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How to make decisions like a poker player

162 points by fronterablog 4y ago

ricardobeat 4y ago
I'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.
- mettamage 4y ago
  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.
  - Raidion 4y ago
    Congrats, that's also thinking like a poker player. https://en.m.wikipedia.org/wiki/Kelly_criterion https://en.m.wikipedia.org/wiki/Kelly_criterion
    - mettamage 4y ago
      I love the Kelly criterion! I should reread it in order to see if I can make a better heuristic on optimal bet-sizing.
    - schmorptron 4y ago
      This is off-topic, but the mobile wikipedia link you posted is surprisingly nice to read on desktop. Seems a lot more pleasant than the wide lines on the desktop site.
      - layer8 4y ago
        This comment comes up repeatedly on HN. While I somewhat agree, I would also suggest to not maximize your browser window by default, to avoid wide lines. I usually have my browser window square-ish.
  - bbarn 4y ago
    > How about the following? I offer you an unfair coin flip advantage of 51% versus 49% Isn't that just baccarat without ties?
    - mettamage 4y ago
      I wouldn't know, I don't know many casino games.
  - bulbosaur123 4y ago
    > 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. I would even if it offered 50+% of getting killed. The small chance you strike a billion is worth the risk.
- necovek 4y ago
  I don't think the advice doesn't apply (they still claim Jane made a good decision, even though it led to a bad outcome: their point is that Jane should keep making good decisions, and not worry about bad outcomes because you can't control luck — if you mostly make good decisions, luck won't matter in the long run), it's just that it's pretty much useless because > "Probability of getting it — you cannot know the exact probability, but estimate it the best way you can (remember the bet with a friend)" is the hard part. Jane's case was clear (good decision), but what about Mike? Is there a proportion of his savings he should have invested that would have turned his "bad decision" into a "good one"? We have no signal to tell us what the probability of any cryptocurrency going up or down is over, say, 6 months (they've all gone up and down completely arbitrarily). Basically, finding the probability of any particular "success" (or actually, a failure) will easily tell you how much you should risk. And that's what it's like with the most of life decisions as well: we don't know the probability — not even the ballpark range. Likelihood that any one person you meet is going to be your life-long partner is basically nil: but we still invest in building relationships before fully committing to either decide they are not, or increase the probability that they will be. But we still do that relationship building investment based on very few signals (appearance, short chats and potentially what social circle someone is from if from a shared acquaintance).
  - kqr 4y ago
    There is no probability to know in the sense you mean -- probability is what we call our personal assessment of the situation, incorporating the (little) knowledge we have. So sure, there is your probability. Will you make money knowing it? That's the question you're alluding to. (As a concrete example: there is no "true" probability of rain six days from now. Either it rains or it doesn't. But a skilled meteorologist can give you a probability that would probably make you a little money over the climate average. Both the climate average and the meteorologist's assessments are correct probabilities. They just reflect different amounts of information.)
    - necovek 4y ago
      I was not referring to discreet outcomes at all (the old joke about everything having a 50% chance: it either happens or it does not). My point is that with the available information when making most life decisions, we usually have no idea at all of even the ballpark chances of something turning one way or another. Basically, the advice from the article is to incorporate luck into your estimations (both good and bad), and to use that to determine if a decision is good or bad, and then only go with good decisions (like a poker player would). And don't stress over bad (or good) outcomes if they were mostly due to really bad luck (i.e. something improbable has happened). But if you don't know if chances of something happening are 10% or 90%, how do you incorporate that into your decision making? What I am saying is that in life, we implicitely work to reduce the range (eg for a romantic partner, get to know them much better), but we've already decided to invest that much time with very slim chances of them turning out to be our lifelong partners.
SnowHill9902 4y ago
Then they won’t invite you to the table again.
morley 4y ago
I'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
- mettamage 4y ago
  > 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.
  - suzzer99 4y ago
    And what's your alternative? Cash under the mattress gets killed by inflation. Gold has its runs but usually underperforms. Bonds also get killed in a downturn.
    - mettamage 4y ago
      There might not be an alternative. However, the example is simply wrong (IMO) since it assumes that within a 30 year timeframe you'll have gained 8% on average (adjusted for inflation). If this would be true, thne yes it would be a decision-making trap. I think that's what morley is getting at. I'm arguing it's a tough sell that the S&P 500 works like that. If one would agree that the S&P 500 might not continue to give 8% ROI on average over a 30 year time frame, then one might consider doing something else with their money. For example, maybe it's more fruitful to invest in yourself to upskill even more rather than putting your money into the markets. I don't know I haven't researched it, I myself try to beat the market, it's a fun endeavour. The jury is still out.
dkjaudyeqooe 4y ago
I'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.
- mettamage 4y ago
  Could you give an example of this?
  - permalac 4y ago
    Not OP. I've seen many people getting a 3 year contract without having a clue of what they had to do, just buzz words. Public sector
  - Spooky23 4y ago
    People who describe themselves as super honest usually are self-deprecating. They tend to under value their knowledge and experience. The reality is, 95% of scenarios don’t require what is asked for, and stating your capabilities in the most generous way is the optimal decision. Just back it up with work.
    - mettamage 4y ago
      Underrated comment :) Upvoted and favorited.
    - dkjaudyeqooe 4y ago
      This is another example I'd use of a bluff: basically saying that you can do a job even though you've never done it before. If you're good and confident in your abilities, it all works out in the end. Everyone wants ridiculous experience but at the end of the day they're just trying to make sure you can do the job.
