The Habits of Highly Effective Risk-Takers
Episode Stats
Summary
Nate Silver s experiences operating in a world of competition and risk led him to explore what his fellow gamblers, as well as hedge fund managers, venture capitalists, and many other kinds of maverick types do differently than other people. Amongst the findings Nate shares in his new book, On the Edge: The Art of Risking Everything, are the 13 habits of highly effective risk takers.
Transcript
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Brett McKay here and welcome to another edition of the Art of Manliness podcast.
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You may know Nate Silver as an election forecaster, but he's a poker player as well.
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And his experiences operating in a world of competition and risk led him to explore what
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his fellow gamblers, as well as hedge fund managers, venture capitalists, and many other
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kinds of maverick types do differently than other people. Amongst the findings Nate shares in his
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new book, On the Edge, The Art of Risking Everything, are the 13 habits of highly effective
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risk takers. Nate and I discuss some of these habits today on the show, including exercising
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strategic empathy, avoiding the pitfalls of resulting, taking a razor fold stance towards
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life, and more. After the show's over, check out our show notes at awim.is slash risk takers.
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All right, Nate Silver, welcome to the show. Thank you so much, Brett. So people probably
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know you as the election forecaster, but what they might not know is you've had a career
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as a professional poker player. Tell us about that. Yeah. So I was one of the, at that point,
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relatively young kids, I guess I was in my late twenties during the poker boom era, which
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was launched with Chris Moneymaker, who was this amateur who won the world tours of poker
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in 2003 and the boom in internet poker. So I went to college, had a consulting job out
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of college that frankly, I kind of hated, but a friend at the workplace was getting a poker
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game started and being a competitive guy. I started practicing online, playing like free
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poker and like free poker doesn't really work, right? No one has an incentive to actually play
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well. So somehow I wrote myself into like actually depositing money at one of the more janky
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online sites and somehow just started winning money. I think the reason why is that there
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were so many new players to the game that there were a lot of fish as we call them poker kind
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of suckers, kind of the blind leading the blind being slightly better than mediocre at this point
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in time was still enough to be relatively good relative to the field. And before long, I was
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staying up all night to play and kind of taking a taxi to work and getting in half an hour late
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and barely knew how to make the printer work and things like that. And so I, I left my consulting
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job to, to play poker and then help run a site called baseball prospectus with sports forecasting.
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So you got a new book out called on the edge and you talk about how your career in election
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forecasting, polling, and gambling are connected by a world that you call the river. What is the river?
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So the river refers to a community of like-minded people. It's basically people that have
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two characteristics. One is that they're really analytical. So they're kind of in the quantitative,
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maybe more money ball mentality. They're trying to put numbers on things. They're trying to estimate
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things, but that's paired with being really competitive. So risk-taking, they are sometimes
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a little bit contrarian. They kind of are lone wolves who make their own way in life. And this
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skill set, which is pretty unusual, if you look at kind of personality typologies, then oftentimes people
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who are quantitative are kind of risk averse and, you know, there may be accountants or something where
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they're play it pretty safe. But when you take these two elements and combine them, the risk-taking
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genes, so to speak, and I think it probably is partly genetic with the analytical ability,
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that can take you pretty far or lead to ruin potentially too. But those types of people,
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I think are for better or worse, the people who tend to end up on the tails of the bell curve,
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the people that sometimes in venture capital or poker or investing or different things or sports
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betting, that's a powerful skillset in today's economy. Yeah. You talk about, you go into different
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areas where you see these two qualities. So gambling is one, poker playing, sports gambling,
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but you also look at the world of VC funders as well.
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Yeah. I mean, if you talk about people who are extremely competitive, I talked to a lot of the
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top venture capitalists in Silicon Valley and they love to compete, even though they might not need the
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money anymore, even though they've already been really successful. They often have a chip on their
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shoulder. That's one thing that also defines people in this world is they tend to be often pretty
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self-motivated, right? They're not the people who are going to say, okay, I made a good living.
