424. How to Make Your Own Luck

In this episode, Freakonomics Radio introduces a new format for book author interviews that involves having authors read book excerpts in addition to being interviewed. This approach is novel compared to the traditional interview format that often leaves authors unsatisfied with the outcome. By allowing listeners to hear the writing style of the author, it provides a truer sense of things and a deeper understanding of the book's content. The new hybrid format is accompanied by a quiz for listeners to test their comprehension. The episode features a captivating excerpt from a book that immediately immerses the reader in the sensory details of the casino room. Overall, this episode highlights the importance of providing authors with a platform to showcase their writing style and bring their books to life through audio media.

In her new book, The Biggest Bluff, Maria Konnikova discusses how her journey from poker novice to professional taught her about life being a game of incomplete information and how it is important to be okay with not being able to control the ultimate outcome. She also explains how her interest in psychology led her to poker, which she believes is a strong tool to address many psychological questions. Konnikova considers her genetic makeup and being born to her parents as the luckiest thing that ever happened to her, but also recognizes being able to leave the Soviet Union at a young age as a lucky break, as it opened up a world of opportunities for her.

Maria Konnikova's experience growing up as a Jew in the Soviet Union had limited her career options in the humanities. However, after immigrating to the US, she achieved success in writing and academia. Konnikova believes that self-control is a crucial skill for managing emotions and handling oneself in life. While choosing a career, she recognized that the academic job market is biased, making her dependent on the preferences of others. Konnikova's story reveals the importance of seizing opportunities, developing perseverance, and adapting to changing circumstances. It also highlights the significance of choosing a career that aligns with one's interests and values, rather than taking a safe or predictable one.

Academic psychology is often biased towards personal favorites and office politics, making it less meritocratic than it claims to be. In contrast, poker is a highly meritocratic game where immediate feedback is given for math mistakes. Even someone who considers themselves innumerate can learn how to understand probability and excel at poker through practice. The human mind learns best by doing, and poker provides an opportunity to constantly use and improve one's math skills. In poker, players must make decisions based on various factors, such as their hand and their opponent's perceptions of them, making it a game that requires both mathematical skills and strategic thinking.

In decision-making, betting on uncertainty can improve our understanding and help us conquer the pitfalls of our decision processes. The best player does not always win, but rather the one who learns to read and react to signals. Immanuel Kant suggests that betting can counter our tendency towards false confidence based on a desire for certainty. In reality, probabilities are often gray and uncertain, and doctors, for example, may overlook this in diagnosing a patient. Maria Konnikova's personal experience illustrates the concept of headwinds and tailwinds, and the idea of locus of control, which suggests that we tend to attribute good or bad outcomes to our own abilities or bad luck.

The way we see control over events determines our locus of control, either internal or external. Most people tend to take credit for good things (internal locus) but blame external factors for bad things. However, this can lead to overconfidence and poor decision-making. The key is to have an internal locus most of the time while acknowledging external factors in bad situations. To optimize internal vs. external, we need to analyze our decision-making process and understand what we can control and what we cannot. It's important to avoid always blaming external factors or always taking credit for good things. In interpreting our experiences, we need to avoid victimhood and take ownership of our lives.

It's important to hold the mindset of an almost-victor in order to overcome bad luck and be prepared for future opportunities. Wallowing in misfortune can lead to missed opportunities and a dwindling support network. It's crucial to take responsibility for our actions rather than playing the victim. Perception is key, and viewing challenges as opportunities for growth, rather than something to complain about, can lead to resilience and success. This mindset can be applied not only in poker but in life as well. Seeking out coaches or mentors, like Erik Seidel, can provide valuable guidance and support on this journey.

Author Maria Konnikova shares her journey towards becoming a professional poker player with the help of her mentor Erik Seidel. She chose Seidel because of his longevity and old-school approach to poker, which helped to amplify her existing skills. Konnikova's interest in poker stemmed from her curiosity about game theory, particularly John Von Neumann's Theory of Games. Von Neumann loved poker because it is a game of incomplete information, unlike other games he found boring and solvable. This highlights the appeal of poker to those interested in chance and unknown odds, making it an intriguing game for strategy and analytical thinking.

Game theory, invented by John von Neumann, was inspired by his belief that poker is a good representation of complex decision-making in the real world due to its element of bluffing and incomplete information. Von Neumann was a terrible poker player but was excellent in applying game theory in strategic decision-making. Poker is a game of incomplete information where players have to make educated bets based on the little known information, making it an interesting model for complex decision-making. It’s an opportunity to develop a framework for developing solutions, and yet it cannot be theoretically solved due to the human element of bluffing and misrepresenting information.

