Chaos, rationality and being daring
Logical approaches to the game of chance - Thinking in Bets
What a fascinating time to be alive.
Politics as we know it is one big mess after another. Global warming is beating expectations. Its weirding effects on the weather are impacting all of us. The dawn of super AI is looming, work and creativity might never be the same.
War in Europe, pandemics, the stability and predictability of anything are going out the window. Investing is precarious yet more money gets thrown at magical internet money than any fundamental world problems.
Yet, there is consistency in the growth in demand for the content we consume. There is also a demand for the content to be ever more absurd. The shock factor of content seems to stay on par with the mental weather and bonkers news.
If nothing else, it seems that everything is getting more crazy.
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A million things I could dig into there. Primarily, it highlights that it is an appropriate time to look into the skills we value.
Rationality - The ability to deal with chaotic scenarios without losing our shit, and consistently make sensible decisions.
I’m going with this one today.
Thinking in bets
Thinking in bets is a brilliant book on the topic of rationality and how to foster it by Annie Duke. Her personal story is also a great primer for being rational in this game of chance we call life.
Annie studied psychology as a young lady. She worked long days and longer nights on a PhD application to fulfil her dream of pursuing a career in leading research.
She was overjoyed when she was accepted but little did she know life was about to turn in a very different direction.
A month before she started she fell very ill. Her passion was deferred for at least a year. With her condition, she was unable to take on normal regular work and she felt lost and abandoned by the world.
Her brother helped her to start playing poker in the evenings to make ends meet. She could play when she had the energy to work, and take rest whenever she needed. It was risky but it fit her random and unemployable schedule and if she controlled her emotions and kept a level head she could make a good living.
She met many interesting characters and also mastered the skill of staying rational in game of continuously changing chances. She learnt a steady recipe for success in poker and life.
Every hand dealt a new array of data on her competitors and her own playing skills.
Within the year she was doing very well as a player.
More importantly, she felt she was learning so much about life (and psychology) that she was motivated to defer longer and stick with her unexpected profession.
Fast forward a few years and Annie Duke became the most successful female Poker player in history (and one of the most successful players full stop).
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Life deals us some very strange hands sometimes, it’s easy to jump to conclusions and quickly judge an event as bad or unfair.
Staying rational and playing with the cards we have is a timeless lesson. You never know what life has in store for you.
Not judging our situation and controlling our response to the flow of forces we can’t control is all we can do.
She has many more lessons for us.
2 rules for unreasonable success
1. Seeking truth
Annie fully accepted that her natural talent might not have been exceptional.
Where she excelled was her ability to seek truth and learn from every action. Her acceptance that she would make mistakes led her to develop a mindset that took her far beyond her peers.
Example
It is a natural human tendency to attribute our wins to our skill and our losses to bad luck.
We look at our competitors and attribute their losses to incompetency and their wins to good fortune.
She always tried to reverse this view!
Our mind doesn’t seek truth, it seeks a way to explain things we want to believe. Seeking truth is paramount to success.
2. Do not chase losses
Humans put 5 times more effort into avoiding a loss than finding a win. We easily fall into the trap of pouring effort and time into areas we do badly, instead of doubling down on our wins.
A weakness or loss can take up all our energy, leaving nothing left for the things that will make us progress
Example
Perhaps the biggest risk to a poker player is chasing wins during a losing streak. A game you are getting crippled in is hard to leave. If you’ve had a bunch of bad luck you feel like you should be getting good cards soon.
Caught up in the moment you can ignore your bad decisions making. Buying back into these games is a great way to lose all your money.
In her accountability group, every player had to explain their wins and losses each week.
Telling your peers that you paid to get back into a game on a bad day was sacrilege (even if you happened to win).
Reckless behaviour was recognised for what it was. Loss of respect from your peers was a motivating drive to keep your head sane instead of getting lost in the moment.
(also more on this below)
3 Mental models for wisdom
Her entire story is a fascinating tale of chance.
Accepting the losses as they are.
Having the awareness to see when good luck shines down on you and making the most of it.
She learnt many mental models that helped keep her in check. Below are some of my favourite concepts that she learnt about humans and decision-making.
1. Wisdom is consistent good choices over the long term
A good decision is the wisest choice given the current information.
Success is the accumulation of wise choices and luck (and hard work)
A poker hand that statistically wins 20% of the time and loses 80% of the time is a bad hand to play (outside of psychology dynamics with other players).
BUT. This hand will still win 1 time in 5.
The wise choice is to bet against it winning.
However, it is a statistical fact that 20% of the time the choice that wins (playing that bad hand) will be the ‘wrong’ choice to make*.*
In life, we often make decisions based on reasonable predictions of an outcome. We are always taking a risk with any choice.
If our decision leads to a failure we can beat ourselves up about it.
Yet it might not have been a bad choice to make statistically. (so it was the right choice!)
