Annie Duke: Thinking In Bets

Welcome to the new retirement podcast. Today, we're going to be talking with Annie Duke, who is a World Series of Poker bracelet winner, a former Poker Professional with $4 million in career winnings, author and public speaker about behavioral finance biases, decision making, learning, and doing better in the long term through the lens of poker and thinking in bets. The name of her new book, Annie lives outside of Philadelphia, and I'm super excited to have her on our show. So with that, Annie, welcome to our show. It's great to have you join us.

I'm so happy to be here. Thank you.

Yeah, I appreciate you making the time. So before we get to your book and kind of all about the behavioral finance stuff, will you share a little bit about your. Your life, kind of, you know, how you grew up and some of the big milestones up to this point?

I'll just start with my adult life. Right. So I went to undergrad at Columbia University. I was studying with. I was a research assistant for actually four full years with a professor there whose name was Barbara Landau, and she was studying cognitive psychology and specifically interested in first language acquisition. At the end of college, rather, at the end of undergrad, she encouraged me to go on to the University of Pennsylvania to study with her mentors, Lila Gleitman and Henry Gleitman at UPenn, which I did, and I spent five years there. I had a National Science foundation fellowship, and I was studying cognitive science, and I was specifically focused on first language acquisition, which is really just a question of how do you learn in a noisy system when there's a lot of noise, a lot of randomness? So at the end of that, I was going out to go become a professor, which is really what I thought the route was that I was going to take. And I actually got sick. I had been struggling with a stomach issue during my last year of graduate school, and it got very bad as I was heading off toward my job talks. So I actually landed in the hospital for two weeks and had to cancel all my job talks and needed some time to recuperate. And so I was intending to take a year off and then go back out, back out on the job market. And during that year was actually when I started playing poker, simply really because I needed money. I didn't have my fellowship, and I just needed a way to make money. So obviously, the meantime turned into about 18 years as I didn't quite. I never quite made it back to being a professor. But about eight years into this kind of getting really, really interested in poker in 2000, two, I got asked to speak to a group of options traders and I was being asked to speak about risk. And I really started to explicitly at that point merge together my academic training around learning and what this real life high stakes application of these kinds of principles was that you were sort of executing at the poker table and how poker and what you were seeing at the poker table might inform the kind of things that I had learned in graduate school, the kinds of things about how we learn and biases and heuristics and, and the way we deal with feedback, particularly when it's noisy. And so I started speaking on that and developed. A lot of my life was spent on that. In fact, more time was spent on that part of my life than poker through the last decade of when I was playing poker. And then in 2012, I retired and I started doing this full time. I founded a nonprofit called How I Decide that was specifically aimed at building the field and creating energy and, and programs in teaching kids decision making, critical thinking skills, which by that time I felt like I was a big evangelist for. And then I wrote this book, Thinking in Bet. So that's sort of. There you go. That's my life story.

Okay, so Annie, that's interesting. So it sounds to me then, so you had this 18, 20 year professional poker career, but it sounds like in the latter half of that, you actually spent more time digging more into the behavioral finance side of this than playing poker and starting to think much more about the decision making side. Is that right?

Yeah. Well, you know, I think that I've always been somebody who wasn't really satisfied with doing only one thing. So when something is exciting me, you know, I kind of just dive into it. And I think that that's what happened. You know, it was a total accident that I ended up speaking in front of this group of options traders. They actually didn't even come to me to speak to them. They came to my friend Eric Seidel. But lucky for me, Eric Seidel really doesn't like public speaking. So he then recommended me to do it instead. And, you know, the thing was, when I was in graduate school, you know, as all graduate students do, I was teaching a lot, and I always really loved teaching. And so, you know, it's this way for me to really think about the two things that I really loved as an adult. You know, the academic work that I'd done in cognitive and behavioral psychology and this other thing that I'd done, which was this kind of weird game that I had found my way to Playing and figured out a way to sort of bring those together and get to start thinking about those again in a very rigorous way. But also get back to teaching, which was something that I really loved. And so I felt like it was a really. It was kind of the perfect thing for me to be able to be doing both things at once and find the intersection between the two things.

I can appreciate that. I was going to ask you why you wrote that book and it sounds like it is a nice. It brings together those two sides where you spent 18 years playing poker and learning how to play that game and how you think about that and then all your work around cognitive psychology, decision making. It's a really enlightening book. I really enjoyed it. I was notating the heck out of it when, when I read it so I could circle back and come up with some good questions and any big takeaways that you would want people to have after reading your book.

I think takeaway number one is embrace uncertainty. I think that a lot of what we're trying to do in our lives is pretend or fool ourselves or convince ourselves or convince other people that we're certain of our decisions, that we're certain of our beliefs, that we're certain of the way that things will turn out. And it's not a particularly accurate model of the world. And I think it actually causes you quite a bit of anxiety and actually creates a lack of compassion. A lot of times, like for ourselves, for other people, the anxiety comes from sort of all of a sudden things don't work out well and it's like the recrimination and I should have known and why didn't I see this coming? And those kinds of things that come along with it that are very anxiety provoking and not particularly self compassionate. And I think that if we think about the fact that at the base of any decision that we make, it's informed by our beliefs that if we have this illusion of certainty about the things that we believe, the house is going to fall apart because the foundation isn't going to be very good because it's not an accurate model of the things that we believe. There's no belief belief that we have that's informed by perfect information just kind of by definition. And we can think about it in the scope of human history. The number of things that like human beings believed that it kind of turned out not to be true later. Like the earth is flat, the sun revolves around the earth. I mean those are simple ones, but I mean there's lots of things like that there are lots of species that we believed were extinct that now have become unextinct, as an example. But there's lots and lots of things that you can think about like that. And that's a pretty good description of your own beliefs at any state. And when I say to people, like, what are things that you believed when you were 20? Is there anything that you now realize, even though you were so certain of it when you were 20, that actually you shouldn't have been certain of it? And they're like, oh, yes, everything. And I'm like, yeah, so don't assume that your beliefs. That you should view your beliefs now in any different way. So I think that the foundation of really good decisions, I think the foundation of being decisive and the foundation of building an accurate model of the world, of really being good at thinking about what the future might hold, comes from embracing uncertainty, not swatting it away. I would say that that would be the first main takeaway. And then the second main takeaway would be, don't try this at home. Don't try this on your own. Because, yeah, we're just sort of built to interpret the world in a biased way. There's all sorts of reasons for it. But, I mean, I imagine most of the people that are listening are familiar with confirmation bias, for example, that we notice things that confirm our beliefs and tend not to notice things that don't. Hindsight bias. That's that feeling of things that actually occur are inevitable. So you can have something that has a 1% chance of happening, and after it happens, it feels like it had to happen that way, for example. So that's a bias. We have a bias towards false positives. So there's all these different types of ways. And people who have read, for example, Kahneman thinking fast and slow, should be pretty familiar with a lot of these kinds of biases that are kind of running our brainware. And the thing is that if I tell you about them and I make you aware of them and you're a smart person, it doesn't mean they go away. In fact, in some cases, there's been evidence that shows that it gets a little bit worse. So I'm just a very strong believer in recruiting other people into the process to really kind of help you to be a better decision maker. On the idea that when I'm watching other people, I can see their bias a mile away in a way that I can't see my own bias. I can use that to my advantage by saying, hey, let's make a team. You'll watch my bias and I'll watch your bias, and then we'll both be better off for it. That would be the second big takeaway, is get some people in the process with you to really commit to trying to be better decision makers and help each other out.