No-limit Hold’em differs from other forms of poker in two ways: the precise amount of information that is held in common vs. private, and the concept of no-limit. The game’s balance between skill and chance comes from the incomplete information provided by each player’s two private hole cards. The ability to go all-in in No-limit Hold’em serves as a powerful metaphor for decision-making in life. The knowledge that going all-in is always an option for everyone creates a tricky variable that makes many decisions difficult. The high-risk and high-reward nature of No-limit Hold’em mirrors our daily choices, and playing this game may help us make better decisions by serving as a proxy for life’s difficult choices.

Maria Konnikova's experience of using poker to explore the concepts of chance and skill started out as a stunt, but evolved into a passion and a source of valuable lessons about decision-making. The immediate feedback provided by poker helped her learn better and analyze her own decisions. In contrast, life is usually too noisy, with too many variables and lag between decisions and outcomes, making it difficult to identify and improve our own decision-making abilities. This realization can help us become better humans and decision-makers. Konnikova's transformation from a skeptic to a passionate explorer of poker and its lessons is a reminder that sometimes, even seemingly superficial activities can lead to valuable insights and personal growth.

Through poker, Maria Konnikova learns the value of repeated feedback in decision-making and the importance of recognizing one's own biases and emotions. She also discovers the consequences of insecurity and gutlessness in both the game and in life. This experience prompts her to question the balance between chance and personal agency in our life outcomes.

Poker is a game that holds a mirror up to real life and teaches us about deception. In both poker and real life, we use subtle deceptions to present ourselves or our hand in the best light. This shows just how much of a skill game poker is, as it requires convincing people you have the best hand even when you don't. A fascinating analysis shows that the actual best hand only wins about 12% of the time, emphasizing the importance of confidence and convincing others in both poker and real life. Though it may be dispiriting for some to adopt this mindset in real life, it is a valuable lesson to learn.

Research shows that gender roles play a big role in confidence and overconfidence. Women are socialized to avoid being confrontational and to be nice, affable, and amenable. These traits may be adaptive in other areas of life, but in games like poker, they can lead to folding more often, not standing up for oneself, and not playing to win, instead opting to be liked. Acknowledging and adjusting for these tendencies can help women be more successful in male-dominated arenas. At the same time, a woman's gender can work to her advantage in poker, particularly against male players who may have preconceived notions about how a female should play.

Gender can be a strategic advantage at the poker table, as initial impressions of players can be heavily influenced by gender. Women can use these perceptions to their advantage, adjusting to how their male opponents see them and exploiting their weaknesses. Passivity is not a safe option and can lead to significant losses. Instead, players should be proactive and take calculated risks. In general, information is power and should be used to gain an advantage over opponents. With a deep understanding of their perception of women, female players can develop new strategies and tactics, transforming gender from a disadvantage to an asset.

Passively staying in a situation can be the seed of far bigger problems. Having knowledge and achieving professional success does not mean that socialization biases have been overcome. Emotional baggage can accumulate without awareness and hinder individual growth in different aspects of life. A Ph.D. in psychology did not prove useful in reading players while playing poker. Metacognitive awareness helped identify mistakes and fix them through situational dynamics. Situational dynamics proved to be the most important aspect of poker, and focusing on it improved reading abilities and allowed for the use of psychology background. Success in poker can be achieved through probability or social-dynamic aspects, and neither approach is overvalued or dismissed.

Playing to your strengths can help you become a great player. There is no right way to play in a certain situation, but a right way to think about it. Tournament earnings do not account for all expenses, and the cost of experience can be high. While the financial part may not always balance out in the short term, the experience gained can be invaluable and lead to other opportunities. It's important to consider both the financial and opportunity costs when pursuing a passion or career.

Poker may not directly relate to life, but it can serve as a powerful teaching tool through its ability to remove noise and allow players to access their thought processes on a deeper level. The emotional resilience and self-analysis skills developed in poker can translate into real-life decision making situations. For example, the sunk-cost fallacy, a decision-making trap that plagues many of us, can be avoided by taking a page out of the poker playbook and focusing on making the best decision given the current circumstances rather than continuing down a costly path just because we've already invested time or money into it.

Investing time and energy in something does not necessarily mean it's worth keeping in our lives. Learning to be mindful and introspective before making decisions allows us to recognize errors caused by emotions and make better choices. This can be achieved by taking a pause, reflecting on our thoughts and feelings, and then responding. It's a powerful tool that requires no special training, and can improve decision-making and self-control in our everyday life.

Skill is important, but luck always plays a role in everything we do. Even the most skilled people can be affected by bad luck. Skill can give us opportunities and help us make better choices, but it can only do so much to mitigate the damage caused by luck. The hope that skill alone will be enough is a useful delusion that helps us keep moving forward, even in the face of bad luck. We must convince ourselves that our skill will carry the day because it has to be. Maria Konnikova's book, The Biggest Bluff, explores this concept. This episode is part of a potential Freakonomics Book Club, and feedback is welcome at radio@freakonomics.com.