Conversely, we can make a terrible choice statistically, but if it pays off people tell us how wise we are.
We don’t beat ourselves up for being foolish, we celebrate our own tenacity and luck.
Before making choices it is good to state our predictions so we can see the truth behind our wins and failures. Journaling and having accountability peers can be very powerful.
Knowing that her accountability group frowned on players buying back in during a losing streak even if they went on to win. Statistically, it is a way to lose all your money. If it happens to work out, it’s not because you are skilled. It is because you are an idiot that got lucky.
Instead of jumping to incorrect conclusions, we can build rationality into our interpretation of fate.
2. Questioning common knowledge
Humans are reasoning machines. To attract a mate, we need to come across as if we have a good grasp of reality and know what’s going on. We don’t like to be wrong.
Thus, we prefer to come up with explanations of why we are correct, instead of looking to see where we are wrong.
We also evolved to learn quickly from others and accept the wisdom of the tribe. This helps us function in society.
If we hear a few people say the same thing, we quickly write it into our internal facts database.
We are inbuilt to believe it and we don’t question common knowledge.
When we take in information, we genuinely believe that we screen it, but actually it just kind of seeps into our subconscious.
We were never shown a scientific paper that told us:
1 human year is 7 dog years
Men inherit baldness from their maternal father
Neither of those facts are true.
(Inheritance fact - some baldness genes are associated with the X chromosome but plenty of other parts of the genome as well)
Yet most of us believe this because we heard them numerous times. So many people seemed to agree that it became a part of our common knowledge of how the world works.
I love this insight. I’ve always enjoyed questioning things we are told. I did a good job of annoying all my new teachers (after a while they realised I was just curious).
Being more aware of how much common knowledge is wrong has pushed me to lean into this attitude.
My writing on where common advice is wrong or unhelpful really helped push my own knowledge (such as you are not the 5 people you spend time with, Your brain is not a muscle - I later released these on my podcast which went on to outperform my old episodes by 20%)
The most erroneous stories are those we think we know best - and therefore never scrutinize or question.
3. Want a bet?
We can reverse our biased opinions a little by challenging them. (Sadly, we aren’t often challenged.)
If someone asks us if we want a bet, it suddenly casts a cloud of doubt upon our thoughts.
Let’s say I’d ask you if you wanted a bet that male baldness is inherited from the mother’s father. You wouldn’t blindly lean on your assumptions straight away. You would take a second and consider:
Where did I actually learn this?
Am I really sure this is true?
Could something else be true after all?
Do I believe this as much as to lose money on it?
Does this other person know something I don’t?
This natural flow of thinking pushes against the river of blind beliefs we normally sail down. A bet is a great screen for how solid a belief it is.
We take so much for granted that is ultimately wrong.
Uncovering just a few of our poor assumptions and biases is a very good result. Challenge others and yourself to make a bet on your belief.
Don’t try to be more right
Just be less wrong
Avoiding failure leads to success
The winner is usually the one with the least mistakes
Derek Sivers (he might make a good poker player)
Summary
Everything appears to be very silly lately, but there is no need for us to lose our heads.
Focus on rationality with any decisions going forwards.
When there is a lot of fear going on it can be a bad move to do something like radically changing a nation’s entire tax policy. On a personal level though some big moves might have a lot more chance than normal.
Many of the best companies were born during recessions.
Try to minimise losses, especially during a losing streak. Also, accept the situation and respond quickly. Seek ways that you can optimise for the big opportunities that are around which others are too fearful to go for.
You will be having losses right now. Don’t waste your energy trying to claw things back from them, when there are much bigger games you could be winning.
Personal update
I was chatting with my voice coach about my radical change in life plans lately.
I’m launching into making content without a real monetisation plan. The goal is to eventually get an audience, that might well take multiple years, looking at the statistics it probably won’t happen at all. She was concerned about how I was ever going to make any money.
Statistically, it seems like a bad bet.
However, I responded that I’ve done plenty of big silly things before and somehow always found a way to be entrepreneurial about it whilst I was going along. So based on my experience, I don’t see why this should be any different.
I don’t know how I’ll make money but I always make connections between ideas and people. If I don’t directly monetise an audience, I’m very confident that I’ll develop the skills and knowledge to solve other problems whilst doing something I enjoy.
So for me, the bigger risk is the losses accumulated on my mental health by being bored out of my mind and feeling like I’m denying myself the opportunity to ‘give it a go’.
Yes, I always want to be rational, but I also want to be daring.
If you feel safe in the area that you’re working in, you’re not working in the right area. Always go a little further into the water than you feel you’re capable of. Go a little bit out of your depth.
When you don’t feel that your feet are quite touching the bottom, you’re just about in the right place to do something exciting.
David Bowie
(new favourite quote)
Really, what is sad about inheriting or being bald?