Yep, that's. That's great. That's a great insight. So the two things are kind of embrace uncertainty. Right. Don't assume that there's only going to be one outcome, but like, hey, there's a range of outcomes with various probabilities which I.

Your beliefs are somewhere in between true and false. That's the other thing.

Right. And your beliefs and your own biases heavily influence how you perceive the world. Yeah. The idea of having a team around you, I think that totally makes sense. And in companies, that's easy to do. How about in people's personal lives? I guess it's their spouse or partners and friends that they should recruit to be part of this.

Yeah. So, yeah, you can sort of find people anywhere. But I just want to go back to saying it's not so easy to do in a company for the reason that our natural tendency when we get into groups is to default to a confirmatory style. So that would go under sort of groupthink, echo chamber, that kind of thing. And particularly, there's a lot of people who sort of think about a good team as people being on the same page, what they then sort of interpret as agreement. So they're purposely trying to create cohesion on the team around people sort of having the same point of view and the same beliefs and the same sort of commitment to the same kinds of ideas. And that actually, I understand why people interpret being a team player that way, but that type of team environment is going to create. Is going to create an echo chamber where people aren't going to feel necessarily free to offer alternative perspectives or sort of challenge the group because they're going to be seen to be dissenters or naysayers are sort of like, what is it, Debbie Downers or.

Yeah, totally, I get that.

Right.

Yeah. And some companies, I know that in some firms, they really try to encourage people to have healthy debate and voice, strongly voice other opinions. Some people are like, hey, no, arguing is great. I don't care if we get into it in these meetings because we want to make the best decision and you have to kind of strongly advocate for your position. But I think that's probably the exception in a lot of firms. I think you're right. A bunch of people come together, come talk about it someone's got a strong idea and everyone else kind of piles on and says, okay, great, let's do that.

And I think it comes from. I was listening to Shane Snow, who wrote Dream Teams, and he was talking about kind of the genesis of this. He was saying there was some research. I sort of feel like it's the same as some of the self esteem research and how that sort of developed into everybody getting a trophy. It was this kind of interpretation of this evidence that turned into something that I'm not sure was so helpful. But he said that there was just this research that showed that people are happier at work when they feel like they're on the same page. But there's different ways that you can define being on the same page. For example, we could be on the same page because we feel like within our team we're on the same page about process. And we agree that the best process is to foster healthy debate. But the simple version of being on the same page is that we agree with each other. That's sort of the simple way to interpret being on the same page. And that when they saw that when this research came out that people are happiest at work when they're on the same page, it kind of got interpreted as well. That means that we should be fostering this situation where everybody's sort of agreeing with each other. Of course, the problem is that think about how that might clash with the drive toward diversity. You're saying you want to bring diverse people onto the team, I assume, because they have diverse points of view. So they have different perspectives that they can offer. And think about how that's going to butt up against this idea that being a team player or being on the same page means that you agree with each other. And now you've brought somebody on because they have a different perspective, but they feel like their perspective is being silenced or that somehow they're not being a good team player if they're expressing that disagreement, which is also pretty bad. So I really liked his perspective on kind of the genesis of it. And then the other thing that I would say is that one of the things that we're kind of not aware of is that the way that within a team, particularly from a leadership position, we can create kind of a situation where we're all sort of like being driven into that confirmatory style or that echo chambery kind of style simply because we infect the group with our own beliefs. Right? So you can think about the difference. And this is that people don't even realize they're doing this could be they have an intention to have a healthy discussion, and yet they sort of infect the process because they don't realize that doing things like, for example, just offering your belief first when you're in a leadership position will actually cause other people to now reason toward what your belief is. So, like, as an example, if you have four different people interview a job candidate and then you all convene in a room to discuss it, everybody's going to sort of influence each other and it's not going to be as productive and the opinions aren't going to be as high fidelity if you actually allow each person to write a report independently before seeing what the other people think, because there's just this, like, cross contamination that occurs. So that's the other thing that you have to watch out for, and that's on teams where the intention is actually to allow for disagreement. You can be sort of killing the disagreement without even knowing you're doing it.

Right. I think that's pretty interesting. The idea of we struggle this in our firm. We're kind of like, all right, we want to be in alignment. Right. But also, I like the idea of healthy debate, and I think reframing it as we're going to agree that we're all going to strongly advocate for our positions and that's okay. And it's not the focus. To just always be perfectly in agreement is kind of an interesting way to look at it. I wonder how many firms actually think about decision making as much as you do. I mean, what's your take when you're out there interacting with these companies?

Yeah, for sure. Bridgewater does. Right. People should go read principles so that you can see this kind of approach on steroids.

Yeah, I've read some of his stuff. He's out there thinking about this.

Yeah. So, I mean, look, I think that almost any company is thinking about decision making. It's just a question of whether they're thinking about it from a way that's informed by the science. As an example, the majority of companies that I work with, when they ask me to come and work with them on, for example, a strategic plan, and I start working with them on what the possible outcomes are. So we sort of figure out what it's sort of scenario planning. Right. Like, here are the possible outcomes from decision A. Here are the possible outcomes from decision B. Obviously, those can be overlapping. And then I ask them this question, okay, so let's start putting probabilities on the outcomes. And the majority of people I work with Are like, what? No, I can't do that. And you know, I'm like, well, why do we agree, like, can we agree that there's some sort of likelihood of each of these outcomes? And the answer is that they're afraid they're going to be wrong. In other words, what they say is, there's no way for me to know for sure what the probability of this thing occurring is in the future. And so therefore they default to I refuse to give you one. So once you see that, what you see is, yes, they're committed to decision making, but clearly in terms of process, they don't actually know how to get to the right process because they don't understand that the whole point is that making a guess at what the likelihood of something occurring is is better than not guessing at all. Number one. So even if all you can say is that this particular scenario that might occur is going to happen between 30 and 70% of the time, they sort of feel like, oh, I don't want to say that because that's not like a right answer because they're not thinking about it. Right. But what I say to them is, that's better than sort of pretending like there is no probability to it at all or just sort of leaving it in the dark, number one. Number two is you know more about this than anybody else does, so your guess is going to be better than anybody else's. And the fact you're guessing is already going to be good. And number three is that just the process of trying to assign a likelihood or a probability to a particular scenario actually causes you to. In a real way. When I go back to that original takeaway, to really embrace the uncertainty. And the uncertainty comes from two places, right? One is from luck. So when you're thinking about the probability of any outcome occurring, you have to acknowledge the luck element. You have to start thinking about, well, what are the things past the decision that I don't have control over that may have influence on the way that this might turn out.

It's back to that uncertainty, right? Accept that that uncertainty is out there.

Exactly. And then the second form of uncertainty is hidden information. What are the things that I don't know? And in order to make a good estimate of how likely something is to turn out, you also have to be thinking about what's the information that I have that's informing the prediction, that's informing the forecast? And it causes you to actually become very information hungry. Like, if you think about, well, our best guess is between 70 and 30% that actually drives you to start asking yourself, well, how can I narrow that range? Like, what is it that I could find out? What information could I possibly discover that could cause me to narrow that a little bit? Because the more that I can narrow it, the better off I am. So what I would say is I think that in the abstract, I don't think you're going to find someone who's not like, yes, I run this business and I'm very much thinking about decision making. But I think that for most people, it's not particularly informed by the science. It's not particularly informed by real probabilistic thinking. By building out these kinds of trees, by really mapping out the future in a real way. I think that most of them are doing decisions where they're trying to get consensus in the room, number one. So they think that that's really important, that we have to get consensus, and then we have to land on one possibility. And once we've done that, we're going to be sure of it. And I think that that's what most people's process looks like.

