Annie Duke on Poker, Probabilities, and How We Make Decisions

Conversations with Tyler is produced by the Mercatus Center at George Mason University, bridging the gap between academic ideas and real-world problems. Learn more at mercatus.org. And for more conversations, including videos, transcripts, and upcoming dates, visit conversationswithtyler.com. And how does one introduce Annie Duke? I would say most of all, she is a force of nature, a best-selling author in multiple books, a very famous poker player, an expert in decision theory, and she has a new book coming out this September called How to Decide: Simple Tools for Making Better Choices. Annie, welcome.

Thank you for having me. I'm super excited to dig in and get into this conversation.

Let me start with a simple question: How can we spot situations when thinking probabilistically is likely to make our decisions worse rather than better?

How can we spot situations when thinking probabilistically is likely to make our decisions worse rather than better? That is such an interesting question. I mean, honestly, I would say that those situations would only be— in some ways, I'm not sure that this, this means that you're not thinking probabilistically, it's just what do you do with the information. But there are certain times when thinking through what the probabilities are in terms of what your reaction is, given the downside risk that you might be exposed to, uh, wouldn't make sense. So the classic example would be if, you know, the sensitivity versus specificity argument. If I'm out on the savanna as an evolving human and I hear rustling in the grass, probably not great for me to think, what's the probability that that's a lion because the downside is so great. The magnitude of the downside dying is so great that thinking categorically in that just yes or no in that situation probably makes sense for survival. But I'm hard— I would love to hear your thoughts on that because I'm kind of hard pressed to think of a lot of examples in which thinking probabilistically isn't helpful.

There may be cases where thinking probabilistically conflicts with the kind of authenticity. So say one of our audience members is out on a date. Should he or she set up a kind of mental probability ticker? Well, you start off the date thinking the chance I marry this person is 2.3%. And then as the evening progresses, the number might go up, it might go down. It's hard for some people not to think that way. Yet it seems actually your chance just might be lower if you even open up that door at all. Right?

So actually, I love that example. So I think it depends on what your goal is, right? So if your goal is to find a great match, then I think that that's actually helpful because the fact that you're thinking that way means that you're more likely to be talking to somebody who is compatible with somebody who thinks that way. So while it might reduce the number of people that you might match with, like the chances, the number of people that, that might end up being long-term, the quality of the match I think would go up because you would be more likely to be compatible in terms of the way that you thought about the world. I always think that this kind of goes into the category of kind of what are you doing with the information, right? So one of the things that I really try to think about is what's the difference between— and I think this goes into this category, and correct me if I'm misunderstanding— but I think about what's the difference between a goal and what's the difference between thinking about what your expected value is. And I think that we confuse the two things, that we're allowed to set really high goals and believe that we will reach them. And at the exact same time, we can be thinking in expected value, which of course is just combined, you know, thinking probabilistically combined with, with what the payoffs are and understand that the expected value may be well below what our goal is. I think that these two things can actually live in the same space. And it's kind of a false dichotomy to think that you can only do one thing or the other, that if you have this kind of running ticker of, let's call it our expected value. On the date that you can't also be having high aspirations and, and some optimism about the date working out. I don't— I mean, I'm just a really big believer that those two things, not only that they can live in the same space, but it's actually useful for them to do so.

Maybe it's a bit like hurdle rates for private business investment. So a business might set a hurdle rate of 30%, knowing deep down underneath maybe they'd be happy with 23%, but they know along the way in the process, gains will be overstated. Costs understated. So maybe if you're searching for friends or a mate or a marriage partner, should you be thinking probabilistically but with bad probabilities and just set all your hurdle rates too high? Because otherwise you're going to fool yourself and leap at silly mistakes.

Just like off the top of my head, yeah, I mean, I think so.

What are the decisions in our own lives that we should not be willing to bet on? So you go to your friend, your friend says, oh, I'll bet you on that. For which of your decisions should you say, no, I'm not willing to make you a bet on that? Like, will your kid get into Princeton? Should you be willing to bet on that with your best friend?

It depends on the friend. So, so this is something where I think that it's actually really important in our lives to understand what the purpose of the interaction is. So there's certain friends where I would absolutely make that bet. That. In fact, I can tell you a story from my own life, but this has to do with, like, is this kind of part of what's going on in your group in terms of the way that you're thinking so that somebody— it doesn't actually jeopardize other aspects of the friendship. So when I went on my first date with my husband, my brother and brother-in-law immediately decided to make a market, and it was whether we were going to get married. Now, to be fair, my husband and I, before we went on our first date, we'd been friends. Both my brother and my brother-in-law knew my eventual husband, but this is when we're going on our first date. They make a market. I think that my brother-in-law ended up bidding 23. My brother then called me up cracking up that my brother-in-law had bid 23 when we hadn't been on a first date yet. And I then started laughing at my brother, said, well, that means you had to bid 22. Like, that was— what are you talking— why are you laughing at him? Like, you somehow bid 22. It's our first date. Now, that's because we're all people who sort of think this way. And so this sort of becomes the fun of the friendship. But there are other people, I think about friends as serving different purposes. So I have friends who I play tennis with. I would never make a bet with them about whether their child was going to get into a certain university, particularly if I was going to take the other side, the side that they didn't want of the bet, because I think that people can interpret that as you think that that's what's going to happen. 'cause we tend to, you know, these things settle to 1 or 0. And so, you know, if I were to get on the other side of that, if I felt that the price was right, I think that they could interpret that as me saying, I think it's gonna settle to 0. And I don't think that that's good for some friendships. So I don't think that you need to bring everybody into your life into this type of thinking. And you can understand that different people bring different types of value.

