Our bets are only as good as our beliefs

Our bets are only as good as our beliefs

In an episode of the classic sitcom WKRP in Cincinnati, called “Turkeys Away,” the radio station’s middle-aged manager, Mr. Carlson, tries to prove he can stage a successful promotion for the rock-and-roll station. He sends his veteran news reporter, Les Nessman, to a local shopping center and tells him to report, live, on a turkey giveaway he is about to unleash.

The station’s DJ, Johnny Fever, cuts from his show to a live “man on the scene” report from Nessman. Nessman fills time, describing a helicopter overhead. Then something comes out of the helicopter. “No parachutes yet . . . Those can’t be skydivers. I can’t tell what they are but—oh, my God! They’re turkeys! . . . One just went through the windshield of a parked car! This is terrible! . . . Oh, the humanity! . . . The turkeys are hitting the ground like sacks of wet cement!” Nessman has to flee amid an ensuing riot. He returns to the studio and describes how Mr. Carlson tried to land the helicopter and free the remaining turkeys, but they waged a counterattack.

Carlson enters, ragged and covered with feathers. “As God is my witness, I thought turkeys could fly.”

We bet based on what we believe about the world. Pete Carroll’s Super Bowl decision to pass on the Patriots’ one-yard line was driven by his beliefs—his beliefs about quarterback Russell Wilson’s likelihood of completing the pass, of having the pass intercepted, of getting sacked (or scrambling for a touchdown). He had data on and experience about all these things, and then had to apply that to this unique situation, considering his beliefs about the Patriots’ defense and how their coach, Bill Belichick, would set up the defense for a likely running play on the goal line. He then made a choice about the best play to call based on these beliefs. He bet on a pass play.

A CEO deciding whether to fire a company president also acts on beliefs. He made his decision based on his beliefs about how the company was doing compared with competitors, what he thought the president did that contributed to or detracted from that, the likelihood he could get the president’s performance to improve, the costs and benefits to splitting the job between two people, and the likelihood he could find a replacement. He bet on letting the president go.

Beliefs about adapting to a new city can shape a decision to move. Our beliefs also drive everyday bets: which brands of cars better retain their value, whether critics knew what they were talking about when they panned a movie we are thinking about seeing, how our employees will behave if we let them work from home.

This is ultimately very good news: part of the skill in life comes from learning to be a better belief calibrator, using experience and information to more objectively update our beliefs to more accurately represent the world. The more accurate our beliefs, the better the foundation of the bets we make. There is also skill in identifying when our thinking patterns might lead us astray, no matter what our beliefs are, and in developing strategies to work with (and sometimes around) those thinking patterns. Checking our assumptions and updating them with evidence gives us a way to improve that foundation.

We have to start, however, with some bad news. As Mr. Carlson learned in WKRP in Cincinnati, our beliefs can be way, way off.