Yeah. I have so many comments, but some quick thoughts. One is, I think so much of our education is around how to think critically, which is important. And also I was an engineer. How to solve problems and build things versus thinking about how do you make good decisions. And when you look at your life, right, the outcome of your life is the sum of, you know, the. The decisions that you made and, you know, whether or not they worked out, right? The luck and uncertainty part of it. Back to poker, which I, you know, the more I hear you speak about it, I think it does have so many lessons for decision making around, you know, like that concept of kind of risk reward, right? So every time you make a decision in poker, you're like, okay, how much am I risking? How much money am I putting in the pot? What's my potential upside? How big is the pot, and is it worth it to. Especially with Texas hold'. Em. I know maybe many of our listeners aren't familiar with it, but basically you pay as you go to get more information because there's cards that are turned over when the game is played. And so you have to decide, do you bet? Do you call as you go along to kind of get additional information? And that idea does translate perfectly to business. There's this concept called lean startup, where essentially you're trying to learn as quickly as you can, as cheaply as you can. You come up with a hypothesis. You build these MVPs, minimum viable products to kind of test your ideas. So you're trying to spend as little as possible, see what happens when you run an experiment and see what happens. And it's similar. But when you're doing that, when you're framing this up, ideally, you're also thinking about, hey, what's the potential upside if this works? What's the cost to run this experiment? A lot of startups out in Silicon Valley run this, and I think more and more new companies are doing it. But do you see your companies embracing that approach?

Some of them, yes. Some of the people that I work with are in agile development, which is obviously exactly that type of mindset, you know. So, you know, again, it just depends on the company. It just depends on the company. Some of them are, you know. But I think that the thing that's important is that even with a company that is not, you know, like a lean startup, thinking, still thinking about the world in that way, that you can be making these small tasks, like these small pokes for information and using that, that you don't need to necessarily settle on exactly one strategy, right? That you can do like these kinds of very small AB tests and just start poking around to sort of see what works and see what doesn't, you know, again, and I think that it has to do with, like, are you approaching the world as someone who's, you know, saying that I need to be epistemically open, right? Like, I need to not feel like I need to know for sure that there's all sorts of different ways that this could work out and I have to be open to trying and seeing which things do I want to test as opposed to deciding on the right answer.

Right. Which is our bias, we want, which.

Is this very different way.

Right. I think very often, especially people that lead companies, they're used to making quick decisions and they kind of have a gut feel for what the right answer is, which they bring to the top table. And they want to quickly get to that conclusion and probably influence everyone else that's helping them make that decision to say, okay, here's the right.

Yeah, I mean, that goes back to that kind of like the contagion problem, right? Like when someone comes in and says, here's what I think we should do, this is my belief, you know, I feel this very strongly that this is the right answer. Good luck having anybody in that room really challenge you in any kind of way. Like, not necessarily that they're not going to do it on purpose. They're just like, wow, this person has a lot of experience and they really strongly believe this. So whatever I thought must be wrong. I mean, it's just sort of a natural way to think about it. And very often, you know, I try to tell people to sort of test this out in their own life in small ways so they can see how hard it is to sort of execute on this in this anti contagion way. So, and you can tell me if this rings true to you. Like when somebody reads an opinion piece on politics, for example, how often do you hear them just say, like, I read this opinion piece in politics, will you read it? Like literally end of sentence? Or do they say, read this opinion piece? I thought this, this, this and this and this. Will you also go read it and then tell me what you think? And of course it's the latter. This is how we communicate to each other. And I think part of it is that we feel like our opinion or our beliefs or the things that we've noticed are important data for me to communicate to you prior to getting your opinion back. I don't think that we're doing it in a way that's ill intended, it's unconscious. I think that we really believe that. Right. It's important data. Like, well, I have thoughts about it, so let me communicate those. Because it's important for, for Steve to know that before he gives me any advice back.

Well, yeah, even, I think I would say even, even the fact that you're even presenting something, you're probably already subject to your own confirmation bias, like, oh, I saw this article, which, you know, reinforced what I believe. And what do you think about that? I mean, you're not saying that like, you know, reinforce what you believe, but just by presenting it, you know.

Exactly. But I'm going to do a lot better if I say, hey, I read this, I read this opinion piece, I'd kind of like to know what you think. Will you please read it? And literally I give you no other information. And I challenge people to try to start interacting with people in this way. And they're surprised by how hard it is how often they have to sort of withhold their own opinion. It's really hard to keep it inside because like, and the other thing is, I think it's not only that you feel like it's important data, but I think that you have a little bit of a fear of what if the person thinks I agree with it when I don't, or what if the person thinks that I don't agree when I do and that somehow that would be bad, like the person will get a misperception of you, or they might think differently about you. And it feels sort of like you're sort of opening yourself up to an attack on your identity in that way, as opposed to just saying, I really am just presenting this to you in a neutral way because I really would like to get high fidelity feedback back from you. And it's irrelevant whether I agree with it or not. Please don't try to guess at it.

Yeah, it makes me think of one thing that I think so I'm a angel investor in this company called Clover Pop. And it's really. Their whole idea is to try to improve decision making. I'm interested in this. I think it's an area of opportunity in our economy where there's all this investment around how do we execute better, how do we track things better? But there's not a lot of technology enablement around how to make decisions better. And I think one of the things they do is they actually blind off who's making a suggestion. So you can have a group of people that, hey, we know this problem really well, we're all interested in solving it. And if the CEO presents his position and the CMO and da, da, da, then you know where the information is coming from. Right. And as we were just talking about, if they're presenting, you know, their opinion about it as well, it biases everybody. But if you come in and say, I don't know who's presenting it. And ideally what you're saying is they just say, ask for consideration back. Hopefully you'd get better outcomes. But I almost think you do have to have other. It's so hard for us to fight our own biases all the time. Doing it through tools might help. And I'm not trying to sit here and pump them up, but I just think it's an interesting area.

Oh, I agree. Yeah, no, I completely agree because this is what I say. I tell people to try this exercise just like an everyday conversation, and people just fall apart with it. It's so. And I mean, I love the idea of what you just said because one of the things that I talk about in the book is how do you implement these scientific norms, like norms for scientific communication into the way that you're interacting with other people in terms of not just sort of making decisions prospectively, but deconstructing decisions retrospectively. Like, both have their own challenges. And there's a wonderful acronym, which is Kudos, which was put forward by Robert Merton, and he was really talking about kind of like norms for Scientific communication and kudos stands for the C is communism. I mean, obviously not the political kind, that data should be treated communally within the team trying to decide about it. Right? That doesn't mean I'm supposed to share my data with another company, obviously, but within team, data needs to be communal. And then the you is basically what you just talked about, which is universalism, which is that the message and messenger should not be equated. So obviously there are certain times when you need to know things about the messenger. Like for example, their level of expertise in something helps you decide whether the information that they're presenting it helps you put a probability on whether it's true or not. Right? So if there's an expert, if I know that you're somebody who's an expert on East Asia, for example, like I'm going to trust what you tell me about the population of Mumbai better than somebody who knows nothing about that. So in that case, like there are certain features that might be important, but outside of that kind of thing, the fact is that there are things that are true no matter who says them. And very often we will trust or distrust the information based on our trust or distrust for the person. So the thing I say is the earth is round, whether it's Mussolini or your mother or your best friend telling you that. Right? Or your worst enemy telling you that the earth is round on the fact nonetheless. So things have truth to them regardless of who the deliverer is. And this is actually really important because otherwise what can happen is that not only sort of on a global sense, information can be sort of distorted in a political way depending on who the deliverer is. And I think we see this a lot in these sort of claims now about like fake news and the way that people interpret information if they're coming from one party or the other, depending on sort of who they agree with in a way that's actually very destructive. But then also you have to think about that in your own life, right? So when you're talking about Clover Pop, what they're trying to do is actually implement universalism, like they're trying to implement that norm of universalism, which is like to blind whether it's a CMO or the CEO or an internal who's offering it up so that you can evaluate the information independent of the person who's delivered it. That's you just really quickly D is disinterestedness. So you want to eliminate conflicts of interest. And then the OS in kudos is objective skepticism, which to sum that up really quickly approach the world asking why am I wrong? Rather than why am I right? So I didn't want to just leave people hanging as to what the rest of the.