Let's say you're betting on sports teams. Should you bet on your favorite team Or should you bet on a team you hate to hedge your utility?

Well, okay. So personally I would only bet if I felt like I was getting the best of it. But that being said, I suppose there could be isolated situations. Like, let's say, so like I, I'm an Eagles fan. So obviously it took a really, really, really, really, really long time for the Eagles to win a Super Bowl. When they did get to the Super Bowl, it might make sense, given the fact that I can have different values. I can want to make money, I can want to have an emotionally good feeling. That's another way that I can experience a payoff. It might make sense for me to bet, to bet the other side just so that I get some happiness even if my team loses. I think when it comes to the Eagles, I don't know if that would be enough. I'm not sure what the number was they would have to win where I would be happy that that team lost. So I guess you'd have to figure out what that, what that indifference point is. But yeah, I mean, I can see— I mean, I think that that's an important thing to think about, right? Payoffs aren't always monetary. They're sometimes emotional. Sometimes you can hedge the emotional downside with a monetary upside. And I guess you could figure out what the indifference point is to that.

But is there a limit to this process? So I think a lot of people would be reluctant to bet on their own divorce. No one would say, well, I've hedged my position. On the other hand, the exact same people are happy to buy life insurance and they think of that as noble. Right. And they say, oh, well, I've hedged my position. I mean, what's exactly the difference that accounts for the things we're reluctant to bet upon?

That's such a great question. I think a little bit of it is magical thinking, which I'll get into in a second. I think a little bit of it is, is this kind of strange thing about hedges that we're, we're obviously hoping that we never have to use them. When we do, I think that often in some ways we're happy. And then when we don't have to use them, I think we're sad that we had those positions on in the first place. I kind of, what I think is that there's certain things, there's certain things about us and certain beliefs that we have that are very, very central to our identity. So when we think about something like fire insurance on our house, you know, what home we live in, in terms of that kind of choice and whether it actually burns down, that feels like very much like a matter of luck that's happened to us. So I think it's easier for us to hedge against it because we're not feeling like that we did anything to make the bad thing happen. And so it gets sort of out of the emotional space because we can kind of offload it to luck. But when we're talking about something like our marriage, now it has to do with like, what's our commitment? What's the commitment that that person has to us? And that now goes into this area of things that we're making decisions about, things that have to do with who we are personally. And I don't think we like to hedge very much against our identity. I think that on top of not wanting to hedge against our identity, because we think of our identity as very categorical and very— like, that really gets into that emotional space about who we are. But I think that on top of that, we have this kind of idea. And this goes into some of my quibbles with things like the power of positive thinking, which ultimately sort of realizes into The Secret, that we have this idea that if we do hedge against something, that somehow if the bad thing happens, we caused it. And this is particularly problematic in, in situations that do have very high emotional valence. So, you know, I mean, obviously the, the hedge that you would put on, on your marriage is to have a prenup. And we know that only about 5% of married couples end up with a prenup. And people are very emotional about that and they're very against it, I think, because they say like, are you predicting I'm going to fail? It's a little bit like the betting problem, right? Are you going to Am I going to bet with you about whether your child gets into Princeton? That if you have a prenup, that it feels like not only are you predicting that you're going to fail, but then if the failure happens, that perhaps you caused it in kind of a magical thinking kind of way. But this goes into this category of like, how can you be a good decision maker if you're not really thinking about the negative outcomes that could occur and then trying to get out in front of those in a variety of ways, one of which might be to hedge. And one of the issues that I have with the literature and the power of positive thinking, which I think ultimately expresses itself through the book The Secret— are you familiar with the book The Secret?

Yes.

Okay. So I think it ultimately expresses itself through The Secret is that it's this idea that if you imagine success, it shall happen. And if you imagine failure, that that also shall happen. And what the mechanism of that is unclear. And of course, The Secret ends up positing this very strange, you know, this really kooky mechanism, which is like your thoughts have magnetic power that actually attract the things that you're thinking about to you. So if you think about a traffic jam, you'll end up in one, which is obviously really kooky. But I think that that's kind of how the human mind works. If I enter into a marriage and I do put the hedge on, which is a prenup, I think that the way that our minds work, it says, okay, now I'm going to cause that to happen. That somehow that saying that I think it's going to happen and I'm going to cause it to happen as opposed to just saying there's all sorts of negative routes that your life can take and more likely to have success if you can think about what those roots are and actually get out in front of them.

Now, I'm not a gambler myself and I don't understand gambling very well, but maybe you can explain it to me. I read an article in the paper today that many gamblers are now betting on shark migration patterns because a lot of the horse races are shut down, dog races are not running. Shark migration patterns. That seems to me also a zero-sum game. Why don't you all just bet on equities, which at least we hope is a positive-sum game? Like, why do these zero-sum games exist when there's this one huge, really quite liquid positive-sum game? And I can get as excited about a company as about a horse, right?

Yeah. So, well, first of all, I haven't played poker since 2012, so like, I'm definitely not betting on shark migration patterns over here. One of the things that I used to say about poker was that You better not be willing to be a poker player unless you want people to endlessly discuss golf propositions. So a lot of poker players play golf and they're always like trying to figure out like how many strokes aside and are we playing a NASA scramble or whatever? And there's endless conversation because they basically want to turn everything into making a market.

To become detached?