  - quadcore 4y ago
    he's bluffin
Raidion 4y ago
I'm a serious but hobbyist player with ~15k hands last month. The thinking like a poker player is mostly about being upfront about your risk tolerances and then having a culture supporting people who make the best risk adjusted decision, even if it doesn't work out. Expected Value is complicated because a 50% chance for $100 is the same as a 10% chance at $1000. It's the variance, not the EV that makes a lot of decisions hard. You (and businesses) need to decide what risk is acceptable, communicate that clearly. Reward people who manage risk in a way that's aligned with the business even when it doesn't work out. Get rid of people who are either take too big risks, and people who don't take risks.
- nogbit 4y ago
  Poker players use “pot odds”. The odds of winning a hand with a future card in order to estimate the call's expected value.
  - matchagaucho 4y ago
    Glad someone mentioned this. A 52 card deck with 3 Aces showing means there is only 1 Ace remaining (either in hand or deck). Future cards have significant impact on odds and betting.
  - myownpetard 4y ago
    Pot odds are just the ratio of the current bet to size of the pot. If you have not yet made your hand (e.g. only 4 spades) then you consider your drawing odds, which is the chance of making your hand. But say there is a pair on the board. Then you need to consider the probability that your opponent has or will make a full house, which would beat your flush if you were to hit. Likewise the probability that someone will have a higher flush than you. Analyzing this in aggregate is what gives you the expected value, which is what poker players consider. If you are simply playing a cash game with unlimited buy-ins. Then assuming your overall bankroll is sufficient, you will always make plays with positive expected value, even with high variance, because it is a continuous game and you expect the total return to be positive over sufficient iterations. If you are playing a tournament with a set number of places in the money, then you need to take into account the variance as well as the expected return because it is an episodic game and the types of plays you will make will depend on not just expected value of the single play but what place you are in currently and the number of players left.
seanhunter 4y ago
The non buzzwordy way to express this is to use some basic concepts in probability to make accurate decisions in the face of randomness. Specifically when making a decision you should think about the expectation[1] of the outcomes overall and some properties of the distribution. This requires you to think through what all the outcomes are and what you think their probabilities are. 1)All other things being equal you should generally prefer a higher expectation decision to a lower-expectation one 2)But you have to avoid decisions which have outcome distribution properties you can't tolerate. Most obviously you should generally ensure that your risk of ruin is zero because even if the probability is very low, that outcome is close to impossible to recover from so must be avoided. 3)For two possible strategies with similar-ish expectations in real-life terms you may well want to choose the one with the lower standard deviation of payoffs. Like say you're choosing between an offer at medical school to train to be a dentist and pursuing your long-shot idea of going to Hollywood and trying to make it as an actor. Imagine that when you look at the outcomes you estimate that in acting you have an insanely low probability of making it but a huge payoff if you do and in dentistry most people do pretty well but no-one's partying on superyachts with Jay-Z and Beyonce. Well even if the expectation of acting works out slightly higher, if they are close enough you should probably pick dentistry because the variance of outcomes is just way lower. If you think about your future as a monte carlo simulation you want to end up "ok" on most of the paths in the simulation even if that means giving up on some "lights out" outcomes. 4)most people agonise the most about decisions where the expectation is really pretty similar so it just doesn't matter that much either way. So don't beat yourself up about whether you made the right decision - just try to learn from the decision and move forward A huge mistake people make is to evaluate the quality of the decision based on the single possible outcome that crystalised into reality by actually happening rather than using the framework above. So resist that temptation and instead evaluate your decision based on whether you chose to maximise expectation while avoiding risk of ruin and excessive variance. [1]In the sense of being the weighted average of all possible payoffs where the weights are the probabilities and the payoffs are the utility of each outcome (usually just in cash terms).
beginnercounter 4y ago
The author sounds like a losing poker player. If my calling frequency is based entirely on pot odds, a good opponent would just start bluffing me out of every pot by increasing their bet size to a point where I can’t profitably call.
- in3d 4y ago
  But note that unexploitable, game theory optimal strategy in poker does not differ based on the opponent. It’s not just based on pot odds, but on the whole sequence of actions and cards. Still not a very good article, though.
  - cthalupa 4y ago
    There are plenty of bots that can play GTO poker better than any human, yet they are consistently losers online at higher levels. Hold 'em, at least, still ain't fully solved.
    - in3d 4y ago
      There are only two ways they can be losers: they are not GTO or the rake is higher than their winnings. Hold’em is pretty much solved (almost because approximations were used for bet sizing). It is possible that you can do better by deviating from GTO to better exploit bad players but that makes you vulnerable to be exploited yourself.
      - cthalupa 4y ago
        That's sort of a no-true-scotsman argument: They lose because they're not playing true GTO. Well, yes, but the point is that a fully GTO non-exploitable strategy is not solved for Hold'em. At least not outside of limit (and kinda no-limit) heads up play. https://arxiv.org/pdf/1805.08195.pdf https://arxiv.org/pdf/1805.08195.pdf (There is also an argument that Libratus actually just approaches Nash equilibrium and isn't fully there, since there are 1e+160 decision points in a heads up no-limit game, but compared to human players the difference is probably meaningless. ) The closest we have seen for larger games is Pluribus - https://www.science.org/doi/10.1126/science.aay2400 https://www.science.org/doi/10.1126/science.aay2400 - but the researchers there aren't even attempting to say they have solved 6max, just that they could be less exploitable than some of the best in the world. It is not particularly useful for online play because it does not try to counter variance or manage bankroll, and in further results it began to lose quite heavily as the pros adapted to it, losing 700BB over the 10k hands. By no means am I saying GTO-based strategy is ineffective - I'd probably be wasting my DTO subscription if I did think so ;) - but we're only part of the way there and the missing bits mean that you can't play perfectly unexploitable poker.
