Podcast Summary
Decision Making, Backcasting, Poker: Backcasting and evaluating decisions using a decision matrix are effective strategies for making informed decisions, especially when information is incomplete, as learned from the experiences of poker champion Annie Duke.
This podcast episode, featuring an interview with decision strategist and World Series of Poker Champion Annie Duke, offers valuable insights into decision-making, particularly in situations where information is incomplete. The conversation delves into the importance of backcasting and evaluating decisions using a decision matrix. Annie shares her experiences and lessons learned from her career in poker, which she believes is an excellent model for making decisions in real life. The episode, first aired in 2019, remains relevant and offers actionable information that can be applied to everyday decision-making and behaviors. The Drive podcast, which focuses on translating the science of longevity into accessible content, is supported by its members, who receive exclusive benefits and content.
Decision making in complex fields: Decision making in complex fields is more like poker than chess due to incomplete information and luck. Recognizing this can help us make informed decisions.
Decision-making, especially in complex fields like medicine, is not like playing chess with perfect knowledge. Instead, it's more akin to poker, where incomplete information and the influence of luck are significant factors. Even with complete information, uncertainty about the outcome remains. This is because the world is stochastic, and small differences in initial conditions can lead to vastly different outcomes. Humans may not be naturally wired to understand probability theory, which adds to the challenge of making informed decisions. However, recognizing the role of incomplete information and luck in decision-making can help us approach situations more thoughtfully and effectively.
Probabilistic Thinking: Effective decision-making requires recognizing and accounting for uncertainty, a skill not naturally wired in us. Superforecasting game and personal experiences with poker highlight the importance of probabilistic thinking and correcting errors in our thinking.
Our ability to think probabilistically is crucial for effective decision-making, yet it's not a skill we're naturally wired for. The speaker shared an experience of participating in an exercise involving answering 20 questions with quantifiable answers, requiring the estimation of a range that likely contains the correct answer. This exercise, known as the "superforecasting" game, highlights the importance of probabilistic thinking and reveals how many of us underestimate the uncertainty of the world. The speaker also mentioned their personal experience with playing poker, which led them to develop an interest in probability and statistics. They emphasized the significance of recognizing and correcting errors in our thinking, as most of us tend to overestimate our certainty and underestimate the role of chance. By becoming more aware of our biases and learning to think probabilistically, we can improve our decision-making and adapt to the inherently uncertain nature of life.
Poker and personal growth: Poker's unpredictability and variable reinforcement schedule fuel motivation and focus, leading to personal growth and cognitive skill development.
The game of poker provides a unique environment for personal growth and the development of cognitive skills due to its elements of hidden information, uncertainty, and variable reinforcement. This was exemplified by the story of a young man named Steve, who started playing poker in the 1980s and eventually became a successful player by learning from his losses, finding mentors, and adapting to the game's unpredictability. Poker's inherent uncertainty leaves room for players to rationalize their losses and inflate their winnings, creating a strong motivation to continue playing and improving. The variable reinforcement schedule, where wins come at unpredictable intervals, further fuels this motivation and leads to a high level of engagement and focus. This environment, as described in the conversation, is reminiscent of the concept of "centers of excellence" where individuals from various backgrounds come together and learn from each other, ultimately leading to the emergence of world-class talent. Additionally, the conversation touched upon the difference between fixed and variable reinforcement schedules and how the unpredictability of poker, as a variable reinforcement schedule, leads to specific behaviors in players, such as a heightened focus and engagement. Overall, the story of Steve's journey into poker highlights the unique benefits of the game and the role it plays in fostering personal growth and cognitive development.
Variable reward systems and compulsive behavior: The unpredictability of rewards in variable reward systems can lead to compulsive behavior, as the human brain focuses on the most recent reward or lack thereof, rather than the overall average reward
The unpredictability of rewards in variable reward systems can lead to compulsive behavior, even when the overall average reward is known. This is because the human (or animal) brain doesn't easily grasp the concept of an average, and instead focuses on the most recent reward or lack thereof. This is why slot machines and variable ratio reinforcement schedules are so effective at keeping people (or rats) engaged, even when they're losing more than they're winning. In poker, this effect is amplified because the rewards are not only variable but also dependent on both luck and skill. The person playing poker may feel "due" for a win, even when the statistical evidence suggests otherwise, leading to continued play despite losses. This is why it's important to adopt a long-term perspective and understand the underlying probability distributions in these types of systems. Skill plays a role in the long run, but in the short term, luck can have a significant impact on outcomes.