You know, I don't, I don't know that it's, I think they just like the action and I think that to your point about the zero-sumness of it all, I think they really want to say, like, if you state a belief, I might be on the other side of that. And there's going to be some price at which we can find a place where you're willing to take one side and I'm willing to the other. And let's do that price discovery. And then let's get on opposite sides of that bet and let's just test out those beliefs. And I think it's just a particular mindset. And I think they become somewhat detached from sort of whether that's zero-sum or not. Now, I think that you may know that there's actually quite a bit of crossover between people who are trading equities and poker players. There's lots and lots of poker players who have, have become options traders, for example, or people who are trading financial instruments. There's people who go the other direction who are in the, in, in finance who then transition to, to poker. And I think it's because the minds work really similarly. You know, I'm sure that what happened was somebody found— read something about shark migration patterns, you know, said it out loud to a bunch of people who play poker, and immediately they started making a market, you know, in the same way that my brother and my brother-in-law did.

If gamblers cultivate detachment to be better at gambling and not so emotional about it, does that mean when they win, they're not that happy? Like, how does a gambler stay happy and stay rational at the same time? Isn't there a trade-off? That if you enjoy risk for its own sake, you'll go broke. But if you don't enjoy risk for its own sake, what are you doing playing these zero-sum games? Yeah.

So, you know, the thing about poker that I think is really interesting is that I think it actually is a very small group who actually figure out a way to be happy. And I think it has to do with what exactly is it that you're trying to get out of the game? So I think that the people who find a way to be really happy are the ones who are really interested in trying to figure out how to solve the problem of making decisions under that kind of extreme uncertainty. And how are actually figuring out, given, given the environment that you're in and the information that you have, how do I build a really good model of my opponent? How do I figure out, given my model of my opponent, what the appropriate line is to play. And you become somewhat, I think, in that case, indifferent to the win or the loss. And it's really about the game itself and solving the problem of the game. But I think that that's actually a relatively small handful of people who are playing poker. I think that one of the things that's kind of hard about poker is that it's one of the only places where you're actually— I'm like looking at you and putting my hand out when we have a transaction that you're on the wrong end of, and you have to actually put that money like in my hand, face to face, in person. And not only that, but in order for poker to really be fun in general, people have to be playing for an amount of money that matters to them. So by definition, when you lose, you're having to do lose in this very personal way where you're actually handing the money to me directly. And it's by definition amount of money that really matters to you. And I think that that can actually make people pretty sad. And if you're sitting at a poker table, you're like, oh yeah, loss aversion is definitely like, yes. I mean, you just see these examples of it all the time where there's this huge asymmetry between how sad people are when they lose versus how happy they are when they win. And I think it's one of those things that unless you're really focused on process, and I think this is a lesson sort of like for all of life, right? Like the way to happiness is to focus on process and then the winning sort of becomes a,, you know, sort of secondary to that. It becomes a way to keep score on how you're doing on the process piece and to really focus on that as opposed to focusing on the end result, which is what does the chip exchange look like at the end of the day? I think if you can't do that, I think that you're just not going to be happy playing the game, frankly.

And what made you most happy about poker, other than just winning, of course, but the process?

Yeah, you know, I think there's a few things that made me really happy when I was playing. I think one thing is, you know, I come out of this PhD program in cognitive science where I was really studying learning. And poker is just a different way to study that topic. That's really, really powerful as a laboratory for thinking about human decision-making, not just about the way that other people make decisions, but it really kind of exposes you to the way that you're thinking, and, and, and in a real way, how hard it is to avoid decision traps, even when you're perfectly well aware that those decision traps exist, and how easy it is for, like, your mind to slip into those traps. Like, you know, as an example, like, I went into that environment knowing full well about self-serving bias, that, that we tend to attribute good things to our own skill. And we tend to attribute bad things that happen to us to luck. And I knew that that thing existed, like I had studied it. And yet when I was at the table, it's so easy to convince yourself that you've lost because of bad luck and you've won because you made great decisions and you're just sort of rinsing and repeating. So, one of the things that I really loved about the game was the way it sort of exposed that to yourself in a way that you— in a lot of ways, it was kind of hard to hide from because if you weren't seeing that clearly, you were going to lose. So not only did it kind of expose that, but then you had to start to figure out, like, okay, so how, how can I at least reduce the impact of that? Which was an ongoing self-discovery process of trying to figure out how, how to reduce the impact of cognitive bias. That was really interesting. And then the other thing that I, I think I really, really loved about the game was that it happens to be one of those games that reveals itself to you as you go along. What you think the game is and what you think you know about it on the first day that you play is really different than what the game has revealed to you, like, by a year in. And even, like, 10 years in, it's totally revealing new things to you. So it just doesn't get stale. It's like this constant process of, like, learning and discovery and trying to understand, like, this really, really, really complex system and and how do I actually kind of get myself into a position where I can actually win despite the uncertainty and despite my own sort of frailties of mind?

Do you think very good poker players make better decisions than average in the other parts of their lives? Like, is there transference of learning, or are they just sort of unhappy train wrecks?

You know, my intuition is that it kind of depends. Again, I think that there's this handful of players who are very process-driven. And I think that for those players, it does indeed transfer. But I know, I mean, it's just so easy for me to recall examples of people where there was literally no transfer, like, like the number of people where, you know, you were definitely not seeing it translate into their personal life. Like, like, just as a really simple example, you could see someone who was like a really, really, really good poker player and they'd be, they'd be really crushing it at the table. And then the next minute they'd be out in the casino. Which is obviously negative expectancy, like just dumping a bunch of money at the craps table or the baccarat table. And it would be very confusing, like, what was happening there? Like, why were you so good in this one domain and then suddenly you were making these really terrible decisions in this other domain? So I, I do think that one of the things that poker teaches you is that, like, you shouldn't assume that just because people are really skillful in one domain that that's going to transfer. Because I think that that ability can be very, very domain-specific.

