, Sachin was the lead run scorer for the tournament.”

Then your friend says, “Wanna bet?”

Suddenly, you’re not so sure. That challenge puts you on your heels, causing you to back off your declaration and question the belief that you just declared with such assurance.

In her phenomenal book Thinking in Bets, poker star Annie Duke writes that when someone challenges us to bet on a belief, signalling their confidence that our belief maybe inaccurate in some way, it triggers us to vet the belief, making us look into the evidence that informed us.

Let’s take a step back, and try to understand how beliefs are formed. This is how you think you form beliefs:

  1. You hear something.
  2. You think about it and vet it, determining whether it is true or false.
  3. Only after that, you form your belief.

But it’s not true. We usually don’t engage in such level of scrutiny about everything we hear. It turns out 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.

While the process of formation of beliefs isn’t the most accurate, we all can appreciate the fact that it is surely very efficient.

You see, back in the day efficiency was important for us to go on with life—far more important than accuracy. Stopping to scrutinise every little thing we heard would have decremented our progress, especially in the early days of Homo Sapiens. If somebody shouted “Tiger!” we didn’t have the luxury to stop and ponder. If there was no tiger, all was well. But on those rare occasions when there was, those who stopped and pondered got eaten. We are the descendants of those who quickly formed beliefs and fled the scene.

While this process was every helpful back then, since there are no tigers roaming around, it can hurt us now, especially in high-stake situations.

“Wanna bet?” triggers us to engage in the step that we only sometimes get to—vetting our preconceived notions and beliefs. Being asked if we are willing to bet on our beliefs makes us examine our information in a less biased way, be more honest with ourselves about how sure we are about our beliefs, and be more open to updating and calibrating our them upon finding counter-evidence. Thinking in Bets is a good way to avoid confirmation bias.

Of course, I am not suggesting that we put money on all sorts of claims. I’m making a point that we often overstate our conclusions and beliefs without conscious examination. Offering a (hypothetical) wager brings the risk out in the open, making explicit what is implicit and frequently overlooked.

If you have a strong belief about something, anything, you can do a thought experiment and ask yourself, “Would I bet on it?” to test really how strong your opinions and beliefs are. This self-examination will weed our a lot of ill-defined notions and bring a lot of clarity of thought and judgement.

Also, after close inspection if you happen to conclude that you are still uncertain about your beliefs, it’s totally fine as well. Whether we realise it or not, we are very likely to be unsure about a lot of things. Now it’s completely upto us if we want to make our position stronger by doing some research, or let it go. While trivial facts (such as whether Sachin was the lead run scorer) can be easily looked up, abstract opinions and ideas (such as market positions and startup ideas) would require heavy duty work in order to vet them. It’s advisable to do the work only if the upside is higher than the downside.

Charlie Munger said, “We all are learning, modifying, or destroying ideas all the time. Rapid destruction of your ideas when the time is right is one of the most valuable qualities you can acquire.” Thinking in bets is a quick way to destroy false beliefs, and it also acts as a precursor to form strong opinions.

Thinking in Bets is very likely to make us realise that there is always a degree of uncertainty, that we are generally less sure than we think we were, and that practically nothing is black and white, 0% or 100%.

The more we recognise that we are betting on our beliefs, the more we are likely to temper our statements, getting closer to the truth as we acknowledge the risk inherent in what we believe. Thinking in bets makes us put our necks on the line i.e., gives us skin in the game.