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I'm going to go retire in Tuscany or something. They want to keep battling and keep fighting,
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sometimes to their own detriment. I mean, I think you can certainly be too competitive for your own
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good. And although most people are probably too risk averse, you'll meet people in the book who are
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way too far on the other extreme. So what you do in this book is you take readers on a deep dive
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into the world of the river. So you talk to gamblers, poker players, hedge fund managers,
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VC guys, you talk to the cryptocurrency guy that just blew up that a Sam Bakeman freed guy.
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And you do this to help readers understand how these people who are deeply analytical,
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highly competitive, have a high tolerance for risk and uncertainty, how they operate.
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But you have this great section and it was sort of an interlude into this tome of a book you wrote
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that I really enjoyed. It's called the 13 habits of highly successful risk takers. And I want to focus
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on this because I thought it was, I thought it was really useful. And in this section,
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you expand out from talking to people in the traditional river community. So who did you
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talk to, to figure out the habits of highly successful risk takers?
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So in this section of the book, most of the people, like I mentioned, are like quantitative types,
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but I also want to talk to people who take physical risks and different types of risks outside of the
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kind of finance crypto betting space. So I talked to literally an astronaut. Catherine Sullivan was one of the
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first woman astronauts. She was picked out of like literally 10,000 people, a class of like a dozen.
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So she's quite a remarkable person. I talked to a former NFL player named Dave Anderson.
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I talked to a guy who was literally an explorer and like climbs mountains. He's been in outer space
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and things like that. He's taught at the Top Gun Academy. And what I found is that they actually had
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more in common with the quantitative risk takers than, than I thought. The ability to be cool under
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pressure. If you're up 29,000 feet on some mountain or you're literally in outer space, then, then you can't
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panic when you're facing stress. You have to be capable of making good decisions under pressure. And they
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have courage too. I mean, Catherine Sullivan was an astronaut at the time of the space shuttle
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Challenger disaster. And, and before each mission for NASA at that time, you actually talk to your family
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beforehand and kind of say a conditional goodbye. And she would say, look, they're putting me on a rocket ship
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outer space. This might not end well. It hasn't always ended well with Apollo or Challenger or
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things like that. So I just want to let you know that like, if something bad happens and I knew the
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risks I was taking and I was doing this for the, for the love of exploration and the good of my
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country and everything else. So they're very impressive, very impressive people. Yeah. Well,
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let's talk about that first habit you found that these people who take physical risk have in common
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with the people in the river, these analytical, highly competitive people. And you mentioned that cool
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under pressure. And you talk about this in the book, like what happens to our minds and bodies
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when we engage in risky behavior. And you talk about your own experience, you know, phenomenologically
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what, what you experienced. So tell us that what happens to our minds and bodies when we're taking
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part in risk. So look, we are trained through life times and, you know, eras and eras of evolution
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to have a stress response. If you're playing poker in a $1, $2 game, and the stakes are low to you,
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then, you know, you're just not going to have the same stress responses when you're playing like a
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$50, $100 game, or you're at the final table in some major tournament. And the key is learning
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how to handle that different operating system that you may find yourself suddenly engaged with.
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Because it's not, by the way, being totally cool and not experiencing any stress. If you look at,
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for example, I talked to a guy who was actually a golf instructor of all things and has worked with
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professional golfers. And he said that like, you know, you might think of golf as a relatively laid
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back sport, but PGA golfers have an elevated heart rate when they're playing, even when they're just
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kind of walking from, you know, the fairway to the green or something like that. They're pumped up
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and the athletes that have learned to deal with the stress can actually get, I mean, in the zone.