That's great. Yeah. That's actually the first time I've heard of, heard that acronym. So this is Robert K. Merton, Right. He was the sociologist. That's right. That's funny.

Exactly. Exactly.

We had his son, Robert C. Merton, on the podcast who was a Nobel Prize winner in economics.

Yeah.

Yeah. Small world.

Yes. Well, that's wonderful. Like, I'm, I'm, I'm a very big fan of his father's and him as well, by the way.

Right. And just a side note, Robert Seabourn is also a poker player. Apparently he plays in a game in Boston, Austin. I was going to ask him about it, and then he's like, well, I don't want to talk about that on the podcast. So I didn't get a chance to ask him. But I think it, I mean, you find that. I think with a lot of math oriented and kind of analytical people, many of them do play poker and they probably take useful lessons from it that they apply in all kinds of places. Wow. So, yeah, that's. It's amazing listening to you kind of talk about decision making and, you know, just for our audience. Right. Making good decisions. Right. Being thoughtful. Thoughtful about or aware of kind of all the biases that we carry in and how that affects our thinking and our behavior, which ultimately affects the outcomes. That's why hopefully this discussion is useful to you. All right, so a couple back to poker a little bit. Just since it's got lessons for us. One of the topics you talk about is, and we touched on a little bit earlier, but this concept of resulting. Can you elaborate on that a little bit? I think it'd be helpful for folks to understand that.

Yeah, for sure. So I just alluded to we can think about how are you thinking about decisions prospectively and also retrospectively. Right. So prospectively, as I'm making a decision, I'm trying to scenario, plan, map out the future, figure out what the probabilities of those features might be, so on and so forth. But the retrospective problem is trying to figure out what you're supposed to learn from your own experiences. Because presumably you should have some sort of feedback loop, Right. Where the feedback that you get is looping back in so that you can be a better decision maker going forward and so on and so forth. But what that requires is that we be taking good lessons from the results of our lives. And this is where uncertainty can wreak a lot of havoc. So out in the world, in life and in poker, the connection between the quality of an outcome and the quality of the decision that leads to that outcome is very loose on one trial. Now, certainly you could run a Monte Carlo and get 10,000 trials of anything you would, where it's the same decision and you're just sort of seeing what outcomes happen to fall in some sort of simulation. Or you could flip a coin 10,000 times. Now, you can start to say something from outcomes, but on a given outcome or a small number of outcome where the sample size is very small, there is an incredibly loose connection. So to sort of get there, like, let's think about the difference between, say, chess and then poker and then like a really simple life decision. So in chess, you can see how decision quality and outcome quality are incredibly tightly linked. So if I lose a game of chess to you, what do we know about my decision making relative to yours?

That hopefully I understand or process the information a little bit better than you did, since we all have the same information available to us, right?

Yeah. So, exactly. So if I lose a game chess to you, it's because I played worse than you did. And it's a completely reasonable thing to work backwards from the fact that we know what the quality of my outcome was. It was bad, it was negative. I lost to figure out what the quality of my decision was and determine that that was also negative, and it was bad. And, you know, I didn't as well in comparison to you. And the reason that that's the case that we can do that in chess is that you're eliminating these two sources of uncertainty. So there isn't a strong element of luck. So in other words, the pieces stay where they are until someone moves them because of an act of skill. Right. Not because somebody rolls the dice and now your pieces just sort of randomly move around or something. Right. So we've eliminated that strong. The strong influence of luck. And then we've also eliminated most of the hidden information in the sense that you can see, you can see my position, I can see your position. So there's no information asymmetry there. And what that means is that when I'm looking at your board, I could theoretically figure out every possible move that you could make in response to any move that I make. So what that means is when you're reducing the really strong influence of uncertainty in that game, what that means is that outcome quality and decision quality become very tightly correlated. Now you can think about a game like poker in combat. Contrast, if I lose a single hand of poker to you, what do we know about my decision making in comparison to yours?

Not a lot, because there's a big element of luck in each hand. But if you win the tournament, it's saying a lot more. So if you make a series of decisions really well, then you have a much higher chance of winning the whole thing.

Yeah. So if I lose a hand to you, we know almost nothing about the quality of my decisions based only on the results. Now obviously if I watched the play, if I could dig into the process, I'd know more. But this is only all you can see is the result. We don't really know very much about my decisions relative to yours. Even after the end of a particular tournament, we don't know that much. We know more because you had to play more hands. But in order to start to get some kind of clear eyed view of somebody where you can sort of see what the decision quality is sort of starting to shine through, you need to see like 1,000 to 1,500 hours out of a poker player. And then you can start to really, really see it. You can see it after a month you can start. You're narrowing it down as you go along, as you add hours in. But in order for the skill element to really start showing through, you need a lot of hours of play. So that's assuming at a live game where you know you're getting 30 hands an hour or something like that. And the reason for that again is that there's this luck element, right? Like I can't control the cards that are yet to come. The deal is random. And then there's also. Now we have this information asymmetry, right? I can't see your cards and so I'm guessing at them. So that's what creates this disconnection between outcome quality and decision quality. Now we can say, like, is life more like chess or poker? I mean, that's sort of the question. And let's take a really simple example, like driving through a traffic light. Well, you can see pretty quickly that life is more like poker than chess. Because if all I know is that you went through an intersection and you got in an accident in that intersection, that's the only thing I know, is that there was an accident that occurred. Do I know a lot about the quality of your driving?

No. Because someone else could have made a mistake versus you.

Exactly right. So now that immediately we can see. Aha. Okay, so this is more like poker than chess. So now here's where the resulting problem comes in. We took a long, winding road now to resulting. Going back to that first point I made, people really aren't comfortable with uncertainty. They don't like the fact that you can't really see into the decision quality. So it's like after the fact, and you're trying to figure out if a decision is good when you had no way to observe process. And so that's pretty opaque to you, but you want to know. And so you use this shortcut which is called resulting, which is saying, well, I know the quality of the outcome, so therefore I must know the quality of the decision. So if I know that the outcome was bad, I can derive that the decision making must have been bad. Now, again, this is completely reasonable in chess, but it's completely unreasonable if you're playing poker. So if life is more like poker, we know it's a relatively unreasonable thing to be doing in life. So the example that I opened the book with, which I think it's like one of the most powerful examples of resulting that I've seen is the 2015 Super Bowl. Pete Carroll COACH of the Seahawks The Seahawks are on the one yard line of the Patriots and there's 26 seconds left in the whole game. The Seahawks have one timeout, and obviously they need to advance the ball one yard in order to score. They're down by four. So a field goal will not do the trick. Right. So they must score a touchdown. Exactly. So as you'll recall, Pete Carroll called a particular play that was pretty unexpected.

That's right. He called a pass play when he had. Yeah, and I was going to say, and he had Marshawn lynch, you know, as a running back, who was a really good short yardage carrier.

