Think In Bets

A memorable scene in John Wayne’s last film, “The Shootist” had the dying gunfighter, J.B. Books (Wayne), and the young Gillom Rogers (Ron Howard) talking, shooting and drinking.

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John Bernard Books: [Interrupts] Bat Masterson?
Gillom Rogers: Yeah, he said that a man has to have guts, deliberation and a proficiency with firearms.
John Bernard Books: Did he mention that third eye you better have?
Gillom Rogers: Third eye?
John Bernard Books: For that dumbass amateur. There’s always some six-fingered bastard that couldn’t hit a cow in the tit with a tin cup. That’s the one who usually does you in. But Masterson always was full of… sheep-dip.
So it sounds like Mr. Books the gunfighter was thinking the way poker players think: in bets. Former poker pro Annie Duke’s new book Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts, makes us think of our decision making not in a 50/50 way, or a zero percent–100 percent way, but account for those unknowns or as Books said, have “that third eye.”

Before being a poker pro from 1992 to 2012, Duke was working on a doctorate in cognitive psychology at Penn.
Gunfights and life are like poker, not chess. There are no unknowns in chess. Each player’s pieces are exposed to their opponent. On the other hand, there are unknowns in life and poker. You can play perfectly and lose, or stupidly and win. Too many people, including some poker players, Duke says, use results to determine if they made a good decision or a bad one. That’s a mistake she says. Luck may have determined your win and a continued repeat of that strategy or decision making will make you a loser in the long run.
At the same time a bit of bad luck can make a person too conservative in their future decision making.
She uses Pete Carroll’s game-ending decision in the 2015 Super Bowl to make her point. The Seahawks had the ball, second down, on New England’s one yard line with seconds left, down four points.

Everyone thought Carroll play call would be to hand the ball to Marshawn Lynch. But, he had his quarterback throw and the pass was intercepted, the game was lost, and Carroll was criticized from coast to coast.
Ms. Duke points out that Carroll was thinking in bets. She estimates there was only a two percent chance a throw would be intercepted, while if the pass was incomplete, there was still time to run the Beast Mode. A completion would win the game. Throwing the pass was the best percentage play. However, Carroll was judged by the results.

He was unlucky. The two percent chance (six-fingered bastard) beat the Seahawks. The people who criticized Carroll were in engaging in hindsight bias, which Duke points out is, “an enemy of probabilistic thinking.”
Duke tells us to be outcome blind and focus on process. For instance, if you focus just on wins in say, investing, you’ll never let your winning stocks run up in price. You’ll sell too quickly, taking many small profits, which won’t overcome your loses.
“To some degree, we’re all outcome junkies,” she writes, “but the more we wean ourselves from that addiction, the happier we’ll be.” While Ms. Duke doesn’t cite Hans Hoppe’s work on time preference, instead using the term ‘temporal discounting,’ she makes the point, “Our problem is that we’re ticker watchers of our own lives (focused on the short term).” We all should take the long view with respect to our happiness. “We would do well to view our happiness through a wide-angle lens, striving for a long, sustaining upward trend in our happiness stock.”

Poker players are a different breed, possessing the mathematical and psychological knowledge, in addition to the moxy, to bet a fortune on the turn of a card. Ms. Duke’s experience at the tables and insight will help you make better decisions and develop that “third eye.” LW

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