m12k 4y ago
I attended a talk by Richard Garfield, the game designer behind Magic: The Gathering. He made a point that adding randomness to a game can be a way to give it that property of "easy to learn, hard to master", and in turn make it easier for a community to grow around the game. When you add randomness, it becomes possible for novices to sometimes beat more experienced players through sheer luck. Contrast that with e.g. chess, where it doesn't take much skill difference before the most skilled player is almost certain to win. So randomness makes it easier for newcomers to get the occasional win, to keep them motivated while learning. But at the same time, randomness can make it harder to master, because the cause-effect-relationship between good decisions and good outcomes becomes blurred, like the article points out, defeating the trivial "reward function" we usually use for evaluating our performance. It takes a lot of discipline to say "I won, but it was luck, because I actually misplayed" and learn from that. And on top of that, high level play will become a game of analyzing and estimating probabilities, minimizing or maximizing variability depending on the strength of your position, basically embracing randomness as a gameplay element to be understood and sometimes even manipulated, despite being so intangible compared to most other gameplay elements. So used the right way, adding randomness to a game can both lower the barrier of entry, and raise the skill ceiling at the same time.
- CPLX 4y ago
  This is an interesting comment, and I'd add one other element to this, which is that randomness is way more realistic, if we think of games as something intended to represent the real world in some way. In real life the best marksman can get wiped out on the first day of a war, the best business strategist can get done in by a once in a generation disaster, and a hapless idiot in business can get an early big break. And so on. I feel like it feels much more natural and intuitive to us to play games that are a mix of skill and random chance.
  - kqr 4y ago
    Note that this is also why some people prefer games that don't have chance -- to experience what that is like.
  - pessimizer 4y ago
deleted 4y ago
[deleted]
DeathArrow 4y ago
As an amateur poker player, both at the table and in life, I can say that sometimes the biggest wins are the result of bluffing. It does not matter what hand an opponent has as long as you can convince him you have a better hand. Also, it is handy to recognize the situations when an opponent might bluff, so you can call.
- kqr 4y ago
  When you put it this way, it sounds like you are referring to plain deception, and not actual game-theoretic bluffing. Bluffing is about making non-optimal choices for the express purpose of making it more expensive for someone else to make optimal choices. If someone knows you're engaging in bluffing, that's fine, because by bluffing you're still forcing them onto non-optimal lines. On the other hand, you would prefer people not to know that you're engaging in deception.
totorovirus 4y ago
Well you can play millions of poker hands online. Life isn't like that. You have only ~30 years, and you have 30 * 365 = 10950 hands if we count each day as a hand. So what you need to work on is how you define "success" in life. Money is a high variance objective, whereas self-improvement is a low variance objective. I think finding a good balance of variance and tolerance to risk is a key to happiness.
- gammabetadelta 4y ago
  yep and in the long-run we are all dead
- angarg12 4y ago
  Slight offtopic, but this is why the "if you try hard enough you will succeed" advice sounds like BS to me. Even if the most dedicated entrepreneur can only try so many startups in their lives. If the odds are vanishingly small then success is far from guaranteed. Rejecting the role of luck in our outcomes is delusional, and people who support it have something to peddle (if only their own personal brand as thought leaders).
  - layer8 4y ago
    Yeah, it’s more like “if you don’t try hard you’re unlikely to be successful” combined with “you shouldn’t underestimate your chances of having some kind of success if you put in some grit”.
  - ryandrake 4y ago
    If you're good, your profit depends on the number of hands you get to play. And that number of hands you get to play is based on your bankroll. In the non-poker real world, most people maybe get to play one hand in life, and that’s it. One at-bat in a baseball game, to use a different analogy. You dump 20 years of savings into buying that laundromat, and that’s your only shot of making it. If we are really lucky we might get one or two more hands to play but that’s it for the vast majority of us. The rich get as many hands/at-bats in life that they want to play, so they will eventually win one. They can just serially start business after business until one of them lucks out and succeeds, then do talks for the rest of their lives on how to be good at business. Money buys you chances to make money.
photochemsyn 4y ago
The suggested step 2 in this article is 'calculate the expected value' . . . but isn't this going to be far more complicated in practice? See: https://en.wikipedia.org/wiki/Expected_value#Expected_values_of_common_distributions https://en.wikipedia.org/wiki/Expected_value#Expected_values... Probability distributions are complicated. Even determining what kind of distribution you are look at is difficult in many cases. Such distributions are also skewed in real life by things like insider information (in poker, that would be cheating). Even so the list is rather intimidating, assuming fair play: Bernoulli, Binomial, Poisson, Geometric, Uniform, Exponential, Normal, Standard Normal, Pareto, Cauchy If financial institutions (and crypto players) are using these kind of approaches to make their bets, then isn't the individual investor hopelessly outgunned in the vast majority of cases? Plus, not having a big pool of capital to absorb temporary losses makes that situation even worse. Investment capitalism, in other words, is just a casino for the uber-wealthy. Letting it rule the economy is a serious mistake.
- kqr 4y ago
  It's even more complicated than you think! The theoretical distributions you list are just that: theoretical. No real-world process generates values exactly according to a theoretical distribution. So you're not even dealing with a somewhat countable list of distributions -- everything has its own unique distribution! Fortunately, you don't need to model things exactly. A very rough approximation often gives me miles better results than plain gut feeling.