Right, exactly. So. Exactly to that point. So he's got Marshawn Lynch. Everybody's expecting he's going to hand the ball off to Marshawn Lynch. Marshawn lynch will just try to barrel through and that's obviously what he's going to do. And with his one timeout, he'll be able to try that choice. And instead he calls a pass play, as you said, and it ended in spectacularly bad fashion. Malcolm Butler intercepted the ball and that was the end of the game. And the in game calling from Chris Collingsworth is like incredibly brutal. You know, I can't believe this call. This is crazy call, you know, so on and so forth. And then the next day, even after people had time to think about it, most people were echoing Chris Collingsworth and there Seemed to be an argument among the major outlets about whether it was the worst play in super bowl history or the worst play in all of football history, which seems pretty brutal. Pretty brutal. So I think this is a really good example of resulting, because you can see this very clearly that what people are seeing is that this result was spectacularly bad. And so therefore, they're going back in and deriving that the decision quality must have been pretty bad. But we can actually get to the heart of the problem by. I can just ask you this thought experiment. So, Steve, like, let's imagine that Pete Carroll passed the ball and it was caught for a touchdown in the end zone. What do you suppose the headlines would have looked like the next day?

You know, he's a very creative genius for running that play that was completely unexpected.

That's exactly right. And in fact, for those people who are football fans, what did they say about Doug Peterson when he ran the Philly special which resulted in a touchdown?

Exactly. Super clever, right? Unexpected.

Super clever.

Out.

Belichick. Belichick, exactly. And you can kind of see what's happening here, right? Because, and remember I said this problem is, like, we can't see through to what the decision quality is. And so we use this shortcut. So you can kind of see, like, people feel like they know whether the handoff to Marshawn lynch is good or not. Like, they feel like they know something about that decision process. They feel like they have access to the quality because it's a play that is pretty agreed upon, you know, that there's sort of consensus around that this would be a good choice. So by choosing something that people really weren't unexpected, you know, really weren't expecting, he's choosing a play that is not well understood, which means that people don't really understand whether it's a good decision or not. Just sort of prima facie, right? Like, they don't get it. They don't know ex ante. So now what happens is that because that's opaque, because the decision is not understood, because there isn't consensus around it, how do you then figure out if the decision is good? Oh, you use this shortcut called resulting. The result was really bad. So therefore I know that the decision must have been really bad. Now, one little factoid, the probability of an interception in that particular situation was between 1 and 2%. So the minute you kind of know that fact, it feels like, well, how could you possibly say that was the worst call in super bowl history? It was only going to turn out the way that it did less than 2% of the time. You know, So, I mean, that. That right there reveals sort of the absurdity.

Yeah.

Of the whole bias.

Yeah. It would be interesting to. If you kind of put, you know, football analysts into cohorts or football fans into cohorts or people who are real. I don't want to say real, but like in poker, you see this, right? You've got amateurs doing things that are crazy or poor. And then you have people that play a lot of poker and they're analyzing this, are like, oh, they're calling him a donkey or saying this guy's doing all this kind of crazy stuff and therefore he's a bad player because he doesn't know any better and giving kind of color commentary on the result because they're not behaving rationally. But in this case, I bet Pete Carroll, and I think you mentioned this in your book. Right. Later on, he was being thoughtful about it. He was trying to game, kind of outplay his opponent. Right. He was trying to do something unexpected on purpose to try and win. Right. And as you said, like, his odds were totally in his favor because it wasn't, you know, he was very unlikely that he'd get intercepted. And he just got kind of got, quote, unquote, unlucky in that one case.

Right, exactly. And you can. You can actually. You can actually ask yourself, what was he getting in return for this? The cost of an interception. And what he was getting in return was an extra play. So there was a clock management problem. He had 26 seconds left in the game with only one timeout. As you know, if you hand it off to Marshawn lynch and he fails to get into the end zone, a lot of time has rolled off the clock. So once you've done that, you've actually only got one play left, whereas if you execute on the pass play. This is where it's really important to think about the three outcomes, three outcomes that are running play. So I'm not including, like, sacred or Russell Wilson fumbling the ball or anything like that. So let's just put those in the all things being equal category and think about the three outcomes of the pass itself, which are it's caught for a touchdown. Okay. So they win the game, it's intercepted. Right. That's going to happen 1 to 2% of the time. But the third outcome is the ball is incomplete. And when the ball is incomplete, of course, the clock stops on its own. You don't use a timeout for that. And that play gets executed really Quickly, so very little time comes off the clock. And because you still have that one timeout left, you can play. So remember, they have three downs, second, third and fourth down to execute on it. So he was actually maximizing the number of plays, the number of chances that he would have at the end zone with this particular choice. And in exchange, it was costing that 1 to 2% chance of an interception.

Right. Which is, you know, it'd be really interesting. Has anyone talked to Bill Belichick about how he thought about it? I wonder if he was like, okay, they have 26 seconds left. You know, maybe they are going to run a passing play because they want to do clock management and, you know, it's likely to be a slant and because I've seen there's whatever and I appreciate all the color on, on, on that decision. In football, you know, as. As you're talking about poker and chess, we know that like AI is really good at and now pretty much can't be beaten. Right. With chess and also with go, where you also have information, perfect information. Is anyone working on AI for poker?

Oh, yeah. So it's getting better at poker. So there's an AI that is very, very good at a particular form of poker, which is heads up poker. So it's just one on one. So obviously that reduces the set of possibilities. Right. Because I'm just playing against one person. And in particular, it's a form of poker where both players are likely to be playing almost every hand that they're dealt. But this is a relatively recent development. But it's now very good at that. It seems to really beat the best players in the world at that. And then we'll see whether it can expand to how? Well, it expands to a multiplayer situation. But it is getting better, but it's solving a different problem. Right. So when you look at, for example, these backgammon computers, they can really just brute force the game. Right. Because again, because you don't have the hidden information. And this is true with chess as well. You can just play out every possibility till the end. So once you have enough computing power, you can solve the game, which is, you know, sue is just this brute force approach to it, which is not something that you do in poker. You can't brute force the game. That's where the difference is. Which is why there wasn't really any progress made in poker until you were thinking, you know, until you were starting to get machines that were more like deep learning machine.

Yeah. It seems like with poker, I remember we're talking about It. There's kind of three levels of poker, right? You're playing, at least with Texas hold', Em, Right. You're playing your cards and just straight up, right. And what's. What are the probabilities of you winning in any outcome? And then you're playing against what your opponent is likely to have. And so therefore, then you need kind of emotional intelligence and also some math. Right. And also this kind of, ideally, a history of what they've done in the past, which is probably hard for computers to get. Right. If you see the same people in a poker tournament, you can kind of study what do they do, how do they behave in certain situations. Yeah. And that's the third part, Right. How is your opponent, like, likely to behave? And that also goes to kind of game theory for yourself, but also for them. I mean, I think one thing that's interesting about poker, we're talking about football. And it's like when I play poker, when people play poker, sometimes they're giving disinformation on purpose. They're trying to mislead so you can bluff later. Or we kind of play a little bit erratically so people can't quite predict your behavior. I don't know how that translates to. I mean, I could see that translating strategically when you're in business to kind of try to outthink your opponents in the business arena.