When you play poker with your brother and sister, how much does the actual course of play reflect real-life family dynamics? Because they're also both famous poker players, right?

No, my sister is actually— she's a writer.

Sure, but you're a writer too.

Yeah. But she does play a little bit of poker. That's interesting. Actually, I think quite a bit, to tell you the truth. It's quite a bit of psychodrama. So my sister is much— quite a bit younger than me and my brother. And I think that that definitely expresses itself at poker. Like, I think that just in sort of the way that she plays, I think that that dynamic of, like, younger sister comes into play. And then I'm actually younger sister to my brother. And when I was growing up, We used to actually play a lot of cards with my father, and I kind of idolized the way that they played, like my dad and my brother, but then I would also get very mad when I lose to them, and I would say that that definitely translates as well.

As your father does, do you have a favorite malapropism or pun, or is that not for you?

Oh my gosh, no, that is definitely my dad's domain. I think that in some ways I might have been scarred by all the punning that was happening in the household, so I'm going to leave that with my father. I will recommend to everybody that if you haven't read Anguished English, it's a really hilarious book.

Now, your best-known academic article is on why children learn nouns more efficiently than they do verbs. In a nutshell, why is that?

Okay, so, oh my God.

This is before you left psycholinguistics, right?

Yeah. So let me first of all give a shout out to Lila Gleitman, who was my advisor. She's 90. I actually just talked to her the other day. And she's amazing, amazing intellectual. But all right, so how wonky do you want me to get? That's the question.

As wonky as you wish to.

Okay, so, uh, so back when I was in graduate school, there were kind of like competing theories. Just as a fun fact, uh, the person who was kind of on the other side of the argument was Steven Pinker, who I'm sure that everybody is familiar with. So essentially, Steven Pinker was— and he, you know, it's not as dichotomous anymore, but at the time people sort of felt like it was either one thing or the other. And what Pinker was arguing was that the way that children learn language is they learn what a bunch of words mean. And then from the words that they learn, they then can bootstrap the syntax, the grammar of the language. 'Cause we know that there are, you know, German has a different grammatical structure than English does, which has a different grammatical structure than say Chinese. And so the question was, how do you sort of figure out the grammar? And he was positing that you do it from learning the meanings of some words. And then you work backwards to the grammar. Uh, that was called semantic bootstrapping. My advisor was on the other side of that argument, which was that actually you learn the syntax of the language and then that allows you to bootstrap the meaning of the words. So that would be syntactic bootstrapping. Some of the evidence for that would be that, um, when there are a lot of cases where kids wouldn't have any input of like a fluent grammatical language and they invent their own grammar that's totally grammatical within what's possible within human grammars, even though they haven't had any grammar inputted to them. So the two examples of that would be, uh, there was a trend back in the '70s to not allow kids who couldn't hear to actually learn American Sign Language. So they were being forced to lip read. Those children invented their own sign language, and it looks very much like a regular natural language. And then another example would be there are pidgin languages where two groups come together who speak different languages. The adults have to communicate with each other. They basically communicate like, you know, Tyler, you, bottle, take, right? Like it's not really grammatical, but the kids actually, the children of those speakers create what's called a creole. And that is actually a fully grammatical language that fits in with the rules of natural language. So the idea is that the grammar itself is already We're sort of born with the syntax, and then you use the syntax to figure out the words. So the study that you're talking about, we basically said, all right, well, let's figure it out. And what we found was that some pretty simple nouns like dog, you can actually pick up from the environment without the syntax. But nouns that are not about concrete things out in the world, like dog, you actually can't really get. So a noun like thought would be hard. Like, what is thought? How can you see that? You can't point to it. But you can point to dog, and people will figure out what dog means. But verbs, actually, unless you actually have the grammar to support it. So it turns out like kind of everybody was right, that the idea is that you learn a few basic nouns like dog. That helps you then figure out something about the grammar that you happen to be born into. And then once you have that grammatical structure, it allows you to start bootstrapping very quickly all the other words. That was really wonky, but you asked.

So when you beat people at poker, to what extent are you winning because you read their language better because you've studied psycholinguistics?

Pretty much not at all. So mostly what you're doing when you're playing poker is that you're really just trying to build a model of your opponent. And most of what you're building have to do with things like what's the frequency with which they enter pots? When they do enter a pot in general, sort of over time, you start to figure out what's the range of hands that they would be playing in different positions for them, like what's a playable hand so that you can sort of narrow, you can sort of throw out some possibilities and start to narrow down.

So they all have perfect poker faces, forgive the use of the expression. You can't look at them and feel, well, I think this person's bluffing.

No, they definitely don't have perfect poker faces. But so let me put it this way. Most of the time in poker, the market's really wide. So tells, things like, you know, let me look into, you know, let me look at your eyes and see what you're doing. People definitely show them, but it's not necessarily the most reliable information, particularly because in order to pick the tell up, you have to be staring at the human being. And human beings in general don't like to be stared at.

Who cares what they like? You're their opponent. They don't like to be beaten either, right?

