Poker, Probabilities, and How We Make Decisions | Annie Duke on Conversations with Tyler

Check out the Conversation with Tyler Episode Page & Show Notes

Key Takeaways

  • It’s hard for people to make bets that hedge against their identity
    • People will hedge against disaster with fire insurance but are less likely to hedge against their marriage with a prenup (only about 5% of married couples have a prenup)
      • “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 situations that do have very high emotional valence.” – Annie Duke
  • Be aware of the self-serving bias: We tend to attribute good things to our own skill, and we tend to attribute bad things that happen to us to luck
  • Being a good poker playing and good decisions in the game doesn’t exactly transfer over to other activities:
    • “I do think that one of the things that poker teaches you is that 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.” Annie Duke
  • The top 500 poker players tend to be brilliant in game-theory and in making real-time, high-stakes decisions
    • “Just because you’re smart doesn’t mean that you can become a great player. I think that you have to be smart in a very particular way” – Annie Duke
  • The number one trait of a top poker player is open-mindedness:
    • “In order to really succeed at the top levels of the game, you 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, the idea that the things that you think to be true or what you think about an opponent — that it just might be inaccurate.” – Annie Duke

Intro

Books Mentioned

  •  Annie calls the book, Anguished English hilarious and recommends people to read it
  • Books such as The Power of Positive Thinking by Dr. Norman Vincent Peale and The Secret by Rhonda Byrne teach readers to think positively because their outcome is dependent on their thoughts 
  • Annie recommends reading Maria Konnikova’s new book, The Biggest Bluff
    • “Her book is a really wonderful. It’s a memoir, but it’s also a real meditation on luck and uncertainty and its influence in your life and game theory.” – Annie Duke

Making Bets

  • Are there situations when thinking probabilistically is likely to make our decisions worse rather than better?
    • If you’re in a savannah and you hear rustling in the grass, you don’t want to spend time thinking about the probability that it’s a lion
  • When making bets with friends, it’s probably best to not make any bets that can be interpreted as negative, such as betting your friend’s kid won’t get into a certain school:
    • “I think that people can interpret that as you think that that’s what’s going to happen.” – Annie Duke
  • When betting on sports, sometimes you can hedge the emotional downside with a monetary upside such as betting against your home team because you know they will likely lose
  • It’s hard for people to make bets that hedge against their identity
    • People will hedge against disaster with fire insurance but are less likely to hedge against their marriage with a prenup (only about 5% of married couples have a prenup)
      • “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 situations that do have very high emotional valence.” – Annie Duke

Lessons From Poker

  • It’s hard to be happy playing poker because the losses hurt much more than the happiness you gain from winning. Instead, focus on the process:
    • “There’s this huge asymmetry between how sad people are when they lose versus how happy they are when they win. It’s one of those things that, unless you’re really focused on process, and I think this is a lesson for all of life, right? The way to happiness is to focus on process.” – Annie Duke
  • Be aware of the self-serving bias: We tend to attribute good things to our own skill, and we tend to attribute bad things that happen to us to luck
  • Being a good poker playing and good decisions in the game doesn’t exactly transfer over to other activities:
    • “I do think that one of the things that poker teaches you is that 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.” Annie Duke
  • When you play poker, you’re trying to build a model of your opponent such as the frequency they enter pots or the range of hands they play with
    • Data shows that men can read men better than can read women, and women can also read men better than they can read women
      • Only about 3% of high level poker players are women so it’s possibly men don’t have as much exposure to studying and reading women

Traits of Top Poker Players

  • The top 500 poker players tend to be brilliant in game-theory and in making real-time, high-stakes decisions
    • “Just because you’re smart doesn’t mean that you can become a great player. I think that you have to be smart in a very particular way” – Annie Duke
      • You need to be curious about being wrong and stay open-minded:
        • “And you have to be so incredibly hungry to collide with corrective information. You have to be open-minded to the corrective information.”
          • In other words, you have to be constantly updating your belief
  • The number one trait of a top poker player is open-mindedness:
    • “In order to really succeed at the top levels of the game, you 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, the idea that the things that you think to be true or what you think about an opponent — that it just might be inaccurate.” – Annie Duke
      • “If you have those things and you’re smart, I think that in a pretty quick period of time, you could become very good at that game.” 
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Notes By Alex Wiec

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