Annie Duke (@AnnieDuke) is a World Series poker champion, Ante Up for Africa co-founder, public speaker, and author of Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts.
What We Discuss with Annie Duke:
- Thinking in Bets isn’t really about poker — and neither is this episode.
- Two things that determine the quality of our lives: the quality of our decisions and luck; we’ll learn to understand the difference between the two.
- Common mistakes we make when evaluating decisions, namely something called resulting — which all of us do — which leads to worse decision quality over time.
- How we can become better belief calibrators, and why this helps us mitigate bias in our thinking and in our decision-making process.
- How Annie and other world champion poker players have formed decision-making pods with one another to help them get better at decision quality and strategy, and how you can do the same.
- And much more…
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We’ve talked before about how uncertainty in life is an uncomfortable inevitability, but one that provides us with valuable feedback if we understand how to pay attention to what it’s trying to tell us. Properly applied, it can guide our decisions if we can just get comfortable with the discomfort of acknowledging it and putting it to use.
In this episode we’re joined by Annie Duke, World Series poker champion and author of Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts. She’ll explain how poker strategies bring this uncertainty to light and help us understand the relationship between outcomes, decision quality, and luck. Listen, learn, and enjoy!
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More About This Show
In an episode featuring World Series poker champion and Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts author Annie Duke, you’d be forgiven for thinking this conversation is going to revolve around poker.
“This isn’t a poker book — simply in the sense that you’re not going to learn poker from reading it,” explains Annie. “What poker is mainly used for is a way to inform some of the ways that we can think about life’s decisions — particularly understanding what a problem is in a relationship between outcomes and decision quality that I think poker exposes in a really nice way in terms of really bringing the uncertainty in most of our decisions to light.
“And then what I’m really trying to get across, using poker as kind of a trampoline to get there, are some of the real solutions that you can implement in order to become a better decision maker — to kind of embrace the uncertainty and handle it. What people really understand from poker is that there’s a lot of uncertainty in the decisions that we make, and if we don’t acknowledge that uncertainty, that our decision quality is not going to get a lot better. And poker can really give us a lot of good lessons for that.”
Quality of Decisions vs. Luck
Outcomes and the decisions that take us to them don’t always align as expected. Good decisions don’t always result in good outcomes, and bad decisions don’t always result in bad outcomes. When the right thing happens for the wrong reason, we often attribute the outcome to the quality of our decision-making process — not realizing (or maybe just not acknowledging) how much luck played into the end result. But, like it or not, life is more a game of poker than a game of chess. Annie explains:
“In the abstract, it seems very clear that you have your decisions and luck — and you can’t really control luck, so you should focus on the quality of your decisions. But what ends up happening is people generally way too tightly link the quality of outcomes with the quality of decisions; they will often ignore the presence of luck when they’re evaluating, particularly, the outcomes of others. They act like we’re playing a game of chess when we’re dealing with life’s outcomes as opposed to playing a game of poker.
“In chess, the outcome is really just determined mainly by the quality of your decisions, right? The luck element is reduced. If I lose a game of chess to you, it’s because you made better decisions than I did, and I made poor decisions.”
The Trouble with Resulting
Annie uses two key decisions by Super Bowl head coaches to illustrate how luck influences us to believe that poor outcomes are the result of poor decisions, when in reality good decisions can still lead to poor outcomes, and poor decisions can lead to good outcomes.
In 2015, Seattle Seahawks coach Pete Carroll made a decision to pass while on the goal line, rather than hand off to his Pro Bowl running back. That pass was intercepted, leading many sports pundits to argue it was a poor decision rather than bad luck.
In 2018, faced with a fourth down on the goal line at the end of the half, rather than kicking a field goal, Philadelphia coach Doug Pederson chose to run a trick play where the ball was thrown to the Quarterback, resulting in a touchdown. This decision was lauded as “smart” because of the result.
In both of the above situations, the outcome was the measurement for the quality of the decision — and this is referred to as “resulting,” which discounts the luck element in a decision’s outcome.
Annie gives an example of the real estate market in the early 2000s leading people to use resulting as an inaccurate measure of their skill in flipping houses. In reality, almost any real estate purchase made during that time was benefitting from an ever-expanding bubble that inflated the market as a whole — but this also led these same individuals to believe they were the victims of bad luck rather than poor decision making.
Listen to this episode in its entirety to learn more about our evolution-instilled favor toward false positives, the persuasive power of cognitive illusions to take us down the wrong path even when we know it’s the wrong path, how motivated reasoning leads us toward a conclusion as opposed to reasoning toward the truth, why we should think of any decision we make as a bet with our desired outcome as the payoff — informed by the information we have with an acknowledgment to uncertainty having the final say, how we can be better belief calibrators to ensure we’re taking in as much information as we need to make the best bets rather than just the information that reinforces what we already believe, and lots more.
THANKS, ANNIE DUKE!
If you enjoyed this session with Annie Duke, let her know by clicking on the link below and sending her a quick shout out at Twitter:
And if you want us to answer your questions on one of our upcoming weekly Feedback Friday episodes, drop us a line at firstname.lastname@example.org.
Resources from This Episode:
- Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts by Annie Duke
- Annie Duke at Facebook
- Annie Duke at YouTube
- Annie Duke at Twitter
- Pete Carroll’s Terrible Super Bowl Mistake by Nicholas Dawidoff, The New Yorker
- Super Bowl 2018: Doug Pederson Helped Eagles Win by Not Blinking Against Bill Belichick by Mike Jones, USA Today
- Müller-Lyer illusion
- TJHS 16: Tali Sharot | Unpacking the Science of the Influential Mind
Transcript for Annie Duke | How to Make Decisions Like a Poker Champ (Episode 40)
Annie Duke: [00:00:00] You know, the question is do you want to feel good now or do you want to sort of improve the quality of your results in the long run? I personally want to choose to improve the quality of my results in the long run, so I'll take a little bit of pain right now.
Jordan Harbinger: [00:00:13] Welcome to the show. I'm Jordan Harbinger. As always, I'm here with my producer, Jason DeFillippo. On this episode, we're talking with Annie Duke. She's a retired championship poker player, and she recently authored a book called Thinking in Bets. This is a really good book. I've really enjoyed reading this. I love things that have to do with bias and decision making.
[00:00:32] Today, we'll discover the idea that two things determine the quality of our lives, the quality of our decisions and luck. And we'll learn to understand the difference between those two. We'll also understand common mistakes that we make when evaluating decisions, namely something called resulting, which all of us do and which leads to worse and worse decision quality over time. We'll also learn how we can become better belief calibrators and why this helps us mitigate bias in our thinking and in our decision making process. Last but not least, Annie will explain how she and other world championship poker players have formed decision making pods with one another. To help them get better at making decisions, decision quality and strategy and how you can do the same at home. Don't forget, we have a worksheet for today's episode, so you can make sure you solidify all your understandings of all those key takeaways here from Annie Duke. That link is in the show notes at jordanharbinger.com/podcast.
[00:01:24] Now, here's Annie Duke. Anyway, thanks so much for coming on the show.
Annie Duke: [00:01:29] I'm happy to be here.
Jordan Harbinger: [00:01:30] So tell us why this is not a poker book because a lot of people are going, “Oh, I don't want to, this isn't, I'm not into poker. I don't play poker, I don't care.”
Annie Duke: [00:01:38] This isn’t a poker book, but simply in the sense that you're not going to learn poker from reading it. What poker is mainly used for is a way to inform some of the ways that we can think about life decisions, particularly really kind of understanding what the problem is. Particularly in the relationship between outcomes and decision quality, that I think that poker exposes in a really nice way in terms of really bringing the uncertainty and most of our decisions to light. And then what I'm really trying to get across using poker is kind of a trampoline to get there, are some of the real solutions that you can implement in order to become a better decision maker in order to kind of embrace the uncertainty and handle it. So what people really understand from poker is that there's a lot of uncertainty in the decisions that we make and if we don't acknowledge that uncertainty, that our decision quality is not going to get a lot better and poker can really give us a lot of good lessons for that.