Except that the problem is that really what you're picking up— so when people are bluffing, they're uncomfortable. And so when you're sort of seeing these, these physical tells from them, what you're seeing is signs of discomfort. But if you stare at somebody too long, they'll be uncomfortable. And so you're— sometimes when you see some of these things, you're not exactly sure, is it they're just uncomfortable because I'm staring at them, or are they uncomfortable because say they're bluffing and they're not comfortable that they're bluffing. So that, that's all I'm saying. It's like there's, there's a little bit, there's like, there's noise in poker tells.

Oh, sure. But if you're right 51% of the time, that's significant, right?

So the reason when you use tells, when you would use tells is when the decision is very close. They would use tells as a way to sort of tip you from one side or the other. So what I mean by that is like, let's say that a situation comes up where the pot is laying you like 3 to 1. So if the pot's laying you 3 to 1, you only have to win the hand 25% of the time, and that's actually a relatively low bar. Like, if I'm playing only against one other person, like, the chances that I'm going to win over 25% of the time are pretty good. So I don't actually have to think too hard in that situation about whether, whether I should play that hand. But sometimes you get into a situation where I have to win the pot 25% of the time, and that's actually right around where my market is sitting. Like, I'm like, uh, that's pretty close. Then tells can come in handy because they're sort of extra information that, that can allow you to tip over onto one side or the other of your decision.

Can you read men better or women better?

In general, I would say that I can probably read— I can read men better. And I— my understanding is that that's also true of men, that the data is that men can read men better than they can read women. And women can also read men better than they can read women. I'm not totally sure about the second part, but I'm pretty sure about the first part, that men have an easier time reading men than they do women.

So what's wrong with us? What's wrong with we men? Are we too vain? Are we too boastful? Are we too sloppy with our countenances? What's our defect?

Right. It could be that only 3% of people who play poker at the level that I was playing are women. So I just had a lot more experience. Reading men, which could be what it was. So that's possible. You know, it's been so long since I read that literature, but, but I think that men more reliably show that information. But I feel like it's been so long since I read that literature, I don't know that I have anything that would be valid to say about it.

Let's try some rapid-fire questions with quick answers. First one, New Hampshire or Vermont?

New Hampshire. I mean, I grew up in New Hampshire. I have to be loyal.

But Vermont's prettier. Why is New Hampshire better?

Because I grew up there. Like, I have to be loyal to my home state. Also, I'd just like to say Lake Winnipesaukee is pretty awesomely beautiful.

Contract bridge or blackjack?

Oh, for me, contract bridge.

Why?

You know, blackjack— I think that blackjack is kind of boring. It's very rote. If you're not actually counting the cards, you know, you're really just kind of playing basic strategy, which means that there aren't really a lot of decisions that are to be made that wouldn't be pre-made. Like, it's not like a fluid game where you're having to adjust to kind of like what's happening around you. Like, you can literally— someone could— you can walk into the casino and someone can hand you a little card and you could follow that card, right? Which isn't very fun. And then if you're counting, the card's just kind of like more complex, but it's still very rote. So, you know, with bridge, it's like, gosh, bridge is so amazing. It's like, how are you thinking about the way that you're playing your cards and just in order to figure out where the king is sitting, right? Or the ace is sitting, right? Like, ah, I love that game.

Options or futures?

Oh, well for me, options, just 'cause like I, I think I understand them better. I'll go with what I understand more.

What's the best song by Nirvana?

Oh, I wanna say, you know, Just Smells Like Teen Spirit, but it seems so cliché, but it's just like such a, it's such a great song. But you know, I just love, you know, the MTV Unplugged that Nirvana did?

Sure.

Can I just like pick that whole album? Like I love it when they went when, you know, it's acoustic with like Kurt Cobain's just like singing. Like, I'm just going to take that whole album and say like that version of all of those songs is so incredible.

I think Anerism would be my single song pick. Is Joan Rivers funny?

I mean, I think that her act was funny.

In 2009, you were on Celebrity Apprentice with Joan Rivers and Donald Trump picked Joan Rivers over you. What's your model for how that happened? Because I would pick you.

Yeah. She's more famous than I am. And it was called Celebrity Apprentice. So, you know, it was funny because, so I had a bunch of people after that say to me, well, that was really unfair. And they started ticking off like all the supposed rules of the game. Like you raised more money, you won more challenges. Like they were sort of as if that was the game that I was playing. And prior when, when I had gotten to, you know, in a heads up situation with her, when we were the final two, I, you know, there's a lag between when the show ends and when the winner gets picked. And I was letting people know, like, oh, just so you know, I'm going to lose. And they were like, no, you're not. And they would tick off all these reasons why I was going to win. And I said, but that's not the rules of the game. It's like Celebrity Apprentice. Donald Trump picks. He's been friends with Joan Rivers forever, and she's more famous than me. I literally have no shot. And no matter what you think the rules are, those really aren't the rules because it's like reality TV. And so he's just, he's going to figure out a way to pick her. And I, you know, I was pretty clear about that. That actually, I wasn't particularly upset by it because I kind of understood that that was kind of the game that I was sitting in. I was upset by other things, but not by that.

I don't intend this as a political question, but what was Donald Trump like?

Basically, probably whatever your viewpoint of him is now would be very true to what he was like in person.

Does he have tells?

Oh, for sure. Yeah, absolutely.

So you think you can, one can just read him flat out in obvious ways?