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It's actually a real thing like Michael Jordan talked about back in the day where things are
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elevated. You have heightened perceptual awareness. You know, your heart rate is faster. Some people
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are kind of, kind of love that environment. They love dealing with the pressure. They feel like the
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world is moving more slowly and they're thinking clearly. And so it's a rare trait, but that is
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common between people who take financial risks and people who take physical risks. If you look at
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traders, for example, on wall street, when there's some big news that breaks about a stock or a position
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they're taking, their heart rates get elevated to their testosterone production changes and things
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like that. This is partly why you can have bubbles in the market is that people are experiencing
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physiological responses, but look, I'm mostly a mind guy, mostly a quantitative guy, but our bodies
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give us important feedback too. And by the way, if you look at poker players now, not all of them,
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but a lot of them are, are pretty self-conscious about their health routines. They understand that being
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under stress is taxing on your body and paying attention and actually watching what your opponents
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are doing is actually quite, quite taxing. Poker is a physical game, at least played in real life
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and not on the internet and things like that. And so look, I'm not saying it's like the healthiest
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population in the world, but we're a long way removed from the days of like donuts and whiskey
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at the tables. Yeah. What do you do to manage your stress response when you're playing a high stakes
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game? I mean, there's some stuff that's kind of basic. I mean, I think breathing deeply. I think
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one thing that's important is like slowing down a bit. I mean, I tend to be a pretty quick decision
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maker about lots of things, but slowing down and saying, I'm going to take my time and be in a
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rhythm with these decisions and really kind of watch what my opponents are doing. That's pretty
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important. I mean, I think also you always want to be playing for stakes that, that you can afford
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to lose. You don't want to go on tilt because your whole life has been upended by, by a poker game.
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So you have to kind of find the right pressure point where you feel real stress, but you also have
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like a safety net underneath you. And that, that is true in poker and outer space or something. You
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don't have a complete safety net or climbing a mountain in the Himalayas. You don't have a complete
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safety net, but in poker, it's kind of just through trial and error, learning that pressure point where
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you play optimally. What does it mean to go on tilt? That's a phrase you see in poker a lot.
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What does that mean? So going on tilt means responding emotionally in an unhelpful way.
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Okay. The most common form of it is if you take a bad beat and then you get really angry about that
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and then you punt off, there's a term we'd use the rest of your chips, but there are other types of
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tilt. There's boredom tilt. If you're not getting a lot of hands, you may start to overplay certain
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things. There's entitlement tilt. Sometimes if you win a lot of money, you feel like you're God's gift
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to poker. All of a sudden, notwithstanding the fact he probably just caught some good lucky cards
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and you get very mad when all of a sudden your luck reverts back to the mean. And I've seen a lot
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of guys late in tournaments or in high stakes cash games where they'll start out really well at the
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beginning of the night, build up a big stack and then lose a pot via a bad beat or, or they get
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outplayed or something. And then they go on tilt. And all of a sudden the guy who was a chip leader is
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on the rail out of the tournament 45 minutes later, people really struggle with literally
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counting their chips before it's time to cash them in. And then feeling like they are now lower
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than the kind of peak they experienced before and going into a downward spiral. It's, it's a real
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thing. And this can happen in other areas besides poker. I mean, a business person who's like, Hey,
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I'm on this hot streak. I'm awesome. And I, they just take these unnecessary risks and it just blows up
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in their face. It reminds me, I'm watching, um, Lawrence of Arabia right now. Have you seen that
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movie? I have not. Okay. Well, there's this part where he, he actually starts to think that he's
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like God basically, that he's unbeatable. And then he gets, he just gets his butt kicked. Um,
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so he went on tilt. Yeah, no, I look, I, you know, people can have, I think a, a God-like complex
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sometimes, right? If you're, if you're, if you're Elon Musk and you wake up and you're like the,
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you know, richest person out of 50 billion people or however many it is that have ever lived, then
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it's probably a little bit weird. You're probably pinching yourself and being like,
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is this real life or what's happening exactly? And dealing with outlier success is something that
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I think also is something that, that is hard, hard. I mean, obviously it's probably you'd love
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to have, but that doesn't mean it's, it's a straightforward thing to deal with either.
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Yeah. Like a good takeaway there is like, you have to be cool under pressure and pressure could be
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when your things are going against you, but also when things are going for you,
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that's a different kind of pressure as well can cause you to do dumb things.
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For sure. I mean, it's how you do in the high stakes moments. And by the way,
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one theme I heard over and over again is that you don't want to try to be a hero, right? So the
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ex NFL player I talked to, he said, well, look at, look at when people, he's a big sports science guy.