Jordan Harbinger: [00:02:35] So in reading the book, I totally understand why poker is an analogy for all of these decision trees and things that we're looking at to make quality decisions. And you’d mentioned in the book that two things determine the quality of our lives, quality of decisions and luck. And we have to know the difference between the two. And that sounds really obvious, but what is the difference? Because I think a lot of us, we mislabeled these things and it can result in disasters.
Annie Duke: [00:03:04] So what I think is really interesting is that when you tell people these things in the abstractly, the quality of your life is determined by the sum of two things, the quality of your decisions and luck. People say, “Oh yeah, of course.” But when you actually look at the way that people act, what you find is that the way that they kind of interpret life outcomes doesn't actually embrace that concept. So in the abstract, yes, it seems very, very clear that you have your decisions in luck and that you can't really control luck, so you should focus on the quality of your decision. But what ends up happening is that first of all, people generally way too tightly link the quality of outcomes with the quality of decisions is if they sort of will very often ignore the presence of luck when they're evaluating particularly the outcomes of others.
[00:03:57] So what they do is they sort of act like we're playing a game of chess, when we're sort of dealing with life’s outcomes as opposed to playing a game of poker. So in chess, the outcome is really just determined mainly by the quality of your decisions, right? So the luck element is super-duper reduced. So if I lose a game of chess to you, it's because you made better decisions than I did, and I made poor decisions.
[00:04:24] Now in life, that's actually generally not the case, except that we don't really behave that way. So the opening of my book I think is a very good example of this. So for people familiar with the super bowl in 2015, the Seattle Seahawks were on the one yard line of the New England Patriots, and there was 26 seconds left and it was second down, and the Seahawks were down by four to the Patriot. So obviously this is an incredibly important play because if they score a touchdown, they're almost definitely going to win the game because the Patriots aren't going to have enough time to merge the ball back down the field.
[00:05:04] So what happens is that Pete Carroll had Russell Wilson to a pass, that passes intercepted in the end zone by Malcolm Butler. And people across the board really just went, I mean, just completely brutalized Pete Carroll's decision making there. So obviously, having an interception in the end zone on the very last play of the Super Bowl is a disastrous result for them to lose the game. And I think that we can agree on that, but they acted like there was no luck involved in that. But that was clearly because of Pete Carroll's poor decision making. So they were really taking the quality of the results and using that to determine the quality of the decision making as if luck didn't play a role in the way that that outcome occurred at all.
[00:05:52] This is a problem that we call resulting, and it comes from this kind of discounting of the luck element. Just quickly, the chances of an interception there hover around 1 percent. So 99 percent of the time you don't get that result. I think that we probably should be paying a little bit more attention to the luck element there. But I think that that's in general how we act when we're looking at other people's results. And then the other thing that we do, which I think is really interesting where we kind of in the abstract understand that there's two things in play, the quality of decisions and luck. But when we actually get down to the practicality, we ignore one or the other, is that when we're actually sort of fielding our own outcomes, when something bad happens to us, we act as a skill wasn't involved at all.
[00:06:38] We just sort of pawn it off to the luck elements to the things that are outside of our control, and we say we got unlucky. But when good things happen, we sort of ignore the luck element and we say that it was because of our great skills. And I think one of the best examples of that is that if you look at car accidents where there, multi vehicle, at least two vehicles involved, over 90 percent of the time people report the accident as not having been their fault.
Jordan Harbinger: [00:07:03] Of course, that makes total sense, especially with insurance companies and things like that.
Annie Duke: [00:07:08] But even when they're just talking to it like it wasn't my fault, I didn't know, it was the other person's fault. And obviously, things that aren't your fault go into the luck category. So even though in the abstract I can say, “Well you understand that it's the sum of your decisions and luck, right?” You know that when it's a bad outcome it's, “Oh my gosh, that's just luck.” And in fact it's so strong that nearly 40 percent of the time when it's a single car accident, when there's only one car involved, the person driving the car report the accident is not their fault. So in that case, you're just kind of acting like there's no skill portion, it's just luck. So there's all sorts of ways and we kind of in which we kind of get this wrong, this connection between outcomes and decisions that, that I think really leads us astray. Even if we understand in the abstract that that has to be true.
Jordan Harbinger: [00:07:52] So the common mistake that we see is called resulting. Looking at the results that come from the decision instead of the actual quality of the decision. And that requires us to look at the difference between bad results and bad decisions, because bad results can still come from good decisions, right?
Annie Duke: [00:08:10] Yeah, bad results can come from perfectly good decisions. I can run a green light and I can still get in a car accident, and likewise, good decision, bad decisions rather can result in good outcomes. Like I can go through a red light and get through perfectly fine. Here's a good example. When people were flipping houses in the early 2,000, I think most of those people thought that the success they were having was because of skill. But we don't know that it was because of skill because there was a big, just sort of upward mart of the real estate market, where housing prices just kept getting higher and higher. And it's not clear that those people were making skillful decisions and flipping. It could have been that you could just buy a random house, and if you sold it a couple of months later, you would make money, no matter kind of what you did.
[00:08:55] And then obviously when 2008 rolled around, a lot of those people didn't do very well. So it was interesting because I think that for those people when they were making money, it was because they were really good at flipping, and then all of a sudden when their business is kind of collapsed it was because the market was bad. So these are very common examples but it actually has, this resulting actually has really bad consequences because it causes you to change decisions when maybe you shouldn't and reinforced decision when maybe you shouldn't. A recent example actually comes from as you know a self-driving Uber just hit and killed a pedestrian. So I'm sure you're aware of that, that's, that was just in the news. And obviously we don't want anybody to die at the hands of a vehicle, whether someone who's in a vehicle or someone who's being hit by a vehicle and it's a tragedy.
[00:09:52] But what I thought was really interesting was that the reaction was to suspend the testing and just to take the cars off the road, not just the Uber cars, but other self-driving vehicles. The thing that, that I saw was, I was looking through the coverage of USA Today, and the New York Times, and the Washington Post, and so on and so forth. And they were all talking about this tragedy that occurred and that obviously the cars weren't safe. And what I didn't see were any comparisons to how self-driving vehicles did per thousand miles traveled versus the technology that we already have on the road, which is cars that are driven by human. So we know that 6,000 pedestrians died per year by regular driven card. So I thought it was kind of interesting that there was that, that the reaction was we had a bad result of it. Therefore the technology and the decision to put the cars on the road must be a really bad decision as opposed to we had a bad result that being set, which is a tragedy. But compared to human driven vehicles, it's that it's actually statistically looking pretty good. I don't know that for sure, but the comparison wasn't done.
Jordan Harbinger: [00:11:05] So this is further complicated, of course, by hindsight bias thinking that the outcome that happens is inevitable. So we get people going, of course, when you have cars without drivers, they're going to hit people, what are you idiots thinking? And it's like, well actually the computer is going to be better at, never mind, you don't care about the facts, right?
Annie Duke: [00:11:22] It's essentially like that. Yeah, so for example here, here's something that I know for sure is that self-driving cars don't text while they're driving. Self-driving cars don't drive intoxicated. They don't drive tired. I mean there's all these, so what I think happens is that the sort of bad outcomes around human driven vehicles are kind of already baked into the decision. So we're not really thinking about what the comparison is. We're just looking at the result of this new technology and saying,” Oh, this must be really bad.” And then hindsight bias comes in. It's like, how could you not have known that that was so dumb to put them on the road in the first place, just as you said. You know, so these things really have real consequences. This is actually a really simple case, which I think is really telling.