Skill vs Luck in Games: The influence of skill and luck varies greatly depending on the specific context of a game or situation. In games like poker, the skill gap is relatively narrow, and luck can heavily influence the outcome. However, in games where the skill gap is vast, such as professional sports, the influence of luck is minimal.
The distinction between skill games and luck games can be blurred, especially when the skill gap is narrowed. While games like baseball or poker have elements of both, the outcome can often come down to the last possession or play, which can be influenced by luck. However, when comparing teams or individuals with vastly different skill levels, such as a professional NFL team versus a Little League team, the influence of luck is minimal. It's essential to understand that the skill gap and the presence of luck can vary greatly depending on the specific context. In games like poker, the skill gap is relatively narrow, and once you've learned the basics, the outcome can be heavily influenced by luck. Texas Hold'em, a popular variant of poker, is an example of a game where the goal is to make the best five-card hand out of seven or nine possible cards. The ranking of hands is clear, with hands like straight flushes being the rarest and highest-ranking hands. However, the presence of community cards in Texas Hold'em introduces an element of luck, as players must use some of the same cards. Other variants of poker, like in the movie "The Cincinnati Kid," where each player is dealt their unique five cards, have less luck involved since players do not share any cards. Ultimately, it's crucial to recognize that both skill and luck play a role in various games and situations, and the balance between the two can shift depending on the context.
Texas Hold'em community cards: The community cards in Texas Hold'em provide valuable information for probabilistic calculations and behavioral analysis, shaping betting strategies and determining hand strengths.
In Texas Hold'em poker, the community cards in the middle of the table provide important information about each player's possible holdings, allowing for probabilistic calculations and behavioral analysis. This information helps determine the relative strength of each player's hand and informs betting strategies. Newcomers to the game may initially have an advantage due to being unpredictable, but this advantage is often short-lived as experienced players learn to range them effectively. Understanding the implications of the community cards and observing player behavior are key skills in Texas Hold'em poker.
Quitting fast in poker: Quitting fast in poker, or knowing when to fold, helps minimize losses and move on to better opportunities. In poker, a good player wins roughly 56% of the time, but the excitement and risk of no limit poker can lead to greater volatility and asymmetric outcomes.
In poker, players are encouraged to quit when they have a negative expectation, allowing them to minimize losses and move on to other opportunities. This concept, known as "quitting fast," is a key strategy in poker and helps mitigate the pain of losses due to loss aversion. Poker also comes in two styles: limit and no limit. In limit poker, a good player wins approximately 56% of the time, meaning the opponent wins 44%. This frequent reinforcement keeps players engaged and motivated to continue playing. Conversely, in no limit poker, players experience greater volatility and asymmetric outcomes, making the game more exciting but also riskier. Overall, the unique dynamics of poker, particularly the ability to quit when the odds are against you, make it an intriguing game that combines strategy, risk, and reward.
Expected Value beyond Money: People value more than just money in poker and a negative expected value doesn't necessarily mean a player is having a bad experience. Entertainment and learning can add value to the game.
While the concept of expected value in poker is often thought of solely in terms of money, it's important to remember that people value other things beyond just the monetary aspect. When players come into the game with a negative expected value, they may still be experiencing positive value overall due to the entertainment and learning experiences they gain. This concept was particularly prevalent in the poker scene of the 1990s, where players focused on creating a fun and valuable experience for everyone involved. A famous example is the late poker player Chip Reese, who made a fortune in poker and backgammon but was also known for his ability to make everyone around him happy, leading them to want to play with him despite potentially losing money. This symbiotic relationship shows that poker is not truly zero-sum, as the value people gain from the game goes beyond just the money exchanged.
Poker, mathematics and learning: Mathematics plays a crucial role in poker, and continuous learning and adaptability are essential for mastering the game. Good decisions don't always lead to good outcomes, and evaluating decisions requires considering potential outcomes, probabilities, and consequences.
Poker, like any complex skill, offers endless opportunities for learning and improvement. The speaker, a professional poker player, shared his personal journey from a casual player in Montana to a dedicated professional in Las Vegas. He emphasized that the enjoyment of the game comes from different things for different people, and his unique understanding of the game's mathematics set him apart from his opponents early on. However, he acknowledged that there's always more to learn and that the game's complexity can be both a challenge and a source of fascination. Another important insight he shared was the realization that good decisions don't always lead to good outcomes, and bad decisions don't always lead to bad outcomes. This understanding challenged the simplistic notion that success or failure is solely determined by the quality of the decision. Instead, he encouraged a more nuanced approach to evaluating decisions, taking into account the potential outcomes, their probabilities, and the consequences of each outcome. In essence, the speaker's experience highlights the intricacies of poker and the importance of continuous learning and adaptability in mastering the game.