- passivate 4y ago
  Its not only complicated, its bordering on the impossible. They are simply hand-waving the "analyze your past decisions" part. Its extremely difficult to be introspective like that. You don't know why someone said "yes" to your deal, and not to someone else. You can guess, but there are so many micro things that fall in your favor when you're successful. Context matters, environment matters, and while we can capture our thoughts, we can't always capture the environment in which those events occurred, etc, etc. This is Harvard business review type stuff, excepting each person to accurately weigh and analyze all that is unrealistic. You're going to find examples of people who "read the book" or "attended the lecture" or "sought advice from X" and struck gold, and these examples provide buoyancy for such ideas. >If financial institutions (and crypto players) are using these kind of approaches to make their bets, then isn't the individual investor hopelessly outgunned in the vast majority of cases? When its your job, you're better at it compared to someone for whom its a hobby. And also, larger firms are able to manipulate the market which tilts the balance in their favor.
alexpotato 4y ago
I think I first heard this quote in one of Taleb's books (paraphrasing): In Ancient Greece, you were a hero for what you attempted to do and not for what you actually accomplished. This was because the Greeks considered the outcome to be primarily governed by the whim of the Fates. What you attempted to do was a function of your courage especially given that a big task could lead to a big failure outside of your control. I think of this quote often anytime the "outcome vs process" discussion comes up.
ericdykstra 4y ago
This article, like Duke's book, has a solid premise, but fails to provide any actionable advice aside from a simple risk/reward framework. When I read the book, I was hoping there would be more information about how to properly handicap various situations, but there just wasn't. Business and life decisions aren't as simple as calculating pot odds and outs. Anyone who has estimated a complex and unfamiliar programming task knows that the unknown-unknowns are the biggest part of any equation.
- theincredulousk 4y ago
  The largest fault in the practical (life) applications of probabilistic thinking is that estimating the odds in real-time is often impossible. Poker is a constrained environment where the odds are computable. It's a useful framework for thinking in various situations, but it is almost never going to reduce to an equation that can tell you some objectively correct answer or decision.
- kqr 4y ago
  If the main reason your effort estimations are off is that you don't allow for unknown unknowns, then that's easily fixable. After all, although we don't know which the unknown unknowns are, the possibility of them is known. And they do, in my experience, tend to increase the required effort by, say, 1--30 × depending on task complexity and familiarity. So even in the most complex and unfamiliar of tasks, you can adjust the upper end of your estimate by 30× and there you go! Unknown unknowns accounted for in your effort estimation. (Simpler or more familiar tasks require smaller adjustments to their upper end. Knowing how much adjustment is appropriate is a matter of deliberate practise.)
theincredulousk 4y ago
Is this site related to Knowledge Project / Farnam Street (fs.blog), a competitor, or just a ripoff??? I noticed because I read what seems to be the exact article there, with the same illustrations and everything on fs a couple weeks ago. Maybe it was a link in the newsletter to this article. Looking around there is a lot of overlap in content.
hnthrowaway0328 4y ago
I think life is way more complex than the poker. Yes the mindset could be useful, but mindset without proper data is not going to help a lot. Here is what I'm thinking: How about we go up a level, and accept that life is basically random and a lot is decided by luck (your gene is luck, your childhood education is also luck, these two pretty much decide a lot of things), as indicated in the article, but maintain a (meta) mindset that can manoeuvre around or even mitigate negative emotions? For example: - Realize that probability is useful in poker but not that useful in life, thus it is impossible to calculate mathematical expectation. - Learn to harden one against impulsive emotional acts (impulsive purchase, suicidal thoughts, etc.). - Learn to control one's material requirements and save some $$ for rainy days. - Keep connections active so when really bad days come maybe someone can get you out.
- kqr 4y ago
  Probability is incredibly useful in real life. But it takes deliberate practise. You can improve your "sense of uncertainty" and assign fairly accurate probabilities to things. This process is known as calibration. It also helps to know some probabilistic identities to derive the same probability multiple ways and see if there's consistency in your assessment.
- hervature 4y ago
  > Realize that probability is useful in poker but not that useful in life, thus it is impossible to calculate mathematical expectation. That's very backwards. Sure, "exact" expectation no. But you can add errors bars to all your estimates, that's the basis of statistics. Being able to correctly estimate things and adjust for uncertainty is incredibly useful in life. Unlike poker, you have time to actually punch things into a calculator and consider different scenarios if you want to be super diligent but most things can be intuited if you have a solid grasp of probability/statistics. To be super pragmatic, the whole thing with fake news and misinformation wouldn't exist if people just applied Bayes theorem. For instance, people will say something like P(vaccine is dangerous | bad pharma company) = 1 but then P(bad pharma) = 0 in the sense that Pfizer doesn't want to kill people.
SMAAART 4y ago
Life's a game of chance where we control the odds. Just this morning I was reading Scott Adams's How to Fail at Almost Everything and Still Win Big, and he was talking about making bets in Life that don't cost any money (they only cost time) and if we do this there's ~100% certainty of winning. Of course he's more eloquent and elaborate. It's also another way to look at "we miss 100% of the shots that we don't take".
freediver 4y ago
It would be interesting to do a decision--making comparison between a chess, poker and bridge player.
ricardobayes 4y ago
Also known as the 'risk-reward' ratio, a concept well-known to traders.
havblue 4y ago
A great concept of Texas holdem is that of chasing the pot: calling when the odds aren't in your favor. In other words, just because you've come this far it doesn't mean you have to keep putting money towards a hand you'll likely lose.