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Look at when players get injured in the NFL. It's often in the high pressure moment. So like
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interceptions, fumbles, kick returns, punt returns, where there's a lot of leverage and a lot of
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things happening at once. And guys get out of their routines. They try to do something heroic
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with 80,000 fans screaming at them or something. And they wind up overextending themselves and not
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executing the basic A, Bs and Cs and getting hurt. If you can just execute your baseline training
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and game plan under pressure, like that's going to get you further than 95% of people. And yeah,
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there probably are a few people who experience some elevated in the zone maverick level kind of
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performance, but just executing under difficult circumstances and not thinking too far ahead
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goes a long way. Yeah. You have this mantra that this guy talked about. Don't be a hero. Just do
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your job. I think that's really useful. Just do your job. Absolutely. So another habit you talked
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about, you mentioned successful risk takers have courage and you describe this courage as residing
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between competitiveness and confidence. Why is courage the word you settle on to describe this
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stance towards life? Look, I talked to a lot of people in this book who, who are making their
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own way in life, right? You know, one of the best poker players I talked to is named Maria Ho. She,
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by the way, is uncanny, fantastic at like reading people. She is able to have conversations with
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people to get very natural streaming conversations while she's in the middle of a poker hand, which is
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actually pretty difficult. It's a different part of your brain that you're using. And, you know,
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she grew up in an Asian American family where I don't mean to stereotype too much, but by her own
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words, her parents want her to become a doctor or something like that. And she was like this,
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right? She kind of bribed her way into like her college dorm poker game by bringing over a bunch
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of beer because all the guys were ignoring her on poker night and things like that. And, you know,
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she's someone who has made her own way and is not afraid of anybody and goes toe to toe and often
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wins against the best players in the world. So I do think there's an element here of, of courage. It's also,
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you know, overconfidence is very risky when you're doing something like playing poker,
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you know, it's a difficult game. You're playing as other skilled opponents. And so,
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you know, part of it is, is being self-aware, but I do think some of it comes down to
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being willing to take chances that have what I call a positive expected value, meaning it won't
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always work out. But over the long run, if you made that decision a hundred times that you would
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wind up in a better place more often than not. And a lot of people are very risk averse. I mean,
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look for many years, I mean, people just barely eked out a living and the average human lifespan
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was 39 years or whatever. And, and you'd get a disease and it would kill you or something like
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that. And now we live in a world where there's a lot more abundance, but people still can have like
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a, a scarcity mindset and do things that they think are risk averse, but actually put them at
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more risk of falling or failing out of success in the long run, because they're too unwilling to make
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a change at a time when that would be good for them. You know where I've seen that idea of being
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risk adverse actually set you up for more harm? Skiing. So whenever I first learned, I, I went really
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slow and I was being really way too careful and I was just falling down all the time. Finally, my
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instructor told me you'd actually do better and are safer if you go faster. Like being too careful is
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what messes you up and makes you fall down. So he said, you just got to kind of go for it. And it,
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and it's true. Absolutely. Or another context where it comes up is in, I talked to HR McMaster,
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who's a former, whatever, multi-star general. And he says in war, you can't just stand still,
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right? If you're in the middle of a battle, you often face situations where you have to charge
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forward or retreat. And it sometimes can be hard to know whether charging forward or retreating is
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better. Sometimes it's better to kind of literally or proverbially fold your hand, so to speak.
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But standing there and being indecisive is by far the worst of those three actions a lot of the time.
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And people freeze, you know, fight or flight is actually not the worst response because freezing
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in the face of stress is often the option that gets you in the most trouble.
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Yeah. You talk about this idea of having a chip on your shoulder. A lot of these people you talk to
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have got a chip on their shoulder. Why do you think they do? Why do they kind of walk around
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with this idea that they're kind of the underdog and they've got something to prove?
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So a lot of them have some degree of childhood trauma. I mean, Elon Musk had a difficult childhood.
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Jeff Bezos was adopted. I mean, it's usually, you know, it's people who are good at milking
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grievance or challenges sometimes, but they're people that feel like they have to,
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they constantly have to prove themselves and maybe, maybe go overboard, frankly. Right. I mean,
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we are, by the way, talking about the people who are extreme outliers, very far on the tail of the
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curve where they keep doubling down over and over again, kind of even when they've already won,
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which may not be healthy necessarily. But, you know, in a world of 8 billion people,
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if you're talking about like the, you know, 100 richest people in the world or 100 most successful,
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then they, they both have to be lucky and good and insanely risk taking. These are not like trust fund
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kids who are just kind of living out their life in Tahiti or something. They're people that often were
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upper middle class. They had certainly some degree of privilege, often a considerable degree,
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but they kept gambling and keep gambling even when they've already won.
