How to make decisions like a poker player
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How to make decisions like a poker player
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Re: How to make decisions like a poker player
#2I'm struggling to see how the advice applies to their own examples. Take Jane, who took a great offer but was hit by a recession:
- potential reward of the decision: checks out
- probability of getting it: 95% if you already have the offer in hand
- resources (time/effort/money) to bet to get the reward: not significant
Then there is 'imagining a bet' and 'analysing your past failures'. The first one might lead you to the 'what if the company goes bust?' question, but would that really help in the decision making or be a reason to not accept the better job? The unlucky event is a recession, not this particular company doing badly (i.e. no signals to see).
If a recession hits, there is no reason to believe the consumer goods co. would fare any better and her old job more secure. I'd really like to see the 'poker player' mindset at play but this just feels like a complete miss.
Re: How to make decisions like a poker player
#3I'm struggling to see how the advice applies to their own examples. Take Jane, who took a great offer but was hit by a recession: - potential reward of the decision: checks out - probability of getting it: 95% if you already have the offer in hand - resources (time/effort/money) to bet to get the reward: not significant Then there is 'imagining a bet' and 'analysing your past failures'. The first one might lead you t…
I think like a poker player, I skimmed the article. What they seem to fail to mention is that variance is important as well. In poker you need to play at least 10000 hands in order for variance to average down a bit. 10000 hands is still very little.
So, if you have a 95% chance of going 10x that's great, but the question is: can you handle a 5% chance of having being potentially ruined for at least a decade? If not, then you cannot take the bet despite the fact that EV is super high.
Put more extremely, if I offer you a 99% chance to take make one billion dollars (legally) and a 1% chance of being killed, would you take it? I definitely wouldn't.
How about the following? I offer you an unfair coin flip advantage of 51% versus 49%, we're going to flip 1 million times, each time the bet is 1 dollar. Would you take it? I would.
The heuristic that poker teaches is: take a lot of small bets with huge upside with little to no downside. It doesn't matter how slim the chance of winning is. Slightly more nuanced (still a heuristic): the chance should be about as big as your volume of chance-taking. Say, you take 10000 chances, then the slimmest chance you can take (on average) is 1/10000.
Re: How to make decisions like a poker player
#4I'm struggling to see how the advice applies to their own examples. Take Jane, who took a great offer but was hit by a recession: - potential reward of the decision: checks out - probability of getting it: 95% if you already have the offer in hand - resources (time/effort/money) to bet to get the reward: not significant Then there is 'imagining a bet' and 'analysing your past failures'. The first one might lead you t…
I think like a poker player, I skimmed the article. What they seem to fail to mention is that variance is important as well. In poker you need to play at least 10000 hands in order for variance to average down a bit. 10000 hands is still very little. So, if you have a 95% chance of going 10x that's great, but the question is: can you handle a 5% chance of having being potentially ruined for at least a decade? If not,…
Congrats, that's also thinking like a poker player.
Re: How to make decisions like a poker player
#5Earlier quoted context omitted.
I think like a poker player, I skimmed the article. What they seem to fail to mention is that variance is important as well. In poker you need to play at least 10000 hands in order for variance to average down a bit. 10000 hands is still very little. So, if you have a 95% chance of going 10x that's great, but the question is: can you handle a 5% chance of having being potentially ruined for at least a decade? If not,…
Congrats, that's also thinking like a poker player. https://en.m.wikipedia.org/wiki/Kelly_criterion
I love the Kelly criterion! I should reread it in order to see if I can make a better heuristic on optimal bet-sizing.
Re: How to make decisions like a poker player
#6Then they won’t invite you to the table again.
Re: How to make decisions like a poker player
#7I've also heard this topic referred to as "results-oriented thinking," which is generally what you don't want: you shouldn't judge a decision based on its result, but on the information you had at the time.
The key to this idea, which I don't see covered in the blog post, for making future decisions is that you shouldn't let past bad luck affect your future decisions. If you lose a positive EV bet, it shouldn't shy you away from making the same bet again.
Some examples off the top of my head about decision-making traps people could make: - Continuing to bet at the roulette wheel to "regain" what you've lost - Not going to a well-rated restaurant again just because you had a random bad experience - Not investing in ETFs after being burned by past downturns - Playing MTG and not burning them out just because they had a counterspell last game
Re: How to make decisions like a poker player
#8I've also heard this topic referred to as "results-oriented thinking," which is generally what you don't want: you shouldn't judge a decision based on its result, but on the information you had at the time. The key to this idea, which I don't see covered in the blog post, for making future decisions is that you shouldn't let past bad luck affect your future decisions. If you lose a positive EV bet, it shouldn't shy y…
> Not investing in ETFs after being burned by past downturns
Helloooo Japan!
ETFs are great, it will never happen to the US economy :)
In other words, based on market behavior from multiple countries, it is definitely a possibility that ETFs won't return much in a period of 30 to 40 years.
Re: How to make decisions like a poker player
#9I've found that frequently bluffing in life pays off. Generally you don't get caught very often and the cost of getting caught generally isn't very high, even if the stakes are. You have to be prepared to take your way out of sticky situations though.
Re: How to make decisions like a poker player
#10I've found that frequently bluffing in life pays off. Generally you don't get caught very often and the cost of getting caught generally isn't very high, even if the stakes are. You have to be prepared to take your way out of sticky situations though.
Could you give an example of this?