[00:12:05] So somebody just did a study where they looked at NBA teams, and they looked at what happened after one point wins versus one point losses. So obviously when it's that close, when you win by a point versus lose by a point, let's assume that that outcome's basically completely determined by luck. The difference between those two outcomes, right? Like, I mean you win by one point, you lose by one point. That could just be like who had the ball last, right? So what they found was that coaches made were much more likely to make lineup changes after the one point loss, and not make lineup changes after the one point win. So they're actually changing their strategy based on something that's almost completely determined by luck. I mean these things really do have real consequences.
Jordan Harbinger: [00:12:45] Well, this makes sense for the brain to do because the concept of patternicity. We're looking for patterns. The rustle in the bushes, it could be a lion, we've got to change our behavior, but this causes us to seek certainty, stability. But we can't work backwards from results because otherwise we're incorporating luck into or other factors into our decision making when it's not appropriate to do so. Is that accurate?
Annie Duke: [00:13:11] Evolution really favor is what are called type one errors, which are false positive. So you can think about it as just as you said, like you're on the Savannah, there's ruffling in the bushes. If you falsely run away when there's no lion there, you're better off than if you wrongly determined that there isn't a lion there and you stick around. That would be a false negative would be, “Oh, I don't think that that wrestling is actually a lion, so I'm going to stick around, and then you’re dead. And a false positive is, I think there's a lion and I run away, but it turns out it was just the wind. There's not a lot of costs to that comparatively.
[00:13:46] So evolution really favors these kinds of false positives, right? So we're really kind of designed to be linking these things together in a really, really strong way. And one of the problems is that, that tendency is so strong that once you know the outcome, it can becomes very difficult for you to separate yourself from the outcome in order to actually look at the decision and any kind of clear eyed or rational way. So I think that I can probably get you to a place where you can really feel that intuitively. So, even though I know the mathematics behind the Pete Carroll decision to pass, instead of handing the ball off to Marshawn Lynch, I still know that the ball got intercepted and I kind of have to sort of remind myself of the mathematics in order to really even believe that myself, that it's a good call because the quality of that outcome is casting such a strong shadow over my ability to kind of see clearly about the quality of the decision. So then if I do the thought experiment, this really shine some light on it, because if I asked you, well what's your sort of gut reaction if I say to you Pete Carroll's on the one yard line with his Seahawks, he's down by four against the Patriots, and he chooses to pass the ball with 26 seconds left and it's caught in the end zone for a touchdown. Like how does that decision feel to you now?
Jordan Harbinger: [00:15:09] Now I'm going, what an idiot. Although I know nothing about football, I'm agreeing with the masses that he should've done something else because that result was terrible.
Annie Duke: [00:15:18] Right, and now what if it's caught in the end zone for a touchdown though? Like if they win the game.
Jordan Harbinger: [00:15:22] Oh, of course, then it's a great decision. I knew that all along. Of course, he should have done that. What a great coach.
Annie Duke: [00:15:28] Right, and all of a sudden the narrative becomes like, “Oh, he out coach Belichick, what an amazing job. And in some ways we already know this because Doug Pederson ran the Philly Special at the end of the second quarter of the Philadelphia-New England Patriots game. And it happened to work out. Nick Foles caught the ball for a touchdown in the end zone. And everybody talks about what a great play that was. But again, you can do the reverse and say, “Well, what if it had been intercepted?” Everybody would have said it was, it was a ridiculous decision. So it's like that the outcome acts almost like a gravity. Well, like it just pulls your ability to analyze this decision into that gravity well,and it's so completely overshadowed by the decision quality that it's really hard to see it any other way.
Jordan Harbinger: [00:16:13] So just being aware of bias isn't really enough because it's kind of like we can't unsee and illusion. Even if what we know we're looking at is indeed an illusion. We need measuring sticks, we need tools. You alluded to the math before, and poker players have to rely on these tools, these measuring sticks, and the bias of other people at the table at the same time because each hand, especially at the highest levels of poker, each hand is about the same price as a house.
Annie Duke: [00:16:39] Yeah, exactly. So I'm glad you referred to the visual illusion. So as I said it, even though I know the math of that Pete Carroll decision, and I understand that, that past call with actually a mathematically really found call. It's still hard for me because I know that the play didn't work out, and it's kind of the same as look at, everybody kind of knows that Müller-Lyer illusion, where you've got the two lines in and one has arrows pointing out and one has arrows pointing in. And even if I show you with a ruler, even if I walk up with a ruler and I show you that the two lines are the exact same time size, as soon as I take the ruler away and you look back at it, that one with the arrow's pointing out just looks longer and you can't unsee it.
[00:17:22] So let's call these cognitive illusions kind of work in the same way. It's very, very difficult on your own just through sort of sheer force of will to sort of undo this bias to say, “Okay, I know what the outcome is, but that's not going to affect the way that I analyze the decision.” We actually really try to fit that stuff together really well. And in fact, it's kind of interesting because just knowing about it doesn't help in the sense that it doesn't help you to know the visual illusion that's not like unsee it. But what's worse is that if the smarter you are kind of the worse it is, because the smarter you are, the easier it is to tell a story that makes a lot of sense to make it fit.
Jordan Harbinger: [00:18:05] Okay, interesting. So this blind spot bias, which namely that we have blind spots about our own bias gets worse if we're smarter because we think we can control our bias more because we're smarter or maybe because our rationalizations are more powerful, which is something that Tali Sharot alluded to when she was on the show as well.
Annie Duke: [00:18:22] That's exactly right. It's both. So it's we think we can overcome them more because now we know about them, and very often we'll incorporate the bias into the rational explanation. So we'll be like, yeah, you know I know I'm not to come into confirmation bias because, so we'll actually wrap it into the explanation. So I mean, if you think about it, think about it this way. Let's say you're trying to tell a story to support a belief that you have and you're using statistics in order to back yourself up. The more statistically adept you are, the better you're going to be at placing and dicing the statistics to support your story. And that's just kind of what we do, like the more sort of intellectually adept we are, the better the stories we can tell to kind of convince ourselves of these truths.
[00:19:05] So that's what becomes really problematic. So the thing is that I think is kind of interesting is that when you're talking about, well what if you could carry a rule around with you, so that you could always be measuring the lines? The answer is yes, that's really fantastic except that you kind of can't measure the lines yourself because of this problem of we're just very good at motivated reasoning. So motivated reasoning is just reasoning toward a conclusion as opposed to reasoning toward the truth, right? So in the case of resulting, it would be reasoning toward a way that makes the result makes sense.
Jordan Harbinger: [00:19:36] Okay, this makes sense, right? I understand that. And so we have to realize that we have imperfect information. We see the world incorrectly, even as we seek to narrow the gap between the information we have and the information we want. And that luck is always a factor. In fact, things like businesses, dating, those all have majority negative outcomes, generally speaking, you date more people than you marry ,for most of us anyway.
Annie Duke: [00:19:59] Well, hopefully.
Jordan Harbinger: [00:20:00] Hopefully, yeah.
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[00:22:46] So in thinking in bets, you recommend that we treat decisions as bets as alternative futures. And if we think in bets, we can sort of take these protective measures for situations where we know our own irrationality might get the better of us. Take us through this a little bit.
Annie Duke: [00:23:03] Yeah. So here's the issue is that any decision that we make, there's two factors that are complicating it, that are creating the uncertainty. I talked about chess a little bit earlier, but they don't exist so much in chest. So the first is luck, which we've talked a lot about. The other is hidden information. So hidden information is just stuff that we don't know. And going back to what you just alluded to as we're trying to gather information, just gathering information alone itself, getting more information alone isn't necessarily helpful because we're very, very good at discrediting information that disagrees with the conclusion that we're trying to get to. We're just good at sort of dismissing that. So that's not necessarily the most help. So what you want to do is actually recognize that there's risk in every decision that you make.
