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Thinking in Bets by Annie Duke (Tim’s Book Club #2)

What if you could change the way you make decisions..? "Thinking in Bets" is your secret weapon for making better decisions.


finance book

The world of finance and investing can sometimes feel like a bit of a gamble. Everyone looks like they know what they’re doing and you feel like you don’t. You throw your hard-earned chips on investments, hoping for lucky outcomes. But what if there was a better way? What if you could approach your finances with the mindset of a poker champion, making informed decisions based on calculated probabilities..?


That's the powerful message behind Annie Duke's "Thinking in Bets." More than just a gambling manual, this book is a practical guide for navigating uncertainty in all aspects of life, including your financial decisions. As a financial advisor, I want to share why I believe "Thinking in Bets" is a must-read for anyone looking to achieve financial security with confidence (and make better decisions generally).

 

Embrace the Game, Not the Guaranteed Win:

Duke, a former professional poker player, argues that life is a series of bets, not guarantees. The market will fluctuate, unexpected events will occur, and sometimes, even the best decisions won't lead to your desired outcome. This doesn't make you a bad decision-maker – it simply acknowledges the inherent uncertainty of life.


The key takeaway..? Focus on the process, not the outcome. "Thinking in Bets" provides tools to improve your decision-making framework, helping you make consistently smarter choices regardless of the eventual outcome. This is really important to learn because life often doesn’t go the way we think or expect. Sometimes (more often than we’d like), we make good decisions that turn out with negative outcomes and vice versa. This can lead us to question whether we made the right decision at all.


You’ve probably met someone (we hear this regularly) who says shares are a bad investment, because they bought a share in the past and it lost money. In these cases, it’s not that shares are a bad investment or that they always lose money, it’s the quality of the decision that lead to buying the shares that should be analysed. Was my research sufficient, did I have a long enough time horizon, did I understand what I was investing in, was I trying to get rich quick and so it goes on.


The flipside is also dangerous…making a poor decision that leads to a positive outcome can lead us to believe that the decision was really good, rather than just lucky.


Luck plays a huge part in our lives and is often overlooked. Some things just happen the way they do, regardless of what we do or the choices we make.

 

Winning Hands: Strategies for Financial Success:

Think probabilistically: Avoid wishful thinking and understand the potential upsides and downsides of your investment choices. Quantify the possibilities and make decisions based on expected value, not what you hope will happen.


Don’t ignore your biases: We all have cognitive biases that can affect our judgment. Learn to identify these biases, like the sunk cost fallacy, anchoring or confirmation bias, and try to limit their influence on your financial decisions.


Seek information, not validation: Gather relevant data and qualified opinions before making any investment move. Don't just look for information that confirms your existing beliefs – challenge your assumptions and embrace new perspectives.


Control your emotions: Don't let fear or greed dictate your investment decisions. Develop emotional intelligence to stay calm and clear-headed in volatile markets. Be honest with yourself about your motivations.


Embrace small bets: Take calculated risks and learn from the results. Testing the waters with smaller investments allows you to refine your strategies and build confidence before making bigger moves.

 

Beyond Investing: Life Applications of "Thinking in Bets":

The principles of "Thinking in Bets" extend far beyond the realm of money and finance. This book can help you make better decisions in all areas of life, from career choices to personal relationships. By understanding the role of uncertainty, managing your biases, and focusing on the process, you can navigate life's bets (choices and decisions) with greater clarity and confidence.

 

“Thinking in Bets” is a great book for everyone to read, even if you’re not really interested in money, finances or poker for that matter. I come back to it from time to time, just to reorient myself with what’s important in decision making – the process rather than the outcome. It’s a heavily highlighted and underlined book for me, which is a sign of a good book.


If you’ve read this book or have any suggestions for similar books that have affected the way you make decisions, please let me know.


If you want to get a copy of “Thinking in Bets” you can get it from your local library, bookstore or from our Amazon affiliate link here.


Here’s to making better decisions


Tim



This post may contain affiliate links, meaning we may a commission if you decide to make a purchase through these links, at no cost to you.


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