Quotes About Risk

In most of our decisions, we are not betting against another person. Rather, we are betting against all the future versions of ourselves that we are not choosing.

Improving decision quality is about increasing our chances of good outcomes, not guaranteeing them.

Thinking in bets starts with recognizing that there are exactly two things that determine how our lives turn out: the quality of our decisions and luck. Learning to recognize the difference between the two is what thinking in bets is all about.

The decisions we make in our lives—in business, saving and spending, health and lifestyle choices, raising our children, and relationships—easily fit von Neumann's definition of "real games." They involve uncertainty, risk, and occasional deception, prominent elements in poker. Trouble follows when we treat life decisions as if they were chess decisions.

When someone asks you about a coin they flipped four times, there is a correct answer: "I'm not sure.

Making better decisions starts with understanding this: uncertainty can work a lot of mischief.

To figure out whether a decision is good or bad, you need to know not just the things that might reasonably happen and what could be gained or lost, but also the likelihood of each possibility unfolding. That means, to become a better decision-maker, you need to be willing to estimate those probabilities.

Most decisions have a mix of upside and downside potentials. When figuring out whether a decision is good or bad, you are essentially asking if the upside potential compensates for the risk of the downside.

Poker players live in a world where that risk is made explicit. They can get comfortable with uncertainty because they put it up front in their decisions. Ignoring the risk and uncertainty in every decision might make us feel better in the short run, but the cost to the quality of our decision-making can be immense. If we can find ways to become more comfortable with uncertainty, we can see the world more accurately and be better for it.

John Maynard Keynes, one of the most influential economists of the twentieth century, summed up this phenomenon well when he said, "Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally." Succeeding unconventionally carries with it the risk of experiencing failure as a result of veering from the status quo.

We are much more concerned with errors of commission than errors of omission (failures to act). We're more wary of "causing" a bad outcome by acting than "letting it happen" through inaction.

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And pros are just better at that choice, playing a mere 15% to 25% of the two-card starting combinations they are dealt in Texas Hold'em. Compare that to an amateur, who will stick with their starting cards over half the time.

I know viscerally how likely 60–40 and 70–30 favorites are to lose (and, of course, the opposite). When people complained that Nate Silver did his job poorly because he had Clinton favored, I thought, "Those people haven't gotten all their chips in a pot with a pair against a straight draw and lost.

We are much more bothered by the downside potential of changing course than we are by the downside potential of staying on the path we're already on.

A higher chance of failing is more tolerated on paths that don't rock the boat. After all, what's the go-to defense in a postmortem after we make a decision that doesn't work out? "I followed procedure," or "I stuck with the status quo," or "I made the consensus choice.

Wrapped within all these forces interfering with quitting decisions is that we do not think of sticking with the status quo as an active decision in the same way that we view switching as one. We are much more concerned with errors of commission than errors of omission (failures to act). We're more wary of "causing" a bad outcome by acting than "letting it happen" through inaction.

Poker teaches that lesson. A great poker player who has a good-size advantage over the other players at the table, making significantly better strategic decisions, will still be losing over 40% of the time at the end of eight hours of play. That's a whole lot of wrong. And it's not just confined to poker.

When people complained that Nate Silver did his job poorly because he had Clinton favored, I thought, "Those people haven't gotten all their chips in a pot with a pair against a straight draw and lost." Or, more likely, they've had those things happen throughout their lives and didn't realize that's what 30% or 40% feels like.

An accurate picture of the odds is important when you're choosing a path. But once you've already made your choice, then you should switch into irrational optimism for the execution phase.

In most of our decisions, we are not betting against another person. Rather, we are betting against all the future versions of ourselves that we are not choosing. We are constantly deciding among alternative futures:

to come up with ways a decision or plan can go bad, so the team can anticipate and account for them.

It is uncomfortable to think about the possibility of failure, but it's worth it to live in that discomfort because you will be better prepared if things don't turn out according to your ideal.

most of our decisions, we are not betting against another person. Rather, we are betting against all the future versions of ourselves that we are not choosing.