I recently read ‘thinking in bets’ by Annie Duke. If you haven’t read it, you should, it is great.
The book deals with decision making when you don’t have all the facts. As a financial modeller, it’s a subject close to my heart.
In poker, you can be the world’s greatest player, make all the right decisions, but still get beat by a novice that gets lucky. Luck plays a large part in the outcome of any hand of poker.
In chess, a novice would have no chance against Gary Kasparov. If you learn the moves and strategies, make the right moves and don’t make mistakes, chances are, you will win.
Annie argues that life, (and business) are like poker and not chess. In an uncertain world, you can make all the right decisions for all the right reasons and still end up losing out.
Equally, you can make all the wrong decisions for all the wrong reasons and still come out on top.
Successful people love to think that life is like chess, that they got to where they are by the sum of all of their great decisions. To think that luck may have played a significant role makes them uncomfortable.
As financial modellers, in the business of supporting decision making by ‘predicting the future’ where does this leave us? If life is half chance, what is the point of trying to forecast the future? What is the point of creating a forecasting model at all? I hear this a lot.
My argument is this. We may not be able to control the outcome of our decisions and account for luck, but we can control the decision making process. We can make sure we give ourselves and our businesses the best chance of success through robust and rigorous analysis. A great financial model allows us to be like the great poker players and only place our bet once we have a clear understanding of the odds.
Sometimes we will win, sometimes we won’t but we can keep learning, improving and refining our decision making to give it our best shot.
Be lucky!