162 points by fronterablog 4y ago

I'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.

mettamage 4y ago
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.
- Raidion 4y ago
  Congrats, that's also thinking like a poker player. https://en.m.wikipedia.org/wiki/Kelly_criterion https://en.m.wikipedia.org/wiki/Kelly_criterion
  - mettamage 4y ago
    I love the Kelly criterion! I should reread it in order to see if I can make a better heuristic on optimal bet-sizing.
  - schmorptron 4y ago
    This is off-topic, but the mobile wikipedia link you posted is surprisingly nice to read on desktop. Seems a lot more pleasant than the wide lines on the desktop site.
    - layer8 4y ago
      This comment comes up repeatedly on HN. While I somewhat agree, I would also suggest to not maximize your browser window by default, to avoid wide lines. I usually have my browser window square-ish.
- bbarn 4y ago
  > How about the following? I offer you an unfair coin flip advantage of 51% versus 49% Isn't that just baccarat without ties?
  - mettamage 4y ago
    I wouldn't know, I don't know many casino games.
- bulbosaur123 4y ago
  > 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. I would even if it offered 50+% of getting killed. The small chance you strike a billion is worth the risk.
necovek 4y ago
I don't think the advice doesn't apply (they still claim Jane made a good decision, even though it led to a bad outcome: their point is that Jane should keep making good decisions, and not worry about bad outcomes because you can't control luck — if you mostly make good decisions, luck won't matter in the long run), it's just that it's pretty much useless because > "Probability of getting it — you cannot know the exact probability, but estimate it the best way you can (remember the bet with a friend)" is the hard part. Jane's case was clear (good decision), but what about Mike? Is there a proportion of his savings he should have invested that would have turned his "bad decision" into a "good one"? We have no signal to tell us what the probability of any cryptocurrency going up or down is over, say, 6 months (they've all gone up and down completely arbitrarily). Basically, finding the probability of any particular "success" (or actually, a failure) will easily tell you how much you should risk. And that's what it's like with the most of life decisions as well: we don't know the probability — not even the ballpark range. Likelihood that any one person you meet is going to be your life-long partner is basically nil: but we still invest in building relationships before fully committing to either decide they are not, or increase the probability that they will be. But we still do that relationship building investment based on very few signals (appearance, short chats and potentially what social circle someone is from if from a shared acquaintance).
- kqr 4y ago
  There is no probability to know in the sense you mean -- probability is what we call our personal assessment of the situation, incorporating the (little) knowledge we have. So sure, there is your probability. Will you make money knowing it? That's the question you're alluding to. (As a concrete example: there is no "true" probability of rain six days from now. Either it rains or it doesn't. But a skilled meteorologist can give you a probability that would probably make you a little money over the climate average. Both the climate average and the meteorologist's assessments are correct probabilities. They just reflect different amounts of information.)
  - necovek 4y ago
    I was not referring to discreet outcomes at all (the old joke about everything having a 50% chance: it either happens or it does not). My point is that with the available information when making most life decisions, we usually have no idea at all of even the ballpark chances of something turning one way or another. Basically, the advice from the article is to incorporate luck into your estimations (both good and bad), and to use that to determine if a decision is good or bad, and then only go with good decisions (like a poker player would). And don't stress over bad (or good) outcomes if they were mostly due to really bad luck (i.e. something improbable has happened). But if you don't know if chances of something happening are 10% or 90%, how do you incorporate that into your decision making? What I am saying is that in life, we implicitely work to reduce the range (eg for a romantic partner, get to know them much better), but we've already decided to invest that much time with very slim chances of them turning out to be our lifelong partners.

SnowHill9902 4y ago

Then they won’t invite you to the table again.

morley 4y ago

I'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

mettamage 4y ago
> 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.
- suzzer99 4y ago
  And what's your alternative? Cash under the mattress gets killed by inflation. Gold has its runs but usually underperforms. Bonds also get killed in a downturn.
  - mettamage 4y ago
    There might not be an alternative. However, the example is simply wrong (IMO) since it assumes that within a 30 year timeframe you'll have gained 8% on average (adjusted for inflation). If this would be true, thne yes it would be a decision-making trap. I think that's what morley is getting at. I'm arguing it's a tough sell that the S&P 500 works like that. If one would agree that the S&P 500 might not continue to give 8% ROI on average over a 30 year time frame, then one might consider doing something else with their money. For example, maybe it's more fruitful to invest in yourself to upskill even more rather than putting your money into the markets. I don't know I haven't researched it, I myself try to beat the market, it's a fun endeavour. The jury is still out.

dkjaudyeqooe 4y ago

I'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.

mettamage 4y ago
Could you give an example of this?
- permalac 4y ago
  Not OP. I've seen many people getting a 3 year contract without having a clue of what they had to do, just buzz words. Public sector
- Spooky23 4y ago
  People who describe themselves as super honest usually are self-deprecating. They tend to under value their knowledge and experience. The reality is, 95% of scenarios don’t require what is asked for, and stating your capabilities in the most generous way is the optimal decision. Just back it up with work.
  - mettamage 4y ago
    Underrated comment :) Upvoted and favorited.
  - dkjaudyeqooe 4y ago
    This is another example I'd use of a bluff: basically saying that you can do a job even though you've never done it before. If you're good and confident in your abilities, it all works out in the end. Everyone wants ridiculous experience but at the end of the day they're just trying to make sure you can do the job.
- quadcore 4y ago
  he's bluffin

