In her book, Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts, Annie Duke draws on examples from business, sports, politics, and poker to share tools anyone can use to embrace uncertainty and make better decisions.

These are some of my favorite concepts and takeaways from reading the book.

“Outcomes are feedback”

A decision, in its simple form, is a bet on a future. From our belief, we make a decision (a bet on a future). That decision will lead to one or more outcomes. We can learn from the way the future unfolds to improve our beliefs and decisions going forward. Actively using results to examine our beliefs closes the feedback loop. This is also a form of learning that helps us reduce uncertainty about our beliefs.

However, this type of learning, while ideal, does not happen very often. There is another element at play, and it is the element of luck. Because of luck (or random chance), we must recognize that the result may or may not always be a 100% direct result of our decision.

“Luck vs. Skill”

How our life turns out is the result of two things: the influence of skill and luck. If making the same decision again would predictably result in the same outcome, or if changing the decision would predictably result in a different outcome, we can say the outcome following that decision was due to skill.

While we would like to think the quality of our decision-making was the primary influence on how things turned out, it is hard to get this right all the time. We need to recognize that there are many instances where it is difficult to tell why anything happened the way it did. Whether to field outcomes into the luck or skill bucket is challenging to execute because of ambiguity.

“Working backward is hard”

Outcomes do not tell us what our fault is and what is not. Outcomes also do not tell us what we should take credit for and what we should not. As a result, learning from consequences is a very haphazard process. Furthermore, outcomes are rarely either all skill or all luck. Outcomes are always a combination of skill and luck – we do not always know each element’s percentage make-up.

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