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Key take-aways from @AnnieDuke& #39;s Thinking in Bets - an essential read/listen for anyone investing, either personally or professionally.
1. Our tendency towards "resulting" — evaluating decisions based on the result, instead of the decision making process.
1. Our tendency towards "resulting" — evaluating decisions based on the result, instead of the decision making process.
In venture, it’s easy to beat yourself up in hindsight for missing a deal or making a bet that didn& #39;t turn out.
But at any point in the decision making process, we are required to make a potentially multi-million dollar bet with incomplete information.
But at any point in the decision making process, we are required to make a potentially multi-million dollar bet with incomplete information.
It’s easy to say “I should have done X or Y” 5 years later when a company is soaring high or fell on its face.
But instead of retroactively evaluating our decisions based on the result, we must evaluate them based on the info we had at the time & the probabilities we bet on then
But instead of retroactively evaluating our decisions based on the result, we must evaluate them based on the info we had at the time & the probabilities we bet on then
If a company had a 15% chance of succeeding when you decided to pass, but it had an unforeseen inflection point (i.e. COVID) which led it to becoming a deca-corn, that probably pops into your head every so often with a twinge of regret.
Oftentimes, an unprecedented result is the consequence of luck, not skill.
A 15% chance of success isn& #39;t 0%, and sometimes we& #39;re just unlucky (the result lands on the less probable outcome). This "bad luck" should not be confused with lack of skill.
A 15% chance of success isn& #39;t 0%, and sometimes we& #39;re just unlucky (the result lands on the less probable outcome). This "bad luck" should not be confused with lack of skill.
While it’s important to stay humble and remember we miss things all the time, it& #39;s also important to avoid regretting decisions purely based on the result.
2. The influence of recency bias and self-serving bias on our decisions.
Recency bias = what has been happening recently will continue to happen.
i.e. the feeling that if we have been lucky/unlucky a few times, our luck will continue.
Recency bias = what has been happening recently will continue to happen.
i.e. the feeling that if we have been lucky/unlucky a few times, our luck will continue.
Annie uses the example of someone staying at the poker table thinking their "roll" (a few lucky outcomes) will persist.
This directly applies to investing where it& #39;s easy to believe that a rising market will continue to appreciate, or a declining market will continue to fall.
This directly applies to investing where it& #39;s easy to believe that a rising market will continue to appreciate, or a declining market will continue to fall.
Self-serving bias = taking credit for positive outcomes, but blaming negative outcomes on external factors
Annie explains how we often take credit for our successes that have more to do w/ luck than skill, but are quick to discredit success of others saying they "just got lucky"
Annie explains how we often take credit for our successes that have more to do w/ luck than skill, but are quick to discredit success of others saying they "just got lucky"
Both of these take-aways feel especially relevant in this crazy market where the goal post moves forward with every new financing round, every exorbitant valuation, and every time we watch the multiples grow (especially when they grow favourably in some of our investments).
No answers here. Just great reminders to:
1. Stay humble & evaluate your decision-making process, not the result.
2. Always question why an outcome happened (luck vs. skill)
3. Check whether your hunger/optimism is coming from a great opportunity or gluttony due to recency bias.
1. Stay humble & evaluate your decision-making process, not the result.
2. Always question why an outcome happened (luck vs. skill)
3. Check whether your hunger/optimism is coming from a great opportunity or gluttony due to recency bias.
Thank you @AnnieDuke for a wonderful read & @HarryStebbings for the recommendation & an incredible interview which led me to get the book! 
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