[00:23:52] And that while it may not be exactly like at a poker table where you're investing money in in a hand of cards, that's going to result in either you getting more money or less money at the end of the hand, that every decision involves risk. Because whenever you make a decision, you can't guarantee what the future is going to be. There is uncertainty in which future unfold, because even futures that occur only 1 percent of the time. If you just Pete Carroll, this question will actually unfold. So what that means is that any decision you make is really just the bet. So bets are decisions that are informed by the beliefs that you have. So that's just the information you have and the things that you believe and the things that you've learned and how you've interpreted that information. They inform the bet you make, which is then a prediction about the future, about what future is going to send you to the place of the greatest return.
[00:24:42] Not just in terms of money, but maybe you're investing in your health or your time or your happiness, and you’re looking for what future is going to result in and say the happiest you, or what future, as you're investing your time, what future is going to result in the healthiest you. Or maybe what future is going to give you the greatest return on your investment in terms of money. I mean, it could certainly be that. So once we kind of recognize that we recognize the uncertainty and the way that the future will turn out, what happens is that we realize, well we can't really be so certain of the way that that things will go. And we can't be so certain of the beliefs that we have because there's simply too much in an information in order to ever achieve 100 percent certainty really on almost any belief. And once you do that, it actually causes you to do bias.
Jordan Harbinger: [00:25:31] To sort of recap here how we think we form beliefs versus how we actually formed beliefs, right? We think we take in all the info and then we carefully calculate our beliefs based on this data. But we really don't. We just kind of taken a little bit of data form a belief really quickly and efficiently. And then later on, instead of taking the new data and then reforming and updating our beliefs, we try to shoehorn the new information into our existing beliefs, which is one reason why fake news works because it sort of uses some facts we already believe, and then adds fake ideas that jive with our existing beliefs. And this is a common persuasion tactic or deception tactic as well because we don't really update our beliefs. Most of us really don't. And it has to be a very manual process. And so I would ask you, and I think this is where you were going, how do we become a better belief calibrator in the first place?
Annie Duke: [00:26:22] Right. By recognizing the uncertainty in our belief. So one of the ways to do that is by really acknowledging that, that decisions are bet. So for example, in the news right now, there's a lot of pundits who are saying that the Democrats are going to take the house in November. So obviously, when they say the Democrats are going to take the house in November, they announced that with certainty. They say this is the way that the future is going to turnout. So let's say that you said that, and you said the Democrats are going to take the house in September, and my response to you was, well, do you want to bet? What would happen? What would you say?
Jordan Harbinger: [00:26:54] Then I would go, “Oh crap, do I really know what I'm talking about here?”
Annie Duke: [00:26:57] Exactly. So, so when I say, do you want to bet? What it does is it bubbles the uncertainty to the surface, right? It exposes the fact that we don't know how the future is going to turn out for sure. And that our beliefs aren’t a 100 percent certain or 0 percent certain. They're somewhere in between, right? So what that's going to do is it's going to cause you to do that vetting step on this belief that you have. So if we kind of go back to that, you know you're on the Savannah and you hear the rustling, you've run away. We just sort of believe there was a lion there and we'd go running away. We're not going back and doing a lot of vetting on that. On that belief, right? If you see a tree, there's a tree, you don't really vet it.
[00:27:37] But when we start to get into these abstract ideas like what you talked about, like with fake news, what happens is that this tendency we have for the type one error just to be like, okay, we believe it. We have a false positive, let's go. Gets us into a lot of trouble, so we formed these beliefs in a really haphazard way and then we don't vet them very well because once we have the belief that drives the way we process information because we sort of reason to the conclusion of supporting our own beliefs because being wrong doesn't feel very good,
Jordan Harbinger: [00:28:04] Right, we want to be right. So we figure out a way in which we can possibly do some gymnastics where, well, I wasn't totally wrong, so I was technically right. But if we use this belief calibration exercise that you're talking about and we communicate our uncertainty and percentages, then maybe our personal narrative no longer hinges on whether we are correct or not.
Annie Duke: [00:28:26] Right, so once I say want a bet? What that does is it causes you to sort of circle back and do this vetting. So it causes you to say like, well why do I believe this? Like what information am I using in order to come to this belief? How sure am I of the belief? What does Annie know that would cause her to challenge me to a bet that maybe I don't know. And ultimately what it does is, it causes you to ask the very important question that we normally don't ask of ourselves, which is why might I be wrong? So we spend a lot of time saying, this is why I'm right. That's what we spend most of our time doing, right? Like let me tell you why I'm right. Let me tell you why my belief is true.
[00:29:05] You get a bunch of people in a political conversation who say are of the same party. and all they're talking about is why they're right. And they're all nodding their head and agreeing with each other. Nobody's saying, well, why might you be wrong? The question just doesn't come up. And we certainly don't bring it up of ourselves. But once you sort of recognize this frame of, well, if a decision is a bet, then I've got to think about it like I'm vetting my time or my future on these beliefs that I have. Then all of a sudden you start to ask yourself those kinds of questions, like why am I wrong? And what that does is it does two things. The first thing is it causes you to think more clearly about how less might be involved, right? So no matter how sure you are, or you thought you were, that the Democrats were going to win the house in November. Once I challenge you to a bet, you start to think about, well, instead of saying they're going to win, what you say is, well, how often will they win? Which brings up this luck element, right?
[00:30:04] And then the other thing it does is it really highlights this hidden information problem. Because what you start asking yourself is what are the other pieces of information that might inform my belief? So it causes you to be really information hungry and go and start seeking out information. So what that means is that you're going to start calibrating your beliefs because you're going to be pretty information hungry. You're going to start thinking about why it might be wrong. You're going to start ask me for other people's opinions. And particularly, you're going to be very interested in opinions that disagree with you because those are actually going to be the most valuable. And that's going to allow you to become more open minded because in order to win a bet, you actually have to have the most accurate representation of the objective truth, which means that you have to be willing to be open minded to changing your beliefs. Otherwise you're going to get crushed in any kind of betting and in the long run.
Jordan Harbinger: [00:30:52] So this mitigates or counteracts this self-serving bias where we take credit for the good, we blame luck for the bad because doing so gives us this positive self-narrative, which is human nature. There's nothing really too surprising about that. But if we can sort of isolate the influence of skill versus the influence of luck and we're not doing this resulting thing where we're deciding which is which based on the outcome, then we start searching for information. We start to figure out what it is that we want to get, which is the truth. And I put that in air quotes because that's a whole philosophical discussion. But we want to get to the truth whereby we win the pot or we win the hand or we win the bet itself. So thinking in bets causes us to seek information regardless of whether or not it has an effect on our personal narrative in order to counteract the bias that makes us wrong so often.
Annie Duke: [00:31:41] I'm just going to like, I'm literally just going to send you out to tell people about my book, because that was very well put. And so I'm just going to be like, go ask Jordan. When you asked me what my book is about, go ask him. So exactly, so I mean look, let’s just go back to the car accident thing. Like you get in a car accident, you come back to me like everybody does and you're like, it wasn't my fault, it was the other guy's fault, so on and so forth. If I said to you, well, do you want to bet on that? Now, you're going to be like, wait a minute, maybe I don't want to bet on it because that at the accident report might not absolutely support what I'm saying. And what's important about that is, I know it seems like kind of a silly example, but what that's going to do is instead of just sort of like offloading this and being like, well that wasn't my fault, at which point you just go about your life, then you don't really change anything.
[00:32:27] If you think about it as if I'm challenging you to a bet which actually caused you to go in and examine, okay, well hold on. What were the luck elements and what were the skill element? You might actually change something significant in a good about the way that you drive, right? So, for example, you might acknowledge like, well yeah, the other guy hit me, but I was actually looking at my phone at the time. So it was technically his fault but I probably could have avoided it through some more defensive driving if I had been paying more attention like just as an example. Like that might be a place that you get, which then may cause you to say, put your phone in the glove box while you're driving as an example. So it can actually cause some good behavior changes.
