Put more ‘educated’ into your guess – with Annie Duke

Thinking in terms of probabilities can be a significant aid to sound decision-making but how can people be helped to do it? We asked our returning podcast guest, US poker player and author Annie Duke



Juan Torres Rodriguez
Fund Manager, Equity Value

How heavy is the laptop I’m typing this article on? There’s no way you can say for sure, of course, but you might reasonably suggest anything between 2kg and 4kg – and you would be in the right postcode. You were never going to guess 100kg because that would be very impractical for day-to-day work. Equally, you would probably not suggest 100 grammes as Apple can still only dream of creating a laptop as light as a hamster.

So although this is a question to which you could not possibly know the answer, you likely knew enough to narrow down a range and so make an educated guess. In short, give or take a bit, you gave yourself a chance – and yet, as professional poker player turned business consultant Annie Duke highlights in her second appearance on The Value Perspective podcast, this is something people often shy away from doing.

Back in June, we ran a series of pieces based on our previous chat with Duke, touching on the benefits of thinking in terms of probabilities; the importance of mental tools such as base rates and how to counter being ‘on tilt’; and outcomes and timeframes in the context of decision-making. This time, we began by asking her how she would go about helping people to think in probabilities – is it something you can even coach?

Beyond the maths

For Duke, whose recently published book How to Decide: Simple Tools for Making Better Choices builds on her 2018 best-seller Thinking in Bets, step one is to address the perception probability is just a mathematical concept by grounding it in what the maths is actually describing. “Research suggests, if you just ask people to think how many times they would expect something to happen out of 100, they are much more comfortable than if you ask them what percentage of the time they thought that thing would happen,” she says.

“You have to use plain language to get people to focus on what the probability is supposed to be describing for them. And that has to do with frequency, really, right? You are imagining doing the same thing over and over again – for example, if you kept making the same sales call, understanding there are all sorts of things you cannot control, like the other person’s mood, how many times out of 100 would you close the sale?”

Next up, says Duke, comes demonstrating why it is so important to think in probabilities – and to express those probabilities in what can feel a very precise way. “If you do not make the case for why this is going to make people’s decision-making better – why it is going to improve the quality of team conversations – then I don’t know that anyone is going to overcome their phobia about probability,” she argues.

“People can get very afraid of what feels like a lot of precision. We are taught in math that there are right answers and there are wrong answers – that ‘two plus two equals four’ is correct, whereas ‘two plus two equals 100’ is wrong. So when you ask someone to tell you the likelihood something will happen, they feel like they are in ‘two plus two equals four’ land when in fact they are in ‘Tell me your best guess’ land.

‘Best guess’ land

“What we are asking is, if you had to really think, what would be your best guess about how often this would occur? And, importantly, this is not about right or wrong but about building up a clearer view of the future.” Indeed, in How to Decide, Duke actually draws an analogy with a crystal ball – the perfect decision tool for anyone looking to be sure what will happen in the future.

“Of course, that isn’t possible,” she continues. “So we are trying to come up with something that is like a dirty  and cloudy crystal ball where we can’t see anything but we wipe it off a bit to get a glimpse of the future. And the better we are at shining up our crystal ball, the better the view we will have of the future – and that is actually going to get us a long way.”

Duke is less concerned about whether something will happen a specific percentage of the time than she is about encouraging people to think about the issue at hand and eliminate possibilities from the spectrum of things that could occur. Rather than seeking an exact answer, she suggests it is helpful to look to identify a range as “that gets us out of the world of right and wrong”.

“If I ask you how many jelly beans are in a jar, it is a lot harder for you to say ‘364 exactly’ than ‘Somewhere between 200 and 500’,” explains Duke. “If I give you leeway to express your uncertainty, then you are much more willing to start thinking in this way. Really it is just estimating because, while sometimes probabilities can only involve objective risk, with most decisions, we are making subjective judgments.

“We are not omniscient – you do not have all the information you need to know how often you will close that sale – but, if I ask you to give me an upper and a lower bound to that probability, that gets people comfortable with the idea. It is signalling I don’t expect you to get this right. We’re not in ‘two plus two’ land but ‘best guess’ land – and probability is actually the best way for you to express any uncertainty you do have.”

Beyond right and wrong

The last piece of the puzzle involves overcoming people’s unwillingness to guess when they feel as if there is a right and a wrong answer. “Very often that unwillingness is coming from this idea you do not know the right answer so you are not comfortable saying anything,” Duke explains. “So what I really try to get across to people is the importance of thinking of all their guesses as educated ones.”

As Duke, goes on to point out, there is almost nothing you could be guessing at that you do not know anything at all about – as the example of the weight of my unseen laptop aimed to illustrate at the start. And going through the estimate process could lead you to look up helpful information – checking Google to find the average weight of a laptop, say – or you might seek the views of other people.

Returning to her example of the probability of closing a sale, Duke says: “You might go and find feedback from other people or get perspectives that may actually help you – perhaps from someone who has had experience with this customer before or with similar customers. That would all help you to refine your guesses on ‘how many times out of 100’.

“What you are trying to accomplish here is to figure out how much you know and explore your level of uncertainty. When I think about the goal of decision-making, it is really that ‘educated’ piece – we do not have much control over the luck element but we have a lot of control over the informational element. And we would be a lot better off, if we can put more ‘educated’ into the guess.”


Juan Torres Rodriguez
Fund Manager, Equity Value


Behavioural finance
The Value Perspective
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