Raidion 4y ago

I'm a serious but hobbyist player with ~15k hands last month. The thinking like a poker player is mostly about being upfront about your risk tolerances and then having a culture supporting people who make the best risk adjusted decision, even if it doesn't work out. Expected Value is complicated because a 50% chance for $100 is the same as a 10% chance at $1000. It's the variance, not the EV that makes a lot of decisions hard. You (and businesses) need to decide what risk is acceptable, communicate that clearly. Reward people who manage risk in a way that's aligned with the business even when it doesn't work out. Get rid of people who are either take too big risks, and people who don't take risks.

nogbit 4y ago
Poker players use “pot odds”. The odds of winning a hand with a future card in order to estimate the call's expected value.
- matchagaucho 4y ago
  Glad someone mentioned this. A 52 card deck with 3 Aces showing means there is only 1 Ace remaining (either in hand or deck). Future cards have significant impact on odds and betting.
- myownpetard 4y ago
  Pot odds are just the ratio of the current bet to size of the pot. If you have not yet made your hand (e.g. only 4 spades) then you consider your drawing odds, which is the chance of making your hand. But say there is a pair on the board. Then you need to consider the probability that your opponent has or will make a full house, which would beat your flush if you were to hit. Likewise the probability that someone will have a higher flush than you. Analyzing this in aggregate is what gives you the expected value, which is what poker players consider. If you are simply playing a cash game with unlimited buy-ins. Then assuming your overall bankroll is sufficient, you will always make plays with positive expected value, even with high variance, because it is a continuous game and you expect the total return to be positive over sufficient iterations. If you are playing a tournament with a set number of places in the money, then you need to take into account the variance as well as the expected return because it is an episodic game and the types of plays you will make will depend on not just expected value of the single play but what place you are in currently and the number of players left.

seanhunter 4y ago

The non buzzwordy way to express this is to use some basic concepts in probability to make accurate decisions in the face of randomness. Specifically when making a decision you should think about the expectation[1] of the outcomes overall and some properties of the distribution. This requires you to think through what all the outcomes are and what you think their probabilities are. 1)All other things being equal you should generally prefer a higher expectation decision to a lower-expectation one 2)But you have to avoid decisions which have outcome distribution properties you can't tolerate. Most obviously you should generally ensure that your risk of ruin is zero because even if the probability is very low, that outcome is close to impossible to recover from so must be avoided. 3)For two possible strategies with similar-ish expectations in real-life terms you may well want to choose the one with the lower standard deviation of payoffs. Like say you're choosing between an offer at medical school to train to be a dentist and pursuing your long-shot idea of going to Hollywood and trying to make it as an actor. Imagine that when you look at the outcomes you estimate that in acting you have an insanely low probability of making it but a huge payoff if you do and in dentistry most people do pretty well but no-one's partying on superyachts with Jay-Z and Beyonce. Well even if the expectation of acting works out slightly higher, if they are close enough you should probably pick dentistry because the variance of outcomes is just way lower. If you think about your future as a monte carlo simulation you want to end up "ok" on most of the paths in the simulation even if that means giving up on some "lights out" outcomes. 4)most people agonise the most about decisions where the expectation is really pretty similar so it just doesn't matter that much either way. So don't beat yourself up about whether you made the right decision - just try to learn from the decision and move forward A huge mistake people make is to evaluate the quality of the decision based on the single possible outcome that crystalised into reality by actually happening rather than using the framework above. So resist that temptation and instead evaluate your decision based on whether you chose to maximise expectation while avoiding risk of ruin and excessive variance. [1]In the sense of being the weighted average of all possible payoffs where the weights are the probabilities and the payoffs are the utility of each outcome (usually just in cash terms).

beginnercounter 4y ago

The author sounds like a losing poker player. If my calling frequency is based entirely on pot odds, a good opponent would just start bluffing me out of every pot by increasing their bet size to a point where I can’t profitably call.

in3d 4y ago
But note that unexploitable, game theory optimal strategy in poker does not differ based on the opponent. It’s not just based on pot odds, but on the whole sequence of actions and cards. Still not a very good article, though.
- cthalupa 4y ago
  There are plenty of bots that can play GTO poker better than any human, yet they are consistently losers online at higher levels. Hold 'em, at least, still ain't fully solved.
  - in3d 4y ago
    There are only two ways they can be losers: they are not GTO or the rake is higher than their winnings. Hold’em is pretty much solved (almost because approximations were used for bet sizing). It is possible that you can do better by deviating from GTO to better exploit bad players but that makes you vulnerable to be exploited yourself.
    - cthalupa 4y ago
      That's sort of a no-true-scotsman argument: They lose because they're not playing true GTO. Well, yes, but the point is that a fully GTO non-exploitable strategy is not solved for Hold'em. At least not outside of limit (and kinda no-limit) heads up play. https://arxiv.org/pdf/1805.08195.pdf https://arxiv.org/pdf/1805.08195.pdf (There is also an argument that Libratus actually just approaches Nash equilibrium and isn't fully there, since there are 1e+160 decision points in a heads up no-limit game, but compared to human players the difference is probably meaningless. ) The closest we have seen for larger games is Pluribus - https://www.science.org/doi/10.1126/science.aay2400 https://www.science.org/doi/10.1126/science.aay2400 - but the researchers there aren't even attempting to say they have solved 6max, just that they could be less exploitable than some of the best in the world. It is not particularly useful for online play because it does not try to counter variance or manage bankroll, and in further results it began to lose quite heavily as the pros adapted to it, losing 700BB over the 10k hands. By no means am I saying GTO-based strategy is ineffective - I'd probably be wasting my DTO subscription if I did think so ;) - but we're only part of the way there and the missing bits mean that you can't play perfectly unexploitable poker.