[00:33:07] And I think that what it really comes down to is I think that there's a tradeoff to be made. Do you want to have things feel good in the moment so that you can sort of like affirm that your beliefs are true in the more in the moment, like okay, I believe the Democrats are going to take the house so I'm going to go talk to people who agree with me and we're all going to pat each other on the back and that feels pretty good in the moment. Or are you going to say, I want the best outcomes and the most learning for my life? Because if I understand that if I take a little bit of pain in the moment, which is maybe having to change a belief that I have, or take responsibility for a bad outcome, or maybe admit that a good outcome that I had was kind of mainly due to luck, which won't feel good now that that's actually what's going to allow me to learn. It's what's going to allow me to calibrate my belief so that they more accurately represents the objective truth. That's going to improve my decision making as I have a better acknowledgement of the luck elements in the game as well. It's going to improve the skill elements for me and that's going to get me better results in the long run.
[00:34:08] You know, the question is do you want to feel good now, or do you want to sort of improve the quality of your results in the long run? I personally want to choose to improve the quality of my results in the long run. So I'll take a little bit of pain right now.
Jordan Harbinger: [00:34:21] Support for the show comes from our friends at Rocket Mortgage by Quicken Loans. This is the mortgage company that decided to ask why. Why can't clients get approved in minutes rather than weeks? Why can't they make adjustments to their rate and term in real time? And why can't there be a client focused technological mortgage solution? Well, Quicken Loans answered all these questions with Rocket Mortgage. Rocket Mortgage gives you the confidence you need when it comes to buying a home, refinancing your existing home loan. It's simple. You can fully understand all the details. You can be confident you're getting the right mortgage for you. It's hard to make a mortgage interesting or exciting, but I will tell you, mortgage industry is one of those that should have had tech improve it a long time ago. And Rocket Mortgage is the only guys that it seemed to be able to get this together. Quicken Loans, no big surprise, pretty innovative company right there.
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Jason DeFillippo: [00:35:16] Equal housing lender licensed in all 50 States in NMLSConsumerAccess.Org number 3030.
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[00:38:17] On the flip side of self-serving buys, where we take credit for the good and blame luck for the bad, sort of extend what you're just telling me now, we tend to blame others for negative outcomes but not give them the credit for positive outcomes. And in thinking in bets, you're explaining that dismissing people as lucky hinders our learning because then we don't really learn from their results. Can you explain this a little bit? Sort of the other side of the same self-serving bias coin.
Annie Duke: [00:38:43] Yeah, so I think that it feels a little weird to people until you mentioned, well, let's pretend that we were playing a game against each other, right? So if we're playing a game against each other, say poker, and I know that I have this self-serving bias tendency, right? Like this is kind of how I'm built, so that when I win a hand, I want to be able to take credit for it. And when I lose a hand, I want to offload it to luck. Now we've discussed a lot why that's really bad for learning, right? Yeah. But maybe, maybe I could just like watch you play and you're like a genius that making decisions in business or the poker table or whatever it might be. The best parent I've ever seen and I can learn from you, except that think about at the poker table, if we play head to head in a hand and I lose the hand to you and I want to offload that loss to luck, I can't give you credit for playing well and still say that I got unlucky.
[00:39:43] I have to say that you won because of luck because I lost because of luck. So now what's happening is that the things that happened to you that are good, I'm saying or because of luck. On the flip side, if I win a hand and I want to take credit for it and say that I won because I played so well, I can't say that you lost because of luck. It has to be that you lost because you played more poorly than I did. What ends up happening is that where we have this pattern where for ourselves we say good results or because of scale and bad results or because of luck. For other people, we say good results are because of luck and bad results or because you deserved it. You can get back to the car accident situation, like basically when people are sort of evaluating others, and other people get into a car accident, they say, well that's because they're very bad drivers, right? Which they need to do because if I get in a car accident with you, it better be your fault by the way.
[00:40:36] So you can sort of feel this like you'll hear people talk like somebody will get a promotion and that where I get passed over and you get a promotion. And people aren't saying, man, you really, you really deserve that more than me, you've worked really hard for that, and you just frankly flat out did a better job than me. If you find someone who naturally says that you should probably hire them, but it's very hard, instead what they do is it's, oh, that person was smoothing the boss, or I deserved it more than them and they just got lucky. You can sort of come up with all sorts of reasons that don't really have to do with their skillfulness at the job, at least not in comparison to you. And what that means is that I'm not going to learn from you because I'm dismissing your good result as just having been something that wasn't in your control. So then, gosh, there's not so much to learn from it anymore.
Jordan Harbinger: [00:41:26] Right. So this becomes a dangerous set of beliefs when we start to rationalize that other people's victories are because of luck. But it's more uncomfortable to think that somebody outplayed us or did a better job. So we have to really be honest with ourselves and say, was this luck or did they do something right? And even when it is luck, there's a good chance that they were in the right place for that luck to happen because of at least some measure of skill.
Annie Duke: [00:41:50] Yeah, definitely. And I think that, I mean I think that this is where it becomes really important to remember that first thing that we started with that the quality of your life is really the sum of your decisions and luck, and that's true for everybody. And acknowledging the luck element in your life does not diminish the quality of the things that you have decided, because luck is just there for everybody. And in fact, you will be a much better decision maker for acknowledging the luck because when you acknowledge the luck in the way that things can turn out, for example, as you're doing scenario planning, you're imagining a broader set of possible futures. You're willing to acknowledge that you don't have control in that way over the way that the future turns out. All you have control over is the planning and the sort of estimating at what those scenarios might look like and trying to get some idea and it and continually improve it, your ability to do kind of two things.
[00:42:40] One is take a guess at the likelihood of different futures occurring, right? So get a really good view of what the futures might be. Start to get better at figuring out how often given a decision that you make a certain future might occur. And then make sure that you're very good at having plans in place, given any of those futures happening, right? So that you're prepared for the bad outcomes, so that you're not just reacting to them. So that you're not just complaining that you had bad luck and just sort of allowing life to kind of run over you in that way. Instead say, well, I knew that this was one of the possible outcomes that could occur and I already have a plan in place for how I'm going to deal with this so that you're not always being reactive. You're actually being proactive all the time. You know, I think that acknowledging luck is actually a really good quality. I don't think it diminishes the quality of your results at all.
Jordan Harbinger: [00:43:48] As long as we acknowledge it, not only for other people, but also for ourselves. That's the trick. Yeah, you can't just keep it on one side of the equation.
Annie Duke: [00:43:57] Right, you don't want to just sort of offload everybody else's good results to luck. You want to come down somewhere in between. I mean, look, anything that happened is some combination of luck and skill. So what you want to do is make sure that you're not coming down in a pattern where you're really heavily coming down on the luck side for good results for other people. Really heavily coming down on the skill side for bad results for other people. Really heavily coming down on the luck side for bad results for you and the skilled side for good results for you. What you want to do is be as much as possible trying to tease out, well what is luck and what is skill, and a pretty even handed way. No matter whether you're looking at somebody else or looking at yourself.
Jordan Harbinger: [00:44:41] So if we can never fully overcome bias, which we kind of know we can't. You recommend forming this truth seeking decision pod around yourself. Can you explain this? You devoted a lot of time to this or attention to this in thinking in bets. And I thought this must be really important to you. You're creating these pods where people tell you the freaking truth, whether you want to hear it or not. And you've got some rules set up for this, and I think this is useful. If you're not a poker player, it doesn't matter. This is kind of like a, this is a great way to evaluate whether or not you are making good decisions reliably.