Well, yeah, I mean, I think it actually translates pretty well. I mean, I think this idea that I was talking to you about, even just thinking about what the probabilities of different outcomes is something that I find even when I'm working with groups that are trying to do strategic planning that they're just very loath to do. I have a narrative in the book about working with a nonprofit, just trying to get them to start thinking in expected value about their grant proposals, their grant process. It was hard. I really had to do some very deep work with them to start getting comfortable with thinking about assigning probabilities to the chances that you get a grant or that you don't, so that you could really understand what the grant is worth. Because when you walk around in this world where you're thinking about things as binary and this is how you're making your decisions when you're applying for a grant that's 100,000, you're just thinking about it as 0 or 100,000, where obviously, if you're thinking probabilistically and you say, well, there's a 40% chance I'm going to get this grant, you can now assign a value to 40,000, which does all sorts of wonderful things for you, right? I mean, certainly it allows you to more efficiently create a work stack. It allows you to really think about when you're winning, to hire an outside contractor, for example. It allows you to be much better at budgeting, like at forecasting what your inflows are going to be. There's all sorts of really good things that come out of it. But people are very loath to do even just that step of thinking about how do I assign probabilities? I mean, that's beyond starting to think about what are the payoffs of it? How do I deal with unknown information in a way that I really think about? How do I deal with the connection between decision quality and outcome quality? How do I try to figure out good process for working back? And then this sort of basic thing of what you just said, which is, how am I thinking about as a good Bayesian, what are the base rates? What are people's natural tendencies? What could I expect them to do in these situations? How could I think about how my actions appear to another person? So people also don't do that as much. People have this idea, for example, that if you come into a negotiation and you're speaking very forcefully, that you'll come off as being very forceful. But we know that very often that when people hold a very strong hand, they're actually less forceful in the way that they present it. And that's a very, very strong human tendency that you can't get to unless you think it from the other side. Unless you think, well, what if you're watching someone be really forceful in front of you? And if you said to yourself, well, wait a minute, if I had a really strong position, how would I be acting? And the answer is, I wouldn't be yelling at everybody, telling them, this is the final offer. I mean, just as an example. But you can't do that until you start to think about how do I look from other people? What is the story that I'm telling? What are their opinions of me, what am I signaling to them with my actions? What are my base rates? How do I incorporate new evidence in order to actually adjust my base rates? These are all kinds of the things that the way poker players are thinking that I think aren't incorporated into most people's everyday decision making.

Right. We're going to see if this works out for Kavanaugh soon, if his strong position. I remember I was reading some poker book and I was talking about, yeah, if you people that have strong hands Tend to kind of act, relax, sit back. That's an indicator that they're actually strong and weak players are a little bit more aggressive or maybe they're bluffing at it and whatnot. And very often, yeah, their actual position is opposite of how they present themselves.

Yeah. I mean, think about it. When was the last time that you sat in a negotiation and you had a really, really strong position in the negotiation and you were like red faced, yelling at the people across the table that this was your final offer, take it or leave it. That's not the way that somebody who's in a really strong position behaves. And yet what happens is that when you're sitting across from someone who behaves in that way, you think there's a one to one mapping, right. And you're like, oh, they're behaving in a strong way. They must be really strong. But if we took a second to step back and say, wait a minute, how do humans really behave in this situation? And the way I can figure out is by thinking about how I would behave in that situation, you get to the truth really quickly. So we tend to be very reactive. We tend to make snap judgments about what the connection between people's behaviors and what their positions actually are. In a way that we would be better to start doing some better perspectives. Taking that would help actually get to the answer. Because it seems so obvious once I say it to you, right? Like when was the last time you had a great position and you were red faced, screaming at somebody that it was the final offer? And of course you're laughing and saying like never. And then you say, well then how come you think that that's the case when they're doing it to you? Oh yeah, yeah, right, yeah, Never. Okay, great. So, yeah, but this is the way, this is just human nature. And that's part of the thing, is that what our gut tells us is often not right. We need to hold our gut up to some sort of rational process, you know, in order to make it accountable to something other than just our feeling.

Yeah, I was just going to say that, you know, when we're talking here, it's so much of our life is about trying to make sense of the world, you know, and we, we try to use these patterns. Our brains are good at patterns, right. And pattern recognition. So we're like. And you know, back, you know, I know you talk about kind of system one and system two and kind of the kind of the emotional side of your brain. And then the more the limbic system and Then the more rational side. And so much of our life is about trying to, you know, bucket things up, put them into, you know, you know, to identify patterns and then. And make it quicker for us to assess things, you know, but the reality is we live in a much more complex world and we need to be much more rational about it. But it's so hard because we're constantly fighting against the, you know, the desire for our brains to kind of make these snap decisions out of system one and get the conclusion right.

Well, yeah, yeah. And if you think about it, it's like. Of course. Right. Because if you were to make every single decision in system two, like building out some kind of probabilistic decision tree, you'd never get out the front door in the morning. It would take too long. And the fact is that most of our brain is this very big, ancient, you know, animal brain. And then we have this very thin layer of prefrontal cortex that is trying to take up this more executive functioning, rational thought. And there isn't a lot of it. And I mean, I talked pretty early in the book, but this is something that Michael Shermer has talked about, that we just have this default toward certain types of thinking because when evolution was selecting features, it wasn't necessarily selecting for accuracy, but rather like, efficiency. So you can think about this pretty simply. Like, for example, we have a bias toward false positives. So I'm on the savannah and there's rustling in the grass. Evolution isn't selecting for the human that now builds out a probabilistic decision tree about whether that is a lion because that human is dead too much of the time. Right. So instead it selects for the human who runs away. And sometimes that human is wrong, but it doesn't matter because 100% of the humans who run away have lived. So the wrong ones and the right ones have lived, and who cares? So you have this strong bias toward false positive positives rather than false negatives. Right. So that's just sort of like how it is. And so it's part of the reason why I said right at the beginning that one of the things is, don't try this at home, folks. Go get some other people to help you with this. Because I have only a little bit of prefrontal cortex, but you also have a little bit of it and somebody else has a little bit of it. And if we get together, we can get more of that executive functioning stuff working for us.

Right. You know, it's. You're making me think about. I was listening to Elon Musk on that Joe Rogan podcast and, you know, the one where he smokes pot on it. But, you know, before, before all that, they had this really interesting discussion about AI and how the, the fact that we're actually, you know, companies are like cybernetic, you know, organisms, if you will, they're a bunch of people, but also enhanced by technology. And we ourselves, with our devices that are, you know, that we're carrying around are becoming almost like enhanced. And we are enhanced, essentially, right? Because we can look up. We can talk to these things and it can look up any information pretty much immediately, which is amazing. And you do see, I could see this happening faster than people think because, like, you know, take navigation, right? So, you know, you can talk on your phone and say, hey, I want to go from, you know, here to whatever, you know, out Los Angeles, you know, on public transportation. What's the fastest way? And it will look at. It does a couple things, right? It finds the different routes that you could take. I mean, you could, you could fly there, you can take a bus, you know, you could drive, whatever. And it'll solve for that. It'll also solve for, you know, what's happening right now. So you're going to drive, you know, what the traffic patterns are today and also what they're. What they're predicted to do. That's what's interesting. Like, like Google just rolled out. You know, tell me when you're going to drive from here to San Francisco and it'll say, oh, the anticipated drive time is or Tier Tahoe is 3 hours versus 4 hours versus 5 hours, which is kind of amazing, right? And you could start to see this with maybe. I mean, based on this conversation, it's like, I believe we need help making decisions. And a lot of this stuff may have to be built into computers to get to more positive or more optimal outcomes, or at least help us get to more optimal outcomes to manage against all these kind of system 1 biases and beliefs that we carry around. That's kind of baggage, if you will.

Yeah, yeah, exactly. I agree. That all happened, you know, obviously before that, before I decided to smoke pot, which I, I have no problem with. I just thought, given that people were questioning Elon Musk's judgment, that maybe that wasn't the best.

