BY RYAN GAVIN
PORTFOLIO MANAGER
In her book Thinking in Bets, former professional poker player Annie Duke offers a perspective that can transform the way we evaluate our choices: Good decisions don’t always lead to good results, and bad decisions sometimes work out wonderfully. This simple yet profound insight suggests that if we judge our decisions solely by their outcomes, we risk learning precisely the wrong lessons.
Implications for investors
This principle resonates particularly strongly in investing, where market noise, randomness, and factors beyond our control often obscure the true quality of our decisions. An investor might make a research-based, prudent choice to buy a diversified index fund aligned with their long-term goals, only to watch the market drop 5% the following week. Was their decision poor because the outcome was negative? Not at all. Meanwhile, someone else might pour their savings into a speculative stock based on nothing more than intuition and see it double in value. The outcome appears excellent, but the process is fundamentally flawed.
Seasoned investors understand this distinction intuitively. They focus relentlessly on their decision-making process: thoughtful asset allocation, appropriate risk assessment, proper diversification, and evidence-based strategies. They know market outcomes will fluctuate unpredictably in the short term, but a sound process dramatically improves the odds of long-term success.
The pay-off in sports
We see similar patterns in baseball, where even the greatest hitters fail most of the time. A batter might connect perfectly—a line drive rocketing off the bat at 110 mph—only to hit it directly at a fielder. Meanwhile, a weakly hit blooper might float just beyond an infielder’s reach for a lucky hit. The more sophisticated approach doesn’t just look at batting averages but examines the quality of each at-bat: exit velocity, launch angle, and plate discipline. Was the pitch in the strike zone? Was the swing mechanically sound? Did the hitter chase bad pitches or show patience?
By focusing on the quality of each decision rather than just its outcome, players can refine their approach and make better choices at the plate. Over thousands of at-bats, a sound process yields more consistent performance, even if any individual attempt doesn’t pan out.
A ripple effect
This mindset builds resilience in all areas of life. When we fixate on outcomes, we subject ourselves to emotional volatility. Wins feel like complete validation even when luck played the key role. Losses feel like total failure even when we executed flawlessly. This emotional rollercoaster can lead to overconfidence after successes and panic after setbacks, sometimes causing us to abandon sound strategies at precisely the wrong moment. In contrast, process-oriented thinking creates stability. It encourages deep reflection, continuous learning, and honest selfassessment. “Did I adhere to my plan? Did I consider the relevant data? What adjustments might improve my approach next time?”
Rather than being thrown by every outcome, we can maintain perspective and focus on improvement. In the end, we can’t control every result, but we can control how we make decisions. By emphasizing process over outcome, we become better investors, better athletes, and better professionals. As Duke suggests, “thinking in bets” means acknowledging uncertainty, embracing probabilities, and making the best decision possible with the information available to us.
That’s all we can do. Over time, it’s enough.