Annie Duke: [00:45:17] Yeah, so I think if we go back to this, what you talked about, which is blind spot bias. We're just kind of blind to our own biases in general. We're pretty bad at spotting them for ourselves. The kind of interesting thing is that we're actually pretty good at spotting them and other people. So, we've all been in situations where we're in a conversation with somebody and they're just talking about how, oh, I got unlucky this, I got unlucky that I got unlucky this. Or like the last five people I've dated have all been jerks and I don't know why, they're just jerks. And you're of course thinking in your head like, yeah, well, maybe some of that is, is because of something that you did or the person comes and they've been in a car accident and they're like, it was completely not my fault. Then you're saying, “Oh, that sounds a little bias to me.” Or they're evaluating why they failed to close the last five sales or why, whatever it might be. And it's very clear to you that their reasoning in a bias way, because we can see other people more clearly than we can see ourselves in that way.
[00:46:20] So if we use that and we say, well look, if I know that I can see other people's bias better than I can see mine, well, it's probably also true that they can see my bias better than I can see mine. So what if we form a little group? What if a bunch of us get together and it only needs to be three people? If it's more, that's great, but as long as you have three people, you're fine. And we make an agreement that we're going to watch each other's back in terms of bias and we're going to demand that we as much as possible don't let each other get away with that kind of thinking. And we really try to encourage exploration of the truth.
[00:42:02] So let's say that we get together and we make the following agreement. We agree, first of all, that our goal is going to be accuracy. So, in other words, our goal is going to be, we want to be the least bias that we possibly can, and we want to try to develop as much as possible the most accurate representation of the objective truth. That doesn't mean that we want to be in an echo chamber and just like affirm everything that we already believe that would sort of anti-accuracy, right? That would just be confirmation. So what we want to do is agree that we're going to be exploratory in our thought. So that's number one, it's an agreement to accuracy. Number two is that we agree that we're going to hold each other accountable, so that when you start talking in a way that's biased and I challenge you on it, you aren't going to be surprised because you've agreed that I'm allowed to do that.
[00:47:52] And likewise, if you hear me talk in a bias way, you're going to challenge me to it because, because I've agreed that you're supposed to do that, that that's your job in this pod together, right? And then what we're going to do is, the third thing we're going to commit to is that we're going to be open to diverse viewpoints. So we want to have intellectual diversity. We don't want to be three people who are spending all of our time only listening to, for example, Rachel Maddow, right?
[00:48:25]It's good to listen to Rachel Maddow because that's a particular representation of the political spectrum. But you don't want that to be the only thing that you're listening to. So you want to listen to it, you want to challenge it, and you want to go and listen to other sources that disagree with Rachel Maddow. And then you want to try to discuss those in some kind of reasonable way, right? So hopefully, you're reading things that if you think about it from the political side, that you're looking at things that are shifting more left like the New York time. But you're also reading, for example the Wall Street Journal, and that you're opening yourself up to those kinds of viewpoints ao that you can have a reasonable discussion about these kinds of things. It’s that commitment to accuracy, holding each other accountable and commitment to diversity of points, and that's what you agreed to in the group.
Jordan Harbinger: [00:49:22] Yeah, this makes a lot of sense. Otherwise we can fall victim not only to our own bias but to confirmatory drift, which is when we seek those that are like us. The people that think like us and this sort of mirrors the Facebook filter bubble, which I've talked about on the show before, where when you click like on a news story, because it has to do with politics that you agree in, Facebook shows you more stories like that, and then pretty soon you're seeing only democracy now,and Rachel Maddow and MSNBC or whatever it is. And you think that other people who have different opinions must be in the minority because look, your news feed is just full of all this confirmatory drift. You just don't know what's happening. So it looks like everybody else who disagrees with you as some sort of weirdo outlier.
Annie Duke: [00:50:05] Yeah, I think that that's really important to point out that all groups aren't created equal and groups can make bias much worse. If you're in a group that has a confirmatory thought style, where the idea is like, let's just confirm each what each other believes. I mean, the example that I can give, you know from poker is you would hear these kind of pods of players where one player would say, “Oh my gosh, I'd have to tell you about this hand that I lost. I got so unlucky.” And then everybody would sort of say, “Oh that's, yeah, that's really horrible.” The other guy played so bad, yeah, you just got so unlucky. And then the next thing it would be their turn to say, and let me tell you about the hand that I lost and oh yes, I got so unlucky.
[00:50:52] And then everybody would sort of be taking turns just complaining about their bad luck, and nobody in the group would be challenging it. In fact, they would just be amplifying that, and so in that sense, what happens when you get in a group like that is it makes it worse because you're essentially hanging out with clones of yourself. And so you sort of like your ideas end up kind of on steroids. They end up becoming more extreme because they're getting reinforced by the people around you, right? But for me, I actually had a very kind of watershed moment in my very early on in my poker career where I went up to Eric Sydell. So Eric Sydell is one of the greatest poker players that ever lived. He's in the poker hall of fame. He has over 38 million dollar in tournament earning. And I had actually known him from the time I was 16 years old, but not as a poker player because I didn't start playing poker until I was 26.
[00:51:46] So this is someone who I knew I liked, I respected. I knew he was really smart, but I had an interacted with him as a poker player until this happened. So I'm in my late 20s at this point, and I went up to him and I started to do the thing. I can't believe I got so unlucky. I lost this hand. I'm so sad. Woe is me. And of course, I'm expecting him just to go, “Oh yeah, that's terrible. What bad luck.” But he didn't do that. What he said was, why are you telling me this? Do you have a question? Is there something like, are you asking me a question? Is there something for me to learn? Because I've gotten unlucky on a lot of hands too. And if you really think that you got bad luck on this hand, then there's nothing wrong with the decisions you made. So there's no point in discussing it, because it's not like it's going to be helpful to either of us.
[00:52:31] So what I thought was really interesting about that was that first of all he laid out that agreement we talked about pretty well. He said, “We have to have a commitment to accuracy,” right? So it has to be about truth-seeking here, about to trying to find out like what's luck, what’s skill, what's the best strategy, what's not, and you didn't ask me a question, you just told me it was luck. So he wasn't going to accept that. He certainly had that accountability piece because he was holding me accountable to that kind of thinking, right? And then he, he was expressing the diverse viewpoints. He's like, you have to be able to listen to things that aren't your natural tendency, that aren't necessarily the way that that you view things if you want to have a conversation with me.
[00:53:12] So what did that do? It did two really great thing. Now when I was talking to him, I was coming to him with questions, and obviously, he had been playing for a lot longer than I had and he was a much better poker player than I was. So when I came to him with questions and started trying to dissect the decisions and I understood that I had to be coming with this agreement in mind, it allowed me to learn lots and lots of things about poker. But I think in some ways the more important thing that it did was it changed the way that I looked at the game and process the game while I was playing, when I was away from Eric, because now when I was sitting at the table, I had to be looking for opportunities for hands that I could go and later discuss with Eric.
[00:53:55] So I couldn't be processing that in the game of like I lost it and I got unlucky, or I won and I'm so great. Instead I had to be saying, “Oh, where are the interesting hands? Where are the questions that I have? Where are the things that I don't understand? Where are the places where I feel like I need help calibrating my strategy?” Because those are the things that I want to take later to Eric to be able to discuss them with them. So it allowed me to be less biased when I was kind of sort of out on my own, because his voice was really kind of in my head. And then I think that what ends up happening is that our natural tendency is that the feel good that we get, that feel good moment is it wasn't my fault, or this great thing is because I'm so smart and that's where we kind of get that natural feel good from.
[00:54:39] But what Eric did was he shifted the feel good that I got, because I really wanted his social approval. So when I walked up to him and I asked him about a hand and you said, “Oh, that's a really interesting hand. Yeah, let's talk about that.” And he engaged with me and he really acted like I was his peer. Now that that was the reinforcement that I was getting, that was now the feel good that I was getting. So I think that that's really such a good demonstration of why a group can be so powerful for debiasing you and really helping you become a better decision maker.