m12k 4y ago

I attended a talk by Richard Garfield, the game designer behind Magic: The Gathering. He made a point that adding randomness to a game can be a way to give it that property of "easy to learn, hard to master", and in turn make it easier for a community to grow around the game. When you add randomness, it becomes possible for novices to sometimes beat more experienced players through sheer luck. Contrast that with e.g. chess, where it doesn't take much skill difference before the most skilled player is almost certain to win. So randomness makes it easier for newcomers to get the occasional win, to keep them motivated while learning. But at the same time, randomness can make it harder to master, because the cause-effect-relationship between good decisions and good outcomes becomes blurred, like the article points out, defeating the trivial "reward function" we usually use for evaluating our performance. It takes a lot of discipline to say "I won, but it was luck, because I actually misplayed" and learn from that. And on top of that, high level play will become a game of analyzing and estimating probabilities, minimizing or maximizing variability depending on the strength of your position, basically embracing randomness as a gameplay element to be understood and sometimes even manipulated, despite being so intangible compared to most other gameplay elements. So used the right way, adding randomness to a game can both lower the barrier of entry, and raise the skill ceiling at the same time.

CPLX 4y ago
This is an interesting comment, and I'd add one other element to this, which is that randomness is way more realistic, if we think of games as something intended to represent the real world in some way. In real life the best marksman can get wiped out on the first day of a war, the best business strategist can get done in by a once in a generation disaster, and a hapless idiot in business can get an early big break. And so on. I feel like it feels much more natural and intuitive to us to play games that are a mix of skill and random chance.
- kqr 4y ago
  Note that this is also why some people prefer games that don't have chance -- to experience what that is like.
- pessimizer 4y ago

deleted 4y ago

[deleted]

DeathArrow 4y ago

As an amateur poker player, both at the table and in life, I can say that sometimes the biggest wins are the result of bluffing. It does not matter what hand an opponent has as long as you can convince him you have a better hand. Also, it is handy to recognize the situations when an opponent might bluff, so you can call.

kqr 4y ago
When you put it this way, it sounds like you are referring to plain deception, and not actual game-theoretic bluffing. Bluffing is about making non-optimal choices for the express purpose of making it more expensive for someone else to make optimal choices. If someone knows you're engaging in bluffing, that's fine, because by bluffing you're still forcing them onto non-optimal lines. On the other hand, you would prefer people not to know that you're engaging in deception.

totorovirus 4y ago

Well you can play millions of poker hands online. Life isn't like that. You have only ~30 years, and you have 30 * 365 = 10950 hands if we count each day as a hand. So what you need to work on is how you define "success" in life. Money is a high variance objective, whereas self-improvement is a low variance objective. I think finding a good balance of variance and tolerance to risk is a key to happiness.

gammabetadelta 4y ago
yep and in the long-run we are all dead
angarg12 4y ago
Slight offtopic, but this is why the "if you try hard enough you will succeed" advice sounds like BS to me. Even if the most dedicated entrepreneur can only try so many startups in their lives. If the odds are vanishingly small then success is far from guaranteed. Rejecting the role of luck in our outcomes is delusional, and people who support it have something to peddle (if only their own personal brand as thought leaders).
- layer8 4y ago
  Yeah, it’s more like “if you don’t try hard you’re unlikely to be successful” combined with “you shouldn’t underestimate your chances of having some kind of success if you put in some grit”.
- ryandrake 4y ago
  If you're good, your profit depends on the number of hands you get to play. And that number of hands you get to play is based on your bankroll. In the non-poker real world, most people maybe get to play one hand in life, and that’s it. One at-bat in a baseball game, to use a different analogy. You dump 20 years of savings into buying that laundromat, and that’s your only shot of making it. If we are really lucky we might get one or two more hands to play but that’s it for the vast majority of us. The rich get as many hands/at-bats in life that they want to play, so they will eventually win one. They can just serially start business after business until one of them lucks out and succeeds, then do talks for the rest of their lives on how to be good at business. Money buys you chances to make money.

photochemsyn 4y ago

The suggested step 2 in this article is 'calculate the expected value' . . . but isn't this going to be far more complicated in practice? See: https://en.wikipedia.org/wiki/Expected_value#Expected_values_of_common_distributions https://en.wikipedia.org/wiki/Expected_value#Expected_values... Probability distributions are complicated. Even determining what kind of distribution you are look at is difficult in many cases. Such distributions are also skewed in real life by things like insider information (in poker, that would be cheating). Even so the list is rather intimidating, assuming fair play: Bernoulli, Binomial, Poisson, Geometric, Uniform, Exponential, Normal, Standard Normal, Pareto, Cauchy If financial institutions (and crypto players) are using these kind of approaches to make their bets, then isn't the individual investor hopelessly outgunned in the vast majority of cases? Plus, not having a big pool of capital to absorb temporary losses makes that situation even worse. Investment capitalism, in other words, is just a casino for the uber-wealthy. Letting it rule the economy is a serious mistake.