The best example. Yeah, well, he did make that tweet he sent. Looks like it's going to cost him 20 million bucks and the company 20 million bucks. Plus he lost the chairmanship. Maybe he should be using some AI enhanced decision for filtering when he sends his tweet to him.

Yeah, I actually just had a discussion on a podcast, just very briefly about that. And I mean, I think that it sounds like he doesn't sleep very much. And lack of sleep really has very deep effect on your judgment. There's all sorts of ways in which there's a lot of research being done in terms of essentially what happens to your in terms of increased cognitive load and sort of what is the equivalent to. In terms of drops and like IQ points, for example. So work done in scarcity, you know, where people feel like their needs, their resources are not enough to meet their needs, for example, and what happens to their ability to think? Well, their capabilities. And it looks like it's equivalent to about a 13 point IQ drop, which is pretty shocking. But that's also the same as what you get if you miss a night's sleep. So missing a night's sleep actually really reduces your ability to think clearly. So, you know, I think all of these things are actually really interesting to look at. There's a great book called Scarcity, actually that I think is a really great book to read where you can really see what the cognitive cost of poverty are. And you also get some of these same kinds of effects. For example, if you're feeling excluded from a friend group, that's another way to end up getting the same effect. So anyway, when we're talking about Elon Musk and what was kind of happening, it sounds like he's having some sleep issues. So that may be part of the explanation. What's going on? Yeah, yeah.

What is the average IQ? Is it like 130 or something like that?

Well, the average IQ by definition is 100.

Is 100, right? Okay, fine.

So if you're talking about 30, that's definitional.

Well, so if you're. So if you're taking a 13 point drop, it's more than 10% loss in your cognitive ability. It's pretty significant.

Yeah, it's really huge when people are stressed because they feel like their resources cannot meet their needs. And this can be in a relative sense, by the way. This doesn't mean that you're living in poverty in an absolute sense. What's interesting is that it's relative. If you live in a place where people are quite wealthy and you're not as wealthy, and so you're having trouble paying your mortgage, even though absolute sense, you might have quite a bit of money relative to the world, in a relative sense, you do not. And that seems to be what the Trigger is. And that's outside of obviously the other effects of living in actual poverty that you can measure in an absolute sense relative to anybody in the world. But I think it's really important for us to think about that because when we're talking about obviously in order to dig yourself out of poverty, part of what goes along with that is basically being able to envision what the future is going to look like for you, identifying what your goals are and then figuring out how to execute on them. But what we're finding is that there's so much cognitive load placed on you by being in scarcity itself that it essentially short circuits a lot of that ability and you end up making much more short term decisions all the time. So there's just some very interesting work kind of in this space in terms of what it's doing to people's ability to think and how much it reduces people's ability to actually realize what their own potential.

Yeah, it's, it's hamstringing us. Well, good. You're supporting my, the thesis behind this business, which is, you know, we're trying to help people get, you know, control over their future. Right. So feel financially secure so that they can make the most of their human capital. Because, and this is what I saw with my own, with my own mother where she was like freaking out about money. And we're like, okay, let's try to solve that problem. And then once that was kind of addressed, and you're like, okay, I have a sense of stability, right. I've got some money in the bank, I have enough income in my life to pay for my life, so I'm not going to go broke, which is the number one financial worry that everybody has. It's like, will I run out of money and end up being destitute? Once that was taken care of, it created the cognitive space to be like, okay, what do I do in my life? What could I do? And what's most interesting to me, which I think then leads you to do hopefully much better work with your life when you use your human capital in the best way possible.

Yeah. And we think about that from a societal standpoint, right? Which is like when we look at the cyclical effect of poverty, when you really understand scarcity, you can start to see where some of that is coming from. Right. Because same thing with your mother. There's all these different ways in which just having those words about what are your resources? And are my resources enough to meet my needs? You know, what that does to your ability to start Thinking about the other things in your life because it just ends up taking up your whole brain capacity. And so from a societal level, how are you addressing that?

Right. Yeah. Hey, so, you know, I think we talked about this a little bit before, but there's this group. Well, there's a movement called fire, right? Financial independence, retirement early. It's mostly fi. Financial independence and especially being embraced by kind of millennials where they're really trying to live much more frugally. And it's really a mindset thing. I was just at this fincon conference and I saw a panel where they had four FIRE people. And you see people like, well, I'm feeding my family of four for 25 or 30,000 bucks a year and we live a pretty good life. It's a total. I think what they're doing is, I mean, I know what they're doing is they're saying, hey, look, I can live more efficiently. And I also want to reframe how I look at my life very differently so that I am coming from this place of kind of abundance and not being driven by what my neighbors had. One of these guys who talked this Mr. Money Mustache who's like the, you know, he's one of the founding guys that does this. He's like, you know, if you reframe kind of how you look at your life where, you know, for most people, like, you know, they're in a community and then they see their neighbor or friend driving around a fancy new car and then they look at their old 10 year old car and they're like, God, my car's a piece of junk. I really need to get a better car. Because if you then reframe that to be like, you know, how awesome is it that I have this like, you know, inexpensive, you know, to insure and maintain and register car, and, you know, I have all this extra free capital. How much? How much? You know, how awesome is that? You know, and it totally changed your life because you're then no longer trying to like, I got to spend money on this or that to keep up with these people. And that creates a sense of freedom and also the sense of I have more space in my life to think about other things. There's going to be a movie about it coming out.

Oh, that's cool. I think that that actually is a very good example of what I talk about in my book, which is changing what the inputs are that give you the reward. Right? So this idea of don't fight our tribal nature, right? So what tribe is giving you Tribe is giving you two things. One is belongingness, right? Like I belong to a group and the other is distinctiveness from other people. And this is something that's actually just very important to us in terms of our human condition. And what the general sort of default for that tribal nature does is it causes you to compare to your neighbors, right? In the way that you're saying, like, where, oh, they have a really nice car. I need to have one of those as well. Just like for me in my poker group, the general default in poker is you sort of see these tribes being formed in poker and I'm sure you know this from sitting at enough poker tables is people sort of saying like, oh, I got so unlucky when I lost that hand and other people sort of agreeing with them and then saying, let me tell you about how I got unlucky, right? Where we sort of don't we want to offload that bad feeling of loss into a way that sort of like, you know, socializes it to the world, right. As opposed to privatizes it to ourselves, sort of onboarding the blame. But you can reframe what it is that you get the reward from. So the group that I worked with said, okay, this is our tribe. What makes you belong to our tribe and be distinct from others is that we're going to try to be the mistake admitters, right? Like we're going to be trying to be the ones who are trying to poke around into the hands that we won and figure out all the disaster decisions that we made in those. And when we lose, we're going to try to figure out like what was our partnet or and we're going to challenge each other when we hear people talking in a way that we think is biased and all these things so that we're still getting that sort of need for tribe fed and we're still getting the social approval that comes with being in a tribe. Like, that was all really good. It was just the features that were being rewarded were different. And I feel like that's the same that you just described to me, that most of us sort of are naturally getting our reward from like, I have a car that's just as nice as my neighbors or nicer than my neighbors or whatever. But they've created a tribe now where it's like we belong to a tribe where we have turned that on its head and the reward for us is that we have an older car, that our expenses are lower and that we're in on a secret that they're not in on. Right? Because you need that distinctiveness. We have a secret that they don't have. And so they're looking at me in a certain way, like, look at you with your poor sloppy car. And I'm like, aha. But you don't know the secret. This is the secret to success in my life right here, that I can resist the temptation to give in to what normal humans are giving into in terms of what the comparison is. So I think it's a very good example of how you can remold tribe to fit in with what your long term goals are by allowing you to still get the short term reward that we all need. It's just that that short term reward is aligning with what you actually want in the long run.