Jordan Harbinger: [00:55:13] How do you recommend we find people for these types of groups? I mean you must know other professionals in your fields or other people that are doing the same activity. Is there a way that you vet these people to make sure they're going to be a good fit?
Annie Duke: [00:55:25] Yeah. You know, I think it's really just like look for people that you sort of feel like you click with, not necessarily because you hold the same views, but because you hear them making an effort, right? I think that you can find it.,you know, you can find people everywhere who are sort of clearly making an effort, who are clearly tried to question who are clearly saying, I'm not sure, I'm not sure if I'm right. Like what do you think? Can you give me input? As opposed to sort of declaration. Those people are obviously going to naturally fit into a group like this the best. And you can go and see if they want to sort of form either your friends and form a group that sort of working through decisions with your friends or an enterprise strategy group or whatever it might be.
[00:56:11] Now that's not to say that when people aren't sort of naturally this way that you can sort of test them out and see how they would respond to that because you can just ask them, “Hey, I'm thinking forming this learning group, like, do you want to be involved?” And they'll either say yes or no, like, but just go find those people. The other thing is that certainly if you're a leader, if you're in a leadership role, you can guide people into this. By helping them through exercises to see the value of this kind of thing. So, for example, if you're a leader, you can create within a team. Let's say that you're working a particular decision where you're trying to land on a strategy decision. You can actually take part of the team and say, okay, you're going to be a red team. And what you guys are going to do is you're going to go off and you're going to give come back with the absolute best argument as to why this strategy is a really bad idea.
[00:57:07] So you guys go and do that. The rest of us are going to work on why the strategy is a good idea. So what you've done is even though you haven't said to them, okay, this is now going to be the agreement of the group. You're kind of demonstrating to them what the value is because now they're going to come back, and they're going to be sort of like presenting their different opinions and they're going to see the value of dissent in that way. Another thing you can do is if two people disagree and they're really far apart on your team. You can ask them to switch sides of the argument and tell them that the other people on the team are going to actually, it's like a contest and they're going to determine who actually argued the other side the best. That kind of stops you from having strong arguments, and that helps people to open their mind and moderate their opinions.
[00:57:53] Other things that you can do is you can work decisions and you can ask the team about things without telling them what your own beliefs are, which is often very hard for them. And they'll very often say, “Well, what do you think?” And when you say, “No, I'm not going to tell you because I think that that's going to bias your decision making here, because you're going to know what I believe. And that's probably going to make you argue toward what my beliefs are. That's again sort of showing them as opposed to telling them what the value is of this kind of thinking. And then what will happen is they'll generally you'll get people to move more toward this kind of style.
Jordan Harbinger: [00:58:28] I love this idea. This reminds me of when I had Shaquille O'Neal, and he talked about his decision making panel of people that he trusted. It was like his lawyer, his accountant, his mom, his uncle, and one of his coaches, his manager, things like that. Because they all had sort of opposing agendas and so if they agreed that each opportunity he brought to them was good, he knew they actually had his best interest in mind. This of course is more for debiasing, but it's a similar concept and you could use the same group in theory for both of these activities, which I think is really interesting and very important, especially if you're in the fields of science or anything like this or poker of course, then this is very useful. If any time you're in a line of work where logical or decision bias can really salt up your game. You want to have something like this around you.
Annie Duke: [00:59:20] Yeah. I mean like think about this, for example, like let's say that you're a trial lawyer. And you won a case or you lost the case and you're trying to now go back and deconstruct the strategy to try to figure out like what pieces of those strategy do you think were really helpful? What do you think was due to luck? What are the things that you want to reinforce? What are the things that you might want to change in the future? Once you know whether you won or lost the case, we already know that that's going to really distort your ability to now analyze that decision. So this is a really good way to think about that sort of like you have these people in your life who are willing to work these decisions with you. Go talk to a couple of people, walk through the case with them and tell them that you want it, and then go talk to some other people. Walk through the case with them and tell them that you lost the case.
[01:00:12] First of all, you're going to be really amazed at how different their analysis is of the trial strategy when you've told one group that you want it versus one group that you lost it. But what that's going to do is essentially implement kind of what Shaquille O'Neal was saying, which is that people have different agenda. So once you kind of can get down to the truth, when you see that the people with the competing agendas are giving you the same kind of advice. So what that's going to do is you're going to look at sort of, okay, what are the people who think that I won the case thing. And let me sort of look at that, and then what are the people who think I lost the case thing, and let me look at that and now I can find sort of where there's overlap. So that that's going to help me get down into like what are the strategic things, what was due to luck, what was due to skill? And it's a pretty powerful exercise to do.
Jordan Harbinger: [01:00:57] There's so much in thinking in bets and I just want to wrap with this very, very useful practical tip, and it has nothing to do with poker, and it's just something that I noticed that you wrote about at towards the end of the book that I think is absolutely brilliant. You just speak a lot about a concept called temporal discounting. I don't want to get too in the weeds on that. People can grab that in the book, but you do use temporal discounting as a strategy for happiness and I've been experienced something like this very, very recently. We tend, when it comes to our emotions and happiness and things like that, we tend to watch the ticker. In other words, what's right in front of me right now, what's happening to me right now. We don't zoom out that far on the timeline. And I'm a recently, I've been a huge fan of zooming out on the timeline and thinking, all right, you're in this position now, but is it setting you up for success later?
[01:01:48] And if you zoom out, you tend to find that a lot of the things that you're doing are going to end up just fine later on down the line or so we hope so. You recommend using our past and future selves essentially to pull ourselves out of the moment to mitigate the emotional impact of a decision, which of course helps us avoid making emotion-based decisions that might be bad for us. Can you sort of explain what this means because I think this is so, so useful, especially for people going through a hard time because it's not just imagine a future in this is all okay. This is an actual strategy.
Annie Duke: [01:02:21] So I really appreciate you asking me about that. That's actually not something I've talked too much about in the podcast. Maybe because in occurrence at the end of the book.
Jordan Harbinger: [01:02:29] People don't make it that far. They're like “Oh well.”
Annie Duke: [01:02:31] Yeah, maybe they don't make it that far though. They're like, but this or that. It's actually really important. So ticker watching means, if you think about a stock ticker, right? It's kind of moving up and down every minute. The stocks going up, it's going down, it's going up, it's going down, it's going up, it's going down. And what we're not really good at as human beings, it's sort of just taking the aggregate, taking the average of how it does. So I think in the book, when you look at Berkshire Hathaway since its inception, it's just kind of this upward positive slope line where it just sort of goes up and up and up and up and up, and you're just kind of making money.
[01:03:08] But if you actually zoom in and you look at Berkshire Hathaway on a given day and you see what's sort of happening, you can see that this up and down, up and down, up and down, up and down. And what happens to us as human beings is that we're really kind of in the moment. We're looking at what the most recent trend is, and so we're getting kind of yanked around by the downswings and also frankly yanked around by the upswing. So the example that I give in the book, which I think people can feel pretty well, is let's say that you're on the side of the road and you've got a flat tire, and it's pouring rain and it's like 40 degrees out. And you realize that you don't have a Jack, and you have no spare. So you've called AAA and you're waiting for them to come.
[01:03:53] And of course, we all know AAA takes forever, and you're just like freezing cold on the side of the road and the rain with your flat tire on the side of a highway. And of course, what everybody's thinking in that moment is, “I have the worst life ever. Like why do these things always happen to me? I'm so unlucky, I'm so miserable.” And what's really interesting to me about it, it's like you could've gotten a promotion, like the biggest promotion of your life three days before, and you're not standing on the side of the road going, “My life's great, because I just got the biggest promotion I could ever imagine.” You're not like taking the average of the last week, right? Like that promotion doesn't even exist for you in that moment. Instead you're just I'm so miserable and this is so awful and why do these things always happen to me?