In some obvious ways. Yes. I mean, some tells, some tells are very, very easy to read and reliable. So, so I was talking about some of the more subtle tells, like once you kind of get to the expert level of poker, but like, as an example, like there's a very reliable tell when people are new to poker that I would use every single time, like it would actually move my market by a lot. If you did this. So, so as an example, there's something when people are new to poker which is strong means weak and weak means strong. So when a player like sort of like puffs themselves up and like takes their chip to bet, and they really like, they grab their chips and it's like a big motion, and they sort of like very forcefully put those chips into the pot, if it's a new player, they're almost always bluffing in that situation. But if they like take their chips and they're like as gentle as a mouse, they're like, oh look, I'm betting, don't pay any attention to me, I'm just gonna sort of quietly slide my chips into the pot, it usually means that they're very strong. Now, now that particular tell goes away pretty quickly. So like when I was saying like tell, it's very hard for tells to like really move your market a lot. I was, I was talking about expert players, but if you're talking about a beginning player, tells can actually sort of make your market. Like they, they're like, they can really tell you something incredibly significant. So yeah, I mean, I feel like he's got some pretty strong tells.

If only poker players voted, how would policies change? How would politics, how would the country be different? It's not a question about party affiliation, but about how poker players think, because your reason for why you vote is going to matter more than which party you vote for if you're all the only voters.

You know, I think that, like, I need to understand what you mean by a poker player because there's all sorts of different types of people who play poker.

The best 500, the top 500 poker players, you all vote. How does the country change? What decisions do we make better? Because you've already said these people are not necessarily better at happiness. They don't necessarily transfer the learning. Would it just be the exact same country? Would we somehow take more clever risks in foreign policy? Would we read the tells of, you know, Putin and other foreign leaders?

So my suspicion is that if only the top 500 poker players voted, Policies would— people would be thinking a lot more about edge cases, like where things could go wrong, for sure, because poker players just are obsessed with that. I think that there'd be more long-termism as opposed to short-termism, again, because you have to sort of be obsessed with that as a concept. So I think that people would be thinking about what are the unintended consequences, like how does this look. Another thing that's really important that poker players think about is if I put this policy in that looks like it's awesome, how can someone come in and find the cracks in it, right? So that, so that it can turn into something bad. Um, so I think that people would be thinking more— I, I feel like the top 500 players would definitely be thinking in that way more. So assuming that they wanted to use their powers for good as opposed to evil, which we'll assume, um, I feel like in general policies would be, would be better, less easy to be advantaged, more thinking more long term. Definitely more willing to take, you know, risks that were worthwhile, I feel like things would be better.

If, say, the top 500 people in finance were the only voters, putting aside policy toward finance, do you think it's basically the same answer or somehow different?

Well, again, I mean, with both groups, I'm assuming that they're trying to do good and not do evil, right? Because obviously you can be thinking about any of this. Yes, I think that that is true as well.

Why are there so many casino scenes in American Western movies and James Bond movies? Gambling scenes, baccarat, right?

I feel like it's a little similar to, you know, why do people play lotteries? And also sort of what is the image of like a gambler in America? Like, first of all, I think that America likes to think of itself as like really idolizing like risk-takers. So I think it sort of shows like James Bond is a risk-taker, but he's very smart. But, you know, I think that it, you know, a lot of it has an association of glamour with it, which is pretty hilarious if you've ever seen people at a poker table. But, uh, you know, I mean, I think they sort of think it's glamorous. And then also I think that there's just a certain amount of fantasy, like maybe I could be in that position and I could like win big, or if I had enough money, I could bet that amount of money. And I, and I think it's fulfilling a lot of like, there's like some wish fulfillment.

Why has poker stayed culturally such an American game? So if you go to Macau, poker is not nearly as big a thing as it would be in the United States. What's the cultural barrier? Why is it not such a universal game?

So, yeah, so it's so funny because I think about that. I think about poker as a pretty universal game because when, you know, certainly when I was playing, you would be sitting at a table and there were people, you know, Chinese, Vietnamese, Korean, German. French, Italian, Spanish, Russian, right? I mean, it really kind of drew people from all over the world into the game, but I suppose maybe that it maybe drew them into whatever the American version of the game— although there's the European Poker Tour and there is poker in Macau. Interesting question. Like, I've always kind of thought of it as very international, but if it's not— and because obviously I'm thinking from the inside view, right? Like, I was living in poker, which seemed like very multicultural when I was playing.

If I went to a random get-together of Taiwanese men in a mid-sized Taiwanese city, I would be shocked if they were playing poker. Maybe it's mahjong, I'm not even sure, some, some other game with tiles, some other form of betting. Whereas in the United States, I wouldn't be shocked by seeing poker anywhere.

Yeah, I guess that's true. Gosh, I've really never thought about this. Um, you know, I think that, I think that every Every culture has some sort of form of gambling. For whatever reason, I feel, you know, these, you know, poker became sort of part of the lore of the Old West, you know, and it was a way that we gambled. I don't know. Can I ask you a question? Like, are there people who, for example, Mahjong, are there people who like make their living playing Mahjong? I don't even know.

I believe so. I'm not an expert in the matter, but yes, I think wherever there's gambling, Even with chess, people make their living from gambling in chess, and that's an absurd gambling game because who's ever better is evident very quickly, right?

Right, which is why speed chess— so speed chess allows you to feel like you got unlucky. That's why the real money is made in speed chess.

Yes.

You know, the other thing, of course, is that I guess in chess you can negotiate. Like, you start with 2 pawns fewer than I get. So you can actually figure out whatever— you can try to negotiate what the tipping point is. Same in golf. Yeah, I'm just going to have to say, I don't know there. I don't, you know, it originated in France too. So I don't, I don't know. That's a really good question. Let's call it a stumper.