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When have you seen this chip on your shoulder become a hindrance? Like what are some people
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where you've seen that become a problem for them?
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I mean, Sam Beckman-Fried is one example of somebody who was willing to take insane levels
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of risk. I mean, obviously he also had issues with fraudulent premises for, for his company and how
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who's using user funds and FTX, but he's someone who almost had a borderline death wish. And I'm
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using that term deliberately because, you know, I mean, he kind of literally told me, this is before
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he got into trouble in terms of bankruptcy and, and being a convicted felon on seven felony counts,
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whatever it is and everything else. Right. He told me that if you're not willing to risk ruining your
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life, that you're not taking enough risk. And that's the wrong message. We're talking about
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calibrated, calculated risk-taking and courage is a part of it because most people left to their
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own devices are too risk averse, but he's someone who goes way too far in the other direction.
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You know, his parents are academics who have a particular philosophy of life. I'm not sure if
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he had trauma or whatever else, you know, he's somebody also who didn't have like a good
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network of friends to help bring him in. So he ran his business out of the Bahamas,
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which are kind of further removed than you'd think from the rest of society. I mean,
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he's in a compound on the other side of the Island from where most of the tourists are.
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His girlfriend's running his hedge fund. His parents work for him. So he doesn't have any
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buddies to like, to say, Hey man, you're going a little too far with this stuff. And that can be
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very dangerous. This seems less of an example, having a chip on your shoulder and more just hubris.
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It seems like Sam Bakeman Freed had this idea of himself as this wonder kid and he developed almost
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this God complex, like he could never lose. And that just made him really make decisions that just kept
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on snowballing. And then he went on tilt, went on mega epic tilt. Yeah. Okay. So another happy
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you talk about is successful risk takers have strategic empathy. Then you talked to HR McMaster
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about this. What is strategic empathy? It's the ability to see the world or the quote unquote game
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in your opponent's shoes. And this is important. I mean, I think one habit people have is to treat
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other people as what in video game terms you call non-player characters, people that don't have
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agency or don't have the ability to make decisions on their own. But when you're in a really competitive
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field, whether it's venture capital or poker or sports betting or, or the military battleground,
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you're dealing with actually some of the smartest and brightest people in the world. And they are
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capable of adapting and adjusting to the situation. And so understanding how they think and kind of,
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to use a more technical term, what the equilibrium is when everyone's playing their best and like,
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where can you hold your ground? Where can you attack? But, you know, we're not talking about the most,
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touchy feely people in the world, Brett. It's like not that type of empathy,
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but saying, if I were in my opponent's position, how would I play this poker hand, for example,
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and then reciprocating that back in your hand and going through the iterations of that.
00:21:20.500
That's like basically what like computers do when they're playing poker. They simulate back and forth
00:21:24.520
one person's action, then people mix adjustments and they adjust and adjust and adjust until you get
00:21:29.240
to some optimum point. In a very competitive world, that's how it works. There usually isn't free
00:21:34.080
money just lying on the ground for taking, you have to, you have to, you know, play your best
00:21:37.940
and assume your opponents are playing their best also. Yeah. You kind of be a little, you have to
00:21:42.040
have the empathy of a psychopath almost. It's like, it's not that like you're like feeling like,
00:21:46.600
oh, I feel bad that they feel bad. It's like, well, I'm just, what would this person do so I can
00:21:50.400
kick their butt? Yeah. I don't know if I quite call it being a psychopath. I mean, I do think in poker
00:21:56.180
in particular, like the emotional empathy part probably is good too. You know, the other day I was playing
00:22:02.500
a fairly high stakes game and my friend had been having a rough night and I thought I could bluff
00:22:09.380
him out of a pot where he was probably supposed to call and much to his credit, it didn't work.