kqr 4y ago
It's even more complicated than you think! The theoretical distributions you list are just that: theoretical. No real-world process generates values exactly according to a theoretical distribution. So you're not even dealing with a somewhat countable list of distributions -- everything has its own unique distribution! Fortunately, you don't need to model things exactly. A very rough approximation often gives me miles better results than plain gut feeling.
passivate 4y ago
Its not only complicated, its bordering on the impossible. They are simply hand-waving the "analyze your past decisions" part. Its extremely difficult to be introspective like that. You don't know why someone said "yes" to your deal, and not to someone else. You can guess, but there are so many micro things that fall in your favor when you're successful. Context matters, environment matters, and while we can capture our thoughts, we can't always capture the environment in which those events occurred, etc, etc. This is Harvard business review type stuff, excepting each person to accurately weigh and analyze all that is unrealistic. You're going to find examples of people who "read the book" or "attended the lecture" or "sought advice from X" and struck gold, and these examples provide buoyancy for such ideas. >If financial institutions (and crypto players) are using these kind of approaches to make their bets, then isn't the individual investor hopelessly outgunned in the vast majority of cases? When its your job, you're better at it compared to someone for whom its a hobby. And also, larger firms are able to manipulate the market which tilts the balance in their favor.

alexpotato 4y ago

I think I first heard this quote in one of Taleb's books (paraphrasing): In Ancient Greece, you were a hero for what you attempted to do and not for what you actually accomplished. This was because the Greeks considered the outcome to be primarily governed by the whim of the Fates. What you attempted to do was a function of your courage especially given that a big task could lead to a big failure outside of your control. I think of this quote often anytime the "outcome vs process" discussion comes up.

ericdykstra 4y ago

This article, like Duke's book, has a solid premise, but fails to provide any actionable advice aside from a simple risk/reward framework. When I read the book, I was hoping there would be more information about how to properly handicap various situations, but there just wasn't. Business and life decisions aren't as simple as calculating pot odds and outs. Anyone who has estimated a complex and unfamiliar programming task knows that the unknown-unknowns are the biggest part of any equation.

theincredulousk 4y ago
The largest fault in the practical (life) applications of probabilistic thinking is that estimating the odds in real-time is often impossible. Poker is a constrained environment where the odds are computable. It's a useful framework for thinking in various situations, but it is almost never going to reduce to an equation that can tell you some objectively correct answer or decision.
kqr 4y ago
If the main reason your effort estimations are off is that you don't allow for unknown unknowns, then that's easily fixable. After all, although we don't know which the unknown unknowns are, the possibility of them is known. And they do, in my experience, tend to increase the required effort by, say, 1--30 × depending on task complexity and familiarity. So even in the most complex and unfamiliar of tasks, you can adjust the upper end of your estimate by 30× and there you go! Unknown unknowns accounted for in your effort estimation. (Simpler or more familiar tasks require smaller adjustments to their upper end. Knowing how much adjustment is appropriate is a matter of deliberate practise.)

theincredulousk 4y ago

Is this site related to Knowledge Project / Farnam Street (fs.blog), a competitor, or just a ripoff??? I noticed because I read what seems to be the exact article there, with the same illustrations and everything on fs a couple weeks ago. Maybe it was a link in the newsletter to this article. Looking around there is a lot of overlap in content.

hnthrowaway0328 4y ago

I think life is way more complex than the poker. Yes the mindset could be useful, but mindset without proper data is not going to help a lot. Here is what I'm thinking: How about we go up a level, and accept that life is basically random and a lot is decided by luck (your gene is luck, your childhood education is also luck, these two pretty much decide a lot of things), as indicated in the article, but maintain a (meta) mindset that can manoeuvre around or even mitigate negative emotions? For example: - Realize that probability is useful in poker but not that useful in life, thus it is impossible to calculate mathematical expectation. - Learn to harden one against impulsive emotional acts (impulsive purchase, suicidal thoughts, etc.). - Learn to control one's material requirements and save some $$ for rainy days. - Keep connections active so when really bad days come maybe someone can get you out.

kqr 4y ago
Probability is incredibly useful in real life. But it takes deliberate practise. You can improve your "sense of uncertainty" and assign fairly accurate probabilities to things. This process is known as calibration. It also helps to know some probabilistic identities to derive the same probability multiple ways and see if there's consistency in your assessment.
hervature 4y ago
> Realize that probability is useful in poker but not that useful in life, thus it is impossible to calculate mathematical expectation. That's very backwards. Sure, "exact" expectation no. But you can add errors bars to all your estimates, that's the basis of statistics. Being able to correctly estimate things and adjust for uncertainty is incredibly useful in life. Unlike poker, you have time to actually punch things into a calculator and consider different scenarios if you want to be super diligent but most things can be intuited if you have a solid grasp of probability/statistics. To be super pragmatic, the whole thing with fake news and misinformation wouldn't exist if people just applied Bayes theorem. For instance, people will say something like P(vaccine is dangerous | bad pharma company) = 1 but then P(bad pharma) = 0 in the sense that Pfizer doesn't want to kill people.

SMAAART 4y ago

Life's a game of chance where we control the odds. Just this morning I was reading Scott Adams's How to Fail at Almost Everything and Still Win Big, and he was talking about making bets in Life that don't cost any money (they only cost time) and if we do this there's ~100% certainty of winning. Of course he's more eloquent and elaborate. It's also another way to look at "we miss 100% of the shots that we don't take".

freediver 4y ago

It would be interesting to do a decision--making comparison between a chess, poker and bridge player.

ricardobayes 4y ago

Also known as the 'risk-reward' ratio, a concept well-known to traders.

havblue 4y ago

A great concept of Texas holdem is that of chasing the pot: calling when the odds aren't in your favor. In other words, just because you've come this far it doesn't mean you have to keep putting money towards a hand you'll likely lose.