How smart are those like top 500 poker players just as humans?

Oh, they're, they're, I mean, brilliant. Most of them, not, not all of them, but almost all of them are brilliant. And that doesn't necessarily mean like they're, they're incredibly well-read. I mean, not all of them are. You know, not all of them would have like sort of a traditional education, but they're all, they're all ridiculously smart.

Do you think they could have done other wonderful things and there's some kind of potential social loss, or being a poker player was the highest avocation and they have some kind of strange personality asymmetry where, say, they wouldn't have made a great CEO, they couldn't have been an inventor, couldn't have done this or that. And like chess players, they end up as poker players. Or are they multifaceted and it's some kind of shame that they were not out there being great in some other role?

I think that there's certainly some significant portion of them that that's true of, that they could be doing great things out in the world. But I also think that there are quirks about people who are attracted to poker because I think that given how brilliant they are and particularly how brilliant they are at game theory and sort of expressing that and instantiating that in a real-time, high-stakes decision-making problem. I think that most of the people who are playing poker could be making more money doing something else, could be creating more productivity for the world, like, you know, sort of like, as you said, like moving out of this zero-sum situation into something that, that's more win-win. But I think that there is something in general about who's attracted and willing to sort of take a haircut to go play poker. Right, in order to do that, that has to do with this sense of sort of independence and not necessarily fitting in with what kind of the norms of society are. So there's a story about, a very famous story about, there was a poker player, a really good poker player, who decided that they wanted to actually try trading instead. So they got a job with a firm to go trade, and the first day they didn't show up, and they called in at like, I think, 11 in the morning or something. And said, "I'm sorry, I can't take this job. It's just too early." Like, they just would not— they just didn't want to get up that early. So they went back to playing poker. And I do feel like that kind of encapsulates sort of like, you know, something about a certain group of poker players.

Now, you probably know the case of the famous economist Steve Levitt. He decided he would become a top poker player. Within a fairly short period of time, he did. Do you think most very smart people could do that, or are they in turn lacking something that these top 500 poker players have?

Yeah, no, I don't think that most just sort of generally very smart people could do it. I mean—

What stops them? What are they lacking?

First of all, I just want to take this moment to tell everybody to go get Maria Konnikova's new book, The Biggest Bluff. Super smart, PhD in psychology, decided she was going to learn poker to try to understand Uncertainty Better and the Influence of Luck in Your Life and managed to become a champion. And her book is a really wonderful sort of like, it's like a memoir, but it's also a real meditation on, on luck and uncertainty and its influence in your life and game theory. And it's, it's really an amazing book. It actually just came out on Tuesday. No, I just, because you're smart doesn't mean that you could, that you can become a great player. I think that you have to be smart in a very particular way. And it would be the way that somebody like Steven Levitt is smart or Maria Konnikova is smart. I think that there—

What is that way? Like, I feel I don't have it, though I've never tried. What is the way? What am I lacking? And all those like me who would fail?

Yeah, I don't know that you would fail, by the way. I think that if you have the ability to think probabilistically, I would say that that's kind of number one, is that you really, really have to understand —That seems like the easy part to me.

That I can do. Yeah, no.

So, but, well, but see, that's the thing is like that one thing, you know, I mean, I actually co-founded the Alliance for Decision Education partly because of that one thing that these, this thing that we take for granted that has to do with thinking probabilistically is not something that's really taught in K through 12. It's not the way that people are trained to think. You can see it all the time. Like, you know, in 2016, Trump, you know, I think he closed on FiveThirtyEight at something like between 30% and 35% to win. And when he won, people were like, they were wrong. That was ridiculous. I mean, you know, and this is how like generally people think. So, so that core thing of like, are you good at thinking probabilistically is a bigger thing than you think. And then I think on top of that, you have to be somebody who's really interested in understanding when the things you believe are inaccurate.. And you have to be like so incredibly hungry to collide with corrective information. You have to be open-minded to the corrective information. You have to be updating your beliefs constantly. And like you, I think that you just have to be willing to have less endowment to your own beliefs and like hold those really loosely because you have to keep this sort of end goal in mind, right? Like I'm not trying to win this hand. I mean, I am, but like, I understand that there's all sorts of things that might intervene in my ability to do that. I'm trying to win in the long run. And the worst thing that I could find out is that I believe something was true and held onto that belief too long, so it affected my bottom line. So I think that you just have to be thinking that way all the time, and then you have to be willing to try to solve for it. And if you have those things, I think that you can become really— I, I, I, and you're smart. I, I think that within a pretty quick period of time, you could become very good at that game.

Let's say you take a player who plays regularly at a local casino, does pretty well, maybe is in the top 5 or 10% of that group and has played for 10 years. And you put that person down at a table with like a top 20, top 30 poker player. I mean, what's the difference? What do the very top players have that that individual would not? How would they beat him?