00:22:14.280
He had the presence of mind to know that like, hey, I know that I'm having a rough night. I know
00:22:19.300
Nate knows that. Therefore, I know that Nate may be trying to exploit that by getting me to fold a
00:22:24.160
pretty good hand. Therefore I call. And so he won, he won a lot of money from me. So that's a good
00:22:28.440
example of him one upping me in strategic empathy. Yeah. One way you can develop the strategic
00:22:33.060
empathy is practice. We did a whole podcast about this, but a red teaming where you try to figure
00:22:38.260
out how to beat yourself. Like how would the competition beat you and like simulate that?
00:22:43.020
We're going to take a quick break for your word from our sponsors.
00:22:50.000
And now back to the show. Okay. Another habit you talk about is that risk takers
00:22:54.400
are process oriented and not results oriented. And you talk about this in the book. We've also
00:23:00.640
had Andy Duke on the podcast talk about this idea of resulting for those who aren't familiar. What
00:23:05.440
is resulting in poker and why is it bad? Yeah. So in poker, generally speaking,
00:23:11.340
if you can get your money in as like a 60% favorite six zero, you're pretty thrilled with that.
00:23:16.480
That leads to a very high return on investment in the longterm. You're still going to lose 40% of the
00:23:21.780
time. In fact, some players might say, I'll take a 53, 47 edge. You'll lose almost half the time.
00:23:26.940
The edges are thin and very competitive games like poker or sports betting. So in poker, you kind of
00:23:32.100
learn this the hard way because you'll have many hands where you get all in and you have like three
00:23:37.500
of a kind and your opponent has a flush draw and you're supposed to win that hand about 65% of the
00:23:42.640
time. But if you play thousands of hands, the 35% comes up a lot. And so, you know, you did
00:23:46.880
everything right and you, you can't control the turn of the cards. So you, you learn that through
00:23:52.640
example. But, you know, I think we all have to acknowledge that like luck plays a role in our
00:23:58.440
lives. Being in the right place at the right time counts for a lot, almost by definition. If you're
00:24:03.020
a very successful person, you probably both, both are lucky and good. I mean, you're probably lucky
00:24:07.640
to be born into a country at a time where there's a lot of economic opportunity and you're lucky to
00:24:12.300
have your, your health and your support network and things like that. And so, so appreciating that
00:24:17.560
I think is a healthy mentality as well. Yeah. So resulting is judging the quality
00:24:22.400
of a decision by its outcome. And that can lead to faulty thinking because, you know, sometimes
00:24:26.960
things turn out well for you, but it's not because of anything you did. You just got lucky,
00:24:32.140
but also something can go badly, but you actually made a good decision. It just didn't go your way for,
00:24:37.580
you know, whatever random reason. Yeah. I mean, you see this, I'm a, I'm a
00:24:41.320
Detroit Lions fan. You see, you know, Don Campbell was criticized for aggressive play calling and
00:24:47.220
going for it on fourth down, but like, you know, you have to take risk and you have to make the
00:24:51.660
best decision that you can in the long run and not be embarrassed by failure and not be embarrassed
00:24:56.120
by sometimes even looking foolish because, you know, look, if we all had perfect information,
00:25:00.440
if we knew how everything was going to turn out, then a, the world wouldn't be very interesting or
00:25:05.320
fun. But also, you know, if you're working in finance or poker or whatever else or investment,
00:25:11.440
you have to take the opportunity before other people do. You can't wait for the perfect academic
00:25:16.740
model to come in and perfectly solve the answer because by that point, the more aggressive players
00:25:21.820
in the market will already have squeezed all the juice out of lemon. And so being willing to work
00:25:27.100
with incomplete information and make your best estimate. And if you're wrong, by the way,
00:25:31.960
you, you should double check your process. If you're wrong, if you're consistently wrong in
00:25:36.760
particular, if you're getting things wrong over and over again, then maybe your process is bad,
00:25:40.300
but, but most people are to results oriented and not process oriented enough. Yeah. The example
00:25:45.480
Annie Duke uses is Pete Carroll in the Superbowl in 2015. So it's a fourth quarter, less than a
00:25:53.080
minute left. The Seahawks need a touchdown. They're on the one yard line of the Patriots and everyone
00:25:59.240
expects Carroll to call a running play because they got the, they got one of the best running
00:26:02.620
backs in the league, but he calls a pass play intercepted game over. And after that, everyone
00:26:08.520
just goes crazy saying like, Oh, it's the worst decision ever. But if you look at the actual
00:26:13.380
statistics and the probabilities, like the decision made sense, it was a good decision. And if you'd won
00:26:19.180
the Superbowl, people would have said, yeah, that was, that was a great decision. So another happy
00:26:23.320
you talk about is a successful risk taker takes a raise or fold attitude toward life.