Transparency in Decision Making: Transparency in decision-making leads to greater accountability and learning from outcomes, reducing the likelihood of attributing poor results to the decision itself.
People tend to judge the quality of decisions differently based on the transparency of the situation. When the outcome is unexpected or the decision-making process is opaque, individuals are more likely to attribute the poor result to uncertainty rather than the decision itself. However, when the decision-making process is transparent, individuals are more likely to accept the outcome, regardless of whether it was good or bad. This phenomenon, known as "resulting," can be observed in various domains, including football, business, and personal life. It's essential to recognize this bias and strive for greater transparency in decision-making processes to improve accountability and learning from outcomes. Ultimately, understanding the role of transparency in decision-making can help individuals and organizations make better decisions and learn from their mistakes.
Decision outcomes: Both good and bad decision outcomes offer valuable learning opportunities. Avoiding bad outcomes shouldn't prevent taking risks and innovating.
The pain and learning experienced from making a decision with a good outcome versus a bad outcome can vary greatly depending on the situation. While making a bad decision with a good outcome may seem less painful, it can still lead to valuable learning opportunities. However, the focus on avoiding bad outcomes and the fear of being labeled as an "idiot" can lead decision-makers to play it safe and avoid innovation or taking risks. This can ultimately hinder progress and growth. It's important for individuals and organizations to recognize the value in learning from all types of decisions and outcomes, and to strive for a balanced approach to decision-making. The fear of bad outcomes should not overshadow the potential benefits of making bold, innovative decisions.
Risk assessment in market: Accurately assessing risk, not just return, is crucial for efficient resource allocation in markets. Underestimating or overestimating volatility can lead to significant consequences.
Efficient resource allocation in any market requires accurate assessment of risk, not just return on capital. A model that underestimates or overestimates volatility can lead to significant consequences for the amount of capital deployed. The concept of "Rock versus Ray Rock" highlights the importance of understanding the true risk-adjusted return on capital. When unexpected events occur, it's crucial to explore potential reasons, including the possibility that one could have done better or worse. In decision-making, it's essential to think critically and consider all possible directions, including up, down, and orthogonal, to avoid building false consensus or making decisions based on data to support a narrative rather than finding the truth. People's reluctance to acknowledge mistakes and their tendency to move slowly or default to inaction can hinder innovation and effective decision-making. The willingness to take calculated risks and make decisions confidently, like Pete Carroll in sports, can lead to success.
Transparency and unusual decisions: People's reactions to unusual decisions depend on their perception of transparency. Proven successful leaders face less criticism for their unusual decisions. It's crucial to examine good outcomes and consider alternative paths for learning.
People's reactions to unusual decisions depend on their perception of transparency. When leaders make decisions that are not immediately understood, they may face criticism. However, as Belichick's career shows, once leaders have proven their success, fans and critics become more tolerant of their unusual decisions. It's essential to encourage exploration of both good and bad outcomes, especially the unexpectedly good ones, as they hold valuable lessons. The Y2K example illustrates that good outcomes can result from good decisions, from inevitable outcomes, or from a combination of both. However, it's only by examining the counterfactuals that we can truly understand the impact of our decisions. By focusing on the "morbidity conference" in our heads, we miss opportunities to learn from our good outcomes and consider alternative paths. To be effective decision-makers, we must balance our focus on the outcomes we didn't like with an exploration of the ones we did. This approach will help us become more thoughtful and intentional in our decision-making.
Counterfactual Analysis: Considering counterfactuals, or possibilities of what could have happened, can lead to better decision-making and improved performance by identifying factors contributing to success or failure and making adjustments accordingly.
Focusing only on negative outcomes and avoiding unexpected events can limit learning opportunities and reinforce risk aversion. Instead, it's essential to consider counterfactuals, or the possibilities of what could have happened, and evaluate preferences and probabilities for each outcome. This approach, inspired by the analysis of historical events like the D-Day invasion, can lead to better decision-making and improved performance in various domains, including archery or poker. By considering all possible outcomes and their likelihood, individuals can identify the factors contributing to success or failure and make adjustments accordingly. This iterative process of exploration and evaluation can ultimately lead to greater progress and elite performance.