Oh, it's, it's such a combination of things, you know. I mean, the way that I would, I would think about it is if I took some of the successful trading options in 1982 and I put them into the environment that exists now where the market is like super, super tight, I wouldn't actually expect them to be able to win. And the reason is that when the markets are really wide, you know, your ability to be sort of leaving, you know, basis points on the table, like you, you just have so, so much more room for like not getting it just right. You know, because the difference between you and, and the people that you're trading against is so wide. So yeah, could you be— if you were really concentrating and you were really working on getting better at modeling your opponent, really understanding bet size, understanding that like you always want to be trying to get on the primary line of play as opposed to the secondary line of play, that gets forced on you as the markets tighten. But that person who's sitting in that game where they might be in the top 10% of their local casino they can be choosing the secondary line of play a lot and still be crushing the game. Once you get against the people who are, who are real experts, who have really kind of come up the ranks, those people are at just such a higher percentage of the time they're choosing the primary line. And when you're butting up against that on the secondary line, like, you're good, like, you're coming up with a pretty good option, but you're not— you're just not coming up with the best option enough. Or you might be on the tertiary line, like, that might be okay if the market's wide enough. And how you're sort of figuring out what's the right choice in any given time. It's like so many things go into that. So you're just gonna like butt up against like, ooh, that market just got really tight on you.

Is playing poker different when you're 9 months pregnant?

Yes. How so? You have to go to the bathroom a lot more, so you miss a lot more hands. The other thing is that honestly, like when you're physically uncomfortable, it does affect the quality of your thinking. Like, I truly believe, like, you know, when I was playing, when I was 9 months pregnant, I was certainly not playing as well as when I was, you know, not 9 months pregnant, just because you're like super physically uncomfortable and you're also tired.

Does alcohol affect high-level play in poker? Oh yes, a lot.

You know, it's kind of interesting, like at the lower levels, if you have somebody who maybe isn't aggressive enough in their play, like they're a little bit too passive. At the lower levels, if you like give them a beer, it would probably be helpful, right? Because it would like, it would like sort of get their courage up, right? And, and in poker, courage can get really rewarded. But again, the problem is that once, once those markets like tighten and, you know, your opponents start to get a lot better, alcohol would not be advised. I would like it if my opponents were drinking.

In the last 10 to 15 years, what's the main thing we've learned from computers about playing poker that we didn't know before?

Yeah. So actually this is a place where I'm not the best person to answer. And the reason is that, so I retired in 2012 and a lot of the stuff that's been done in terms of simulations has actually occurred in that period since I retired. So now people have access like Maria Konnikova. A lot of the learning that she did was, was through being able to run these Monte Carlo simulations and try to figure out through being able to run those simulations, it's a lot easier to figure out what the game theory optimal choice would be. And those things we were sort of trying to figure out by feel, you know, or sometimes by hand. And so there's just like a whole bunch of really interesting plays that players are making now that I think that we, you know, back in the day when we were sort of all doing it just sort of ourselves, you know, I don't know that we would have been able to come to them because they're not intuitive. In the same way, I think that backgammon has changed a lot too. Like, The intuition about, you know, for somebody prior to being able to run all these simulations about how often you should be like leaving, um, a naked checker, you know, a shot, you would have been trying to cover those a lot more, you know, back in the '90s. But what the computer simulations have shown you is that you should actually be leaving those shots a lot more often than what your intuition might tell you. And I think that there's a lot of similar things in poker, but honestly, I can't really give you specifics because a lot of those changes occurred after the point that I retired. I don't know how I would have done in that environment. I'm not sure that at this point I'd be willing to put in the work. I think if I, if I tried to play poker today, I would just get destroyed. It's my opinion.

If you meet a young person, maybe 18 or 20, and they tell you they want to become a top poker player and they're already quite good, maybe you could imagine it. I mean, what signs do you look for in them to judge whether they really have the talent, temperament, whatever it takes? What do you look for?

You know, I think the number one thing really honestly is like open-mindedness. I just think in order to really succeed at the top levels of the game, you just have to be so open-minded. You have to be so willing to ponder on a daily basis the idea that you might be wrong. You know, the idea that the things that you think to be true or, or what you think about an opponent, that it just might be inaccurate.. And that if you're not willing to kind of like ponder that, which I think is difficult, right? Like, I mean, the human brain isn't really built to just be constantly thinking like, where am I wrong? Where am I wrong? Where am I wrong? Like the human brain is built to go like, I'm right, I'm right, I'm right. It's kind of a hard thing to actually, to actually live, to actually put into practice. So I think that that's probably the number one thing that I would be looking for. I mean, obviously it would be If they're already successful, I kind of already know they probably know the basics. They're, they're good with the math. You know, they, they certainly must have a feel for the game and, you know, skill in the game. But then I would be looking at like, how eager are they to learn and learn in this particular way, which is just always think, thinking, what did I do wrong? You know, there's, there's a story about Phil Ivey that I think is so telling, um, about, you know, what it takes to be a great player where he won a really, really huge tournament. And then he went to dinner, and during the dinner, all he talked about— like, he was just obsessed. It's like all he talked about were the places where he felt like he didn't bet enough, or he bet too little, or a hand he shouldn't have played, or a hand he didn't play and he should have, or mistakes that he felt that he had made, um, playing that final table. And this is someone who had just won a huge tournament, who by all accounts at that time was like the best player in the world. And I think it's so telling that that's what he was talking about right afterwards. Was just picking apart, like, what are all the places where he was leaving equity on the table, where he wasn't grabbing what was sitting in front of him and trying to clean up around the edges of that and figure out all the mistakes that he made. And I don't know that everybody is built for that. Annie Duke, thank you very much.

I offer my virtual applause. Thank you. Thank you. Those were such great questions. Oh, good. A lot of fun for me always. It was great reading, rereading all your work and videos and everything.

Thank you. I mean, really, that was really challenging. Thank you. Thanks for listening to Conversations with Tyler Cowen.

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