[01:04:38] So when I ask people to imagine in that spot is, okay, so imagine that you had this flat tire a year ago, and now I'm asking you today, a year later, how much do you think that that flat tire would have affected your overall happiness over the year?
Jordan Harbinger: [01:04:56] Zero.
Annie Duke: [01:04:56] Exactly. I actually argue maybe it would've helped it, because it's a pretty good story to tell at a cocktail party.
Jordan Harbinger: [01:05:04] Here you go.
Annie Duke: [01:05:05] So, I'm always thinking about cocktail party stories, but yeah, so like it's certainly not taking it down. Like it's not like a year goes by and you're like, I had a miserable year because I had a flat tire one day. It doesn't make any difference. But yet in the moment it feels like it's everything. So the question is how can you kind of zoom out so that you're looking at things more like that the long term trend of Berkshire Hathaway as opposed to what might be happening at 11:30 on a Tuesday? And what I argue is to do one of two things. Basically just when you're feeling that emotion and we can all feel that emotion, right? Because it's physiologically very powerful. Your heart is racing, your cheeks are flushing. You can feel yourself getting really upset, to take a moment, to really commit when you feel those feelings, to take a moment to ask yourself one of two questions, whichever one feels the best to you. The first is, well, if this had happened a year ago, how do I think I would feel about it today? Or you can say in a year, how do I think I'll actually feel about this flat tire? For me personally, it works better to say, well, if it happened a year ago, how do I think I would've felt? But that's just for me personally. I think for other people it just depends. Some people find it easier to say, well do I think that this will matter in a year?
[01:06:28] And I think that once you do that, it allows you to kind of step out of that emotional brain, right? It kind of turns your limbic system off, which is the emotional part of your brain. It allows it to shut down. And there's a very strong neurological reason for why it allows you to calm your emotions down, which is an order to imagine the past, or imagine the future. You have to engage your frontal cortex. It must be engaged. That's part of the circuitry that allows you to think about the future in the past. And it turns out that the frontal cortex has an inhibitory relationship with the limbic system.
[01:7:05] So when your emotions are lit up, it's hard for you to think. And we all have felt that, right? And when you're thinking really hard, it's hard for your emotions to light up. So basically, by taking that moment to step back and say, well, if this had happened a year ago, what do I think? Like, do I think it would really matter today? Like how would I feel about it now? It basically engages your frontal cortex and allows you to start getting your, your emotions to calm down.
Jordan Harbinger: [01:07:33]Perfect. So zoom out, avoid those emotion-based decisions that are bad for us long-term because you got to realize it's all just one long poker game, I suppose.
Annie Duke: [01:07:43] Yeah, I try to encourage people to try to think of themselves as a happiness stop, right? Like your goal is I've got these long-term goals and I want to execute on them. So that my life's happiness can look like the Berkshire Hathaway stock where it's just kind of got this upward trend. And in order to do that, I need to not be getting yanked around by what's happening in the moment. Because otherwise what would happen is that when Berkshire Hathaway has like a downswing, I just sell the stock, and it doesn't give me a chance to actually realize that that gain. So you don't want to be making these emotional decisions in the moment because it's not going to actually allow you to reach that long-term goal of just generally increasing the quality of your life's outcome.
Jordan Harbinger: [01:08:27] Annie, thank you so much. Very useful, very practical and really interesting. You've clearly done a lot of homework on this, which has shown, dare I say which shows in your results, but maybe, maybe I shouldn't be looking at your results to decide whether or not this is really worthwhile.
Annie Duke: [01:08:42] That's the paradox of results. If you've got enough of them, you can say something interesting. I don't know. I mean I feel like I've had a lot of luck in my life personally. I mean I really do. I had a lot of kind of lucky breaks along the way. But I mean it's the difference between, let me think, part of the problem when I say we're not very good aggregators, we tend to really focus on outcomes as they come, is that if you only flip a coin once, you can't say very much, but if you could step back and flip a coin 10,000 times, now you can actually say quite a bit. It's just that we're very bad at waiting around to collect enough data to sort of see what it looks like in the long run. We really make snap judgement based on individual outcomes that come in.
Jordan Harbinger: [01:09:25] Annie, thanks so much.
Annie Duke: [01:09:26] Thank you.
Jordan Harbinger: [01:09:28] It's a really good show, Jason. I love this book. Did you get a chance to check it out?
Jason DeFillippo: [01:09:32] Actually, we read this on the drive from Chicago to Los Angeles with me and show notes, Bob. And we loved this book. We devoured it in one day, and there's so much good stuff in this book. And I was first introduced to Annie on Celebrity Apprentice, and I'm so glad that we didn't talk about Donald Trump in this episode. I think we should get interview points for not mentioning Trump in this because I'm sure she's sick of talking about it.
Jordan Harbinger: [01:09:55] Yeah, I feel like it's a low hanging fruit when somebody is on a show like that. First for, I forget. I want to thank everyone who suggested her as a guest. I think the first person was Stu Silberman. Thanks Stu.
[01:10:04] A lot of other people chimed in on this one. And I know that she can be a little bit controversial. People were like, “Oh, do you know this person? She's bad in this way and she's bad in this other way.” And I dug around on this and I asked a lot of professional poker players that I know, including some other folks that may or may not be well liked in the poker community that are also well known. And I just sort of thought, you know what? There's a big nothing burger, and in addition, the book is really good. So I hope people who caught this aren't sort of soured by, well, years and years ago, this company she had folded. I feel like Jason, there's sort of this trend, especially in the poker community, that this is some vicious fans that really just have a very, it's like politics. Everyone's got very strong opinions one way or another on each of these players and it's a little bit overwhelming. I didn't see that coming. I was just looking at the content. But Holy moly, when I floated these ideas of show guests, we, it was like explosion in my face. I was not expecting that.
Jason DeFillippo: [01:11:03] So my stepdad was a semi-pro poker player for a long time, so we had poker on in the house all the time. And my mom who never played poker at all, had such strong opinions about all of the players, even though she's never met them, never interacted with them, but it's like professional sports, you just hate the opposing team. You find the people that you like, you hate the opposing team. Even though these are just people who are playing a card game. It's like, what the? Why? Why come on?
Jordan Harbinger: [01:11:29] It's a lot of conspiracy theory stuff. I noticed it's like a business will fail, which as we know happens, especially if you're just a celebrity that fronts for our business or a charity. You don't have your hands in every single goings on in the business and then it's like something happens and they go, “Oh well,” and then investors or shareholders lose money and they're like, you stole it. Like, no, I don't have it, what you’re talking about? Anyway, I digress.
[01:11:52] The book title is Thinking in Bets. And if you enjoyed this one, don't forget to thank Annie on Twitter. That'll all be linked up in the show notes for this episode, which can be found at jordanharbinger.com/podcast. Tweet at me your number one takeaway from Annie Duke. I'm @jordanharbinger on both Twitter and Instagram. And don't forget, if you want to learn how to apply everything you just heard from Annie, make sure you go grab the worksheets. Also in the show notes at jordanharbinger.com/podcast.
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[01:12:48] This episode was produced and edited by Jason DeFillippo. Show notes are by Robert Fogarty, booking back office and last minute miracles by Jen Harbinger. I'm your host, Jordan Harbinger. Throw us an iTunes review to get a chance. This is helping us get visibility and you know, it's just nice to read some nice stuff in there from time to time. If you don't know how to do that, jordanharbinger.com/subscribe, and if you're having trouble submitting, you've got to throw an extra random word or a number or something in your name. Because if your username is chosen already or taken already, it won't give you an error. It'll just not let you click submit.
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