Skillful reflection: Examining wins and losses through skill leads to continuous improvement and mastery, requiring a higher level of thinking and introspection.
Examining both wins and losses through the lens of skill, not just focusing on losses, is crucial for improvement and growth. This concept can be applied to various skills and experiences, including poker and learning to swim. The framework for learning involves becoming consciously incompetent, consciously competent, and eventually unconsciously competent. However, it's essential to acknowledge that examining wins and losses through skill requires a higher level of thinking, which can be challenging as it may challenge our beliefs and identity. This process may lead us to question our decisions and outcomes, potentially turning a win into a loss. But ultimately, this level of introspection is necessary for continuous improvement and mastery.
Self-deception in industries with significant luck: In industries with clear outcomes, significant luck, tight feedback loops, and high stakes, individuals have a greater capacity for self-deception. Analyzing past decisions and learning from them is crucial for long-term success.
In industries where outcomes are clear and the influence of luck is significant, individuals have a greater capacity for self-deception. This is particularly true when there's a strong short-term influence of luck, a tight feedback loop, and significant skin in the game. Poker and high-frequency trading are examples of such industries. The capacity for self-deception can lead to either abject failure or improvement, and it's unclear whether individuals naturally tend to think this way or if it's a result of their experiences. However, there are individuals across various industries who are naturally inclined to analyze their decisions and outcomes to improve their performance. The ability to critically evaluate past decisions and learn from them is essential for long-term success in these industries.
Long-term decision making: Longer time horizons require critical thinking, self-reflection, challenging assumptions, and a systematic approach to decision-making to minimize biases and their consequences.
As the time horizon for making decisions increases, the importance of critical thinking, self-reflection, and challenging assumptions becomes more crucial. This is because with longer time horizons, there is more leeway to let biases influence decisions without immediate consequences. This is in contrast to activities like trading options, where feedback is quick and consequences are more significant. Therefore, it's essential to adopt a systematic approach to decision-making, model the world counterfactually, and encourage challenge and innovation. The longer the time horizon, the more important it is to dig deep into potential problems and propagate a culture of learning and improvement within teams. This is why activities like swimming, which require a longer time horizon to master, demand a higher level of thinking and introspection.
Backcasting goals: Considering our goals from the finish line perspective can provide insights, help make better decisions, and create a more robust strategic plan by identifying practical steps and considering potential challenges and opportunities.
Thinking about our goals from the perspective of the finish line, or backcasting, can provide valuable insights and help us make better decisions. By asking ourselves what we want to be able to do when we're older, we can identify the practical and pragmatic steps we need to take now to achieve those goals. This approach also allows us to consider the role of luck and how we can decrease the chances of negative events occurring. By working backwards, we can create a more robust strategic plan that takes into account potential challenges and opportunities. The Centenarian Olympics concept is an example of this, encouraging us to think about what we want to be able to do at 100 and working backwards to determine what we need to be able to do at each stage of life to make that a reality. This approach can help us live more intentionally and make decisions that align with our long-term goals.
Decision making and luck: Effective decision-making requires recognizing the role of luck and skill, embracing the probabilistic nature of decisions, and identifying the curves in our decision-making process to navigate them effectively.
Understanding the role of luck and skill in our lives is crucial for effective decision-making. Malbrough's book "The Success Equation" is recommended for further exploration of this topic. Additionally, embracing the probabilistic nature of decisions and recognizing when to go fast and when to slow can help us make better decisions and avoid analysis paralysis. The framework discussed allows us to identify the curves in our decision-making process and navigate them more effectively, ultimately freeing us up to make faster decisions in the straightaways and even on the curves. This conversation highlighted the importance of deep exploration and the value of a comprehensive understanding of complex concepts. The Drive podcast offers exclusive member benefits, including detailed show notes, Ask Me Anything episodes, a premium newsletter, access to a private podcast feed, and a highlight reel of previous episodes, for those seeking to delve deeper into these topics.
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Dr. Peter Attia's podcast provides valuable information on various health and wellness topics, but it's important to remember that the information shared is for general informational purposes only. No doctor-patient relationship is formed through the podcast, and users should not rely on it as a substitute for professional medical advice. Additionally, users should be aware of any potential conflicts of interest and disclosures made by Dr. Attia, which can be found on his website. To access member-only benefits, learn more, and engage with Dr. Attia, users can visit peteratiamd.com, find him on social media platforms, or leave a review on their preferred podcast player. Remember, always consult with a healthcare professional for any medical concerns.