00:26:29.580
This is partly what I talked about before with HR McMaster on the battlefield. You don't want to
00:26:33.580
get stuck in the middle sometimes. I mean, and often in poker, if I go sometimes in the summer,
00:26:37.620
I'll deal like a backyard game at my friend's apartment in Brooklyn. And this is with people
00:26:42.060
who have never played poker before, except maybe once, once a summer when we play and really
00:26:46.440
inexperienced poker players are uncertain. And so what they wind up doing is calling a lot
00:26:51.620
or checking the in-between passive actions instead of the bolder actions of raising or
00:26:57.060
folding. Folding, quitting can sometimes be a bad action. I mean, you may have talked to
00:27:01.680
Andy Duke about this here, but quit. In general, people are happier when they, when they make
00:27:06.140
a change. If they think they're unhappy in a relationship or a job, or they want to move
00:27:09.960
cities or something or change their lifestyle. Usually if you talk to them afterward, they're
00:27:13.920
happy they made that decision. I think it's also kind of partly a matter of cultivating a few
00:27:19.600
things in life that you specialize in. I think where you can have more of a comparative advantage
00:27:24.420
over the field, I think is usually more worthwhile than trying to be like a jack of all trades.
00:27:29.600
And you talk about Andrew Luck, the football player, kind of using this principle in his
00:27:34.600
own career. Tell us about that. Yeah. So, you know, very successful Stanford graduate,
00:27:39.900
Indianapolis Colts quarterback, but had a bad offensive line, was injured a lot. And to many
00:27:45.060
people's surprise, retired when he was age, I think 29 or 30, when he still had probably half
00:27:49.540
his career left. And, and he said, look, I have a new, a newborn on the way for the time being.
00:27:54.640
I have my health. I'm a smart dude. I went to Stanford and I've had a great career, but I want
00:28:00.120
to make sure I have a good life for the rest 50, 60 years of my life. I don't have to prove
00:28:05.220
anything to anybody. And the, you know, the NFL player I talked to in the book, Dave Anderson,
00:28:08.780
who is, you know, kind of a guy who is more on the margins of the sport, kind of a Wes Welker,
00:28:13.600
short slot receiver type, but like in a lot of training camp battles to gain starting time and
00:28:18.760
things like that. He's like, you know what? I admire Andrew Luck because there's no particular
00:28:24.000
honor if you go through and get hurt. And by the way, Dave's ex friends, ex teammates, I mean,
00:28:29.460
a lot of them, you know, suffered physically from the NFL. It's a, it's a, it's a sport where you're
00:28:35.180
taking real physical risk and your body is grinded down. And so he's like, I admire the guys who do that.
00:28:40.380
But if you're a guy who found success and you're willing to say, I want to, you know,
00:28:44.360
get some mileage and have a wonderful life for my next 50 years, then, then he admires that too.
00:28:49.480
Yeah. So luck folded because he saw the expected value. It was like, ah, it's better if I just quit
00:28:53.900
this NFL thing and do something else. And like the call thing would have been like, I'm going to keep
00:28:57.700
the career going. Maybe I go to a different team with a better offensive line and maybe I can make it
00:29:01.560
work. He's like, ah, no, I'll just quit this. Yeah. I mean, maybe call it, or maybe that would be
00:29:06.440
raising actually, right. To say that, okay, I'm going to demand a trade and improve my situation.
