The thesis of this book is that thinking about choices as bets improves the decision-making process. By doing this, it forces the decision-maker to evaluate the strength of the belief (subjective probability) and the significance (upsides and downsides) of each possible outcome (p. 66). Uncertainty about the outcome could be due to either incomplete knowledge or inherent randomness in the problem at hand (p. 69).
Quantifying uncertainty helps in two key ways. The first is that it allows you take an inventory of why you believe something (p. 66). Even if your uncertainty is over a wide range (e.g. something is 20 to 80 percent likely), setting bounds helps you to focus. Second, by quantifying your uncertainty it also means that changing your mind doesn’t have to be a binary process. As the author says, “I was 58 but now I am 46 percent sure” feels better than “I was right but now I know I was wrong.” (p. 70) Treating your beliefs as probabilities helps to avoid loss aversion bias around the ideas you hold.
Another theme of the book is that you should carefully evaluate the quality of decisions based on the information you knew at the time, not based on whether you turned out to be right or wrong. The author callsthe latter method of evaluating decision-making “resulting,” by which she means overindexing on the quality of the outcome rather than the quality of the decision. One way to improve your decision-making is to participate in a group that holds you accountable for your decisions and the accuracy of the information on which you made them (p. 130). In fact, one succinct way to summarize the book is that “a bet is a form of accountability.” (p. 135)
One paragraph of the book is worth quoting in full:
Surfers have more than twenty terms to describe different kinds of waves. The reason is that the type of wave, the way it breaks, the direction it’s coming from, the bottom depth, etc., create differing challenges for surfers. There are closeouts (eaves that break all at once), and double-ups (a type of wave created when two waves meet to form one wave) and reforms (a wave that will break, then die down, then break again). Non-surfers just call all of these “waves.” On rare occasions when we non-surfers need to be more specific, we just add a lot of extra words. Those extra words don’t cost us much because it doesn’t come up very often–maybe never. But for people involved in specialized activities, it’s worth it to be able to communicate a complex concept in a single word that laypeople would need lengthy phrases to convey. Having a nuanced, precise vocabulary is what jargon is all about. It’s why carpenters have at least a dozen names for different types of nails, and in the field of neuro-oncology, there are more than 120 types of brain and central nervous system tumors. (p. 197)
This is a clear and thorough explanation of why jargon exists in various fields. As the author shows, the language of bets applies very generally and can help to improve decision-making any time you encounter uncertainty.