Think Twice summary

In horse racing, winning the Triple Crown is considered a monumental achievement. A horse must win the Kentucky Derby, Preakness Stakes, and Belmont Stakes in the same year – a feat that’s been accomplished only 13 times. In 2008, horse trainer Rick Dutrow was certain his horse, Big Brown, would capture the Triple Crown. After decisive victories in the first two races, Big Brown looked unstoppable. Shockingly, not only did Big Brown lose the Belmont, he finished dead last – something no prior Triple Crown contender had ever done. 

The oddsmakers that had Big Brown picked as a 3 to 10 favorite made a critical error in judgment: they failed to properly consider the context of how previous Triple Crown hopefuls had performed. Analyzing past data reveals a sobering fact – only about 40 percent of horses who’ve won the first two Triple Crown races go on to win the third. The oddsmakers discounted this broader statistical reality. They also ignored Big Brown's mediocre Beyer Speed Figure, a metric that measures a horse's performance. Essentially, the oddsmakers relied on an inside view of the situation.

The inside view focuses on readily available, case-specific details – in this instance, Big Brown's previous wins and apparent good health and conditioning. The alternative is taking an outside view – considering relevant statistics, comparable scenarios, and broader context to inform decisions. Unlike the inside perspective, the outside view provides a reality check on biases and assumptions.

Humans naturally gravitate toward an inside view. We tend to be overly optimistic in our predictions. The vast majority of people rate themselves as above average on positive traits, for example. We also overestimate our ability to control outcomes. Just watch any home renovation show – despite tight budgets and deadlines, projects invariably go over time and cost. Or consider the constant corporate appetite for mergers and acquisitions, despite research showing most fail to improve profitability. 

Once you’re aware of inside versus outside view dynamics, you see it everywhere. Integrating more outside view thinking is imperative for good judgment, so here are some steps that’ll help you become a less biased thinker.

First, identify an appropriate reference class based on your situation. Next, analyze the distribution of outcomes within that reference class. Then make a prediction informed by that distribution. Finally, adjust your prediction as you gather more case-specific feedback.

The inside view feels natural, and avoiding its pitfalls takes conscious effort. But by deliberately adopting an outside view, you’ll counteract biases and provide perspective – and see your decisions steadily improve.