Right. That's a great. I mean, I love how you analyze that because that's exactly what's happening. The folks that are in this financial independence movement, you know, they. They totally reframe it to, you know, to be like, hey, I'm. I'm proud of how frugal I am. And they go out of their way to kind of demonstrate that in their own, you know, to their friends, but also in. In their outside lives. I mean, just quick, quick story. I met the community manager of this site called Biggerpockets, and I'm going to hopefully go on their podcast or get them on. On here as well, their real estate.

But this woman, I just went on Bigger Pocket.

Did you go.

Listen to me on Bigger.

Did you talk to Mindy Jensen?

No. No. Who did I talk to? David.

And because I know they run, they run, they run, they run two podcasts. There's bigger pockets and there's bigger pockets of money. So I'm talking to the one about bigger pockets of money. But anyway, so I was gonna grab coffee with her. And so we're in this resort and everything's super expensive. And she's like, I'm like, all right, why don't we go eat here? And she's like, I can't buy this food. It is just way too overpriced. I won't let. And I was like, I'll buy for you. She's like, I won't let you spend the money on this. So we had this whole negotiation about where we could eat and what was possible. She's like, I want to go out to the. I want to go out to the store and get food. I was like, all right. But there's also the time value, money and everything else. And anyway, I appreciate that she stuck to her problem principles. She ultimately did let me buy her a bagel with cream cheese on it for $4.50. That was the one thing we could find. And we got some water, but, you know, but I appreciated the fact that, like, hey, you know what it part the. The core founding principle is like, look, we're going to be frugal, we're efficient with our money. I mean, and on the other hand, she's like, doing huge real estate deals. It's not like she's short of money. She just chooses to live her way life this way, and it creates sense of freedom because, you know, I mean, we're all sitting here worried about, like, oh, am I going to run out of money? Da, da. You know, and then you look around, you're like, oh, what are the carrying costs of my life? Right. What if it was like, you know, a quarter of what it is? What would my life be like then? Oh, well, you know, it'd be pretty freaking different. So I think you're going to be hearing more about this, but. Cool.

Yeah. Well, it's a great. I mean, it's a great example. Like, I hadn't really thought about that movement in that way, but the way that you described it really triggered that connection for me as just a really wonderful example of how you can create tribe around thoughtfully thinking about how can we use this belongingness and the distinctiveness to actually get us toward a goal that we really want to get to as opposed to just sort of the default of how we normally act. And it's really a beautiful example. I know about the movement, but I never thought about it in that way until you described it in that particular way.

Well, I'm just learning more about it, too. I just think that there's a lot of lessons for folks from that community because they have detached themselves successfully from the normal framework. I mean, we're all conditioned. We grow up, we're getting stuff, and we're kind of taught well. The American way is to buy more stuff. I mean, that's our whole economy, right? We got to buy and consume more stuff. It drives the economy, employs everybody. On the flip side, we're getting more and more efficient at creating this stuff. We're realizing stuff doesn't make us happier because there's hedonic adaption. So I do think that there's more.

Choice, makes us unhappy.

Yep, exactly. There's all the we, you know, now that we have all this, you know, stuff around us and all this information coming at us all the time now, more and More people. People are moving towards, hey, they want to see people in person. You know, they want to have more thoughtful conversations. So hopefully, you know, we will get to a happy place in our society where we can have our core needs taken care of, but still have time in our lives for our family and friends and the things that are meaningful to us and do meaningful work, which is what I think really is the source of happiness. Not like the new 911 in your garage. That makes you happy for about a week and then you're kind of like, wow, this thing's a lot to ensure. Oh, so look, Annie, I appreciate your time. I know we've gone way over, but I just want to. I'm going to try to kind of summarize what I'm learning here and feel free to correct me, but my takeaway from your book, Thinking in Bets is one, there's a ton to learn. You've learned a ton from playing poker and you've applied. And also obviously all your, the work you've done and research about decision making. And we almost have to be aware of the kind of the biases and beliefs that we bring to the table and how that affects our thinking. And then there's, there's a lot of great lessons. If you start to kind of accept the uncertainty in life, try to weight the potential outcomes and make decisions accordingly. So, you know, if there's a high likelihood, you know, then you can put that amount of resources into it or a high likelihood something will happen and also high likelihood that it's going to be really influential for your life or whatever your business, you can put more resources into that. And if it's low likelihood or low outcome, you should invest resources accordingly. I think the other big thing is another big thing is just learning, right. Having a system to get feedback and kind of welcome that feedback loop in your life where you. One thing you mentioned to me that I thought was great was you want to have, I think it was strong beliefs, but loosely held or evolving beliefs, I guess is how you put it.

Yes. But I shouldn't get credit for that, by the way. That's a common. Yeah, don't give me credit for coming up with that exact thing that you say. I just wanted not take credit for it.

Right. But I think that idea of like having evolving beliefs, right, that the world is changing, we're learning, and don't always default back to how you thought about things is. It's important part of evolving as a person. Anything else that I missed there in that summary?

I think that was a pretty darn good summary, I gotta say.

I appreciate that. I really did enjoy the book a lot and I'm gonna share it with our team and hopefully our listeners pick up on it. So anything else you want to cover, any big influencers or things you want.

To call out, make it, because it sounds like we're mission aligned. Yeah. And then the second thing I would say is that, you know, I mean, I think that this kind of thinking and this kind of decision making takes practice. So I have a newsletter that I put out every Friday which is really looking at current events and it's four or five pieces in each newsletter which is looking at things that are happening out in the world currently and how do you apply this kind of thinking to them. So as an example, like in the last newsletter, I think I had a piece about the Serena Williams to do and what the world really tells us about whether there was sexism or not and what different arguments people were making and how you can kind of evaluate those. Just as an example, I'll look at things that are coming out in social science or behavioral economics and looking at results that are coming out, looking at things in politics and how do you apply this kind of thinking to evaluating those looking things in business? So I think probably in the next newsletter that I put out, I'm going to do something about what the shift in opinion before and after the Kavanaugh hearings were on. Opinion about who was telling the truth and who wasn't. Not. Not such a surprise. It seems to be aligned completely with what your political party is. And nobody's opinion changed very much from the new information, which isn't that surprising. I'm going to talk about that and talk about how Tribe really drives what your opinion is and affects the way that you process information. So that's just sort of a flavor. But people can go onto my website, anniduke.com, and they can see archives of the newsletter there so they can see if it's to their taste. That way you can try it before you subscribe to it, but hopefully some people will find some value in that and we'll subscribe to it.

Thanks Annie for being on our show. Thanks Dotto Robison for being our sound engineer. Anyone listening? Thanks for listening. Hopefully you found this useful. Our goal at New Retirement is to help anyone plan and manage the their retirement so they can make the most of their money and time. And if you've made it this far, I encourage you to, as we said, check out Annie's book Thinking in Bets and her website and newsletter. And how do I decide as well. And also welcome you to check out our site and planning toolsewretirement.com where you can build your own plan for free and take advantage of our premium advanced tools and personal support. We also have a private Facebook group and you can find us on Twitter as well at New Retirement. The last thing here, which is we haven't asked for before, but if you like, this would love to. Or either way, would love to get reviews on itunes or Stitcher or anywhere you know, we read them. And we'll try to change the show based on your feedback. It just helps us kind of build awareness for what's going on out there. All right, so that's it. Thanks again and have a great day.