00:29:11.080
Whereas calling is kind of muddling through for another season when, when you're worried about,
00:29:16.360
and by the way, I think often when people are in a situation, they're unhappy. And I mean,
00:29:20.080
that's reflected in inferior performance. You know, people can even have a tendency to like,
00:29:25.800
you see this in poker tournaments sometimes where a player's made the third day of a tournament,
00:29:29.940
but then he's getting stressed out. Maybe he's having to miss days of work,
00:29:33.400
or maybe he's homesick, or maybe he feels like he's accomplished enough. And there's a little
00:29:37.380
bit of like survivor's guilt or imposter syndrome and they'll self-sabotage or even things like if
00:29:42.460
you're playing poker and you didn't eat a good lunch and you're thinking, boy, it wouldn't be
00:29:46.340
nice to have like a burger and like a beer or something, right. You'll find ways to like,
00:29:50.020
and fly home on the red eye. You'll find ways to self-sabotage if you're in a situation where
00:29:54.460
you're not able to be fully present. Yeah. This can happen in your career. You hate your job,
00:29:58.860
but instead of, you know, either folding or raising, you just kind of keep muddling along
00:30:04.540
to see if you can make this work and you're just miserable. Yeah. That's when you start to make
00:30:09.420
mistakes. And as someone who's done a lot of different things in life and had a lot of
00:30:13.000
different careers, I mean, I just know kind of from experience that like I can be like literally
00:30:17.600
five or 10 times more productive when I'm happy and engaged than when I'm trying to muddle through.
00:30:21.980
Yeah. So another rule is, or another habit you found that successful risk takers had is
00:30:27.300
successful risk takers are prepared. And you talked to it. Did you talk to a fighter pilot
00:30:31.560
about this? Yeah. I talked to, uh, Victor Viscobo is the name of the explorer I talked to earlier.
00:30:36.900
So he's been to like the seven highest peaks on each continent. But before that he, he was a fighter
00:30:41.820
pilot and also taught other pilots at what's kind of informally called the Top Gun Academy. So I
00:30:47.320
talked to him shortly after Top Gun Maverick came out and I kind of asked him what he thought
00:30:51.420
about that movie. And he's like, yeah, Maverick is actually kind of bullshit, right? Cause Tom
00:30:56.840
Cruise is telling people don't over-prepare and just kind of trust your gut and wing it a little
00:31:02.340
bit more. I mean, I guess this gets a little bit to the skiing thing where sometimes you do have to
00:31:05.600
let go and be immersed in the situation, but military missions, you know, missions to execute
00:31:11.840
some tactical strike are meticulously planned out. And what you find is that when you're planning
00:31:17.760
out plan for the everyday eventualities and you're actually better prepared when something
00:31:22.860
unexpected happens, you're not wasting bandwidth with the basic blocking and tackling stuff. You
00:31:27.460
know how to execute and, and, you know, fly the jet home and turn around if you need to.
00:31:32.040
So you have more of your attention. I mean, attention is a scarce resource. People forget that,
00:31:36.300
like people say, why didn't you pay attention to this or that? Well, it's because like attention
00:31:39.000
is a scarce resource and the human mind can do amazing things when it's focused. And so, you know,
00:31:43.840
clearing up mental bandwidth with preparation for dealing with emergency situations or dealing with,
00:31:50.000
you know, amazing opportunities is a really important life skill.
00:31:53.880
Yeah. See, Eisenhower famously said, plans are useless, but planning is everything.
00:31:59.960
And then something else I was fascinated by in the book, and when you're talking about this,
00:32:03.160
this world of poker or something that's happened in the past 15, 10 years that's made poker players
00:32:09.160
better is this development of like poker simulators or software. Tell us about this guy.
00:32:13.760
I thought it was really interesting because I think this kind of goes along with it. You're
00:32:16.360
preparing so you can make those more intuitive decisions when you need to.
00:32:20.500
Yeah. So these are called solvers is the name where they literally use, you know, lots of fancy
00:32:25.620
technology to calculate what the optimal play is, the game theory optimal play is for poker in any
00:32:31.080
given situation. Now it's not as easy as it sounds because it's this complicated, literally like
00:32:35.340
13 by 13 matrix. And, and sometimes there are multiple best plays that you're, you're equally good
00:32:41.200
to raise or call for example, but that's a matter of preparation, right? Where, because your opponent's
00:32:46.280
not going to play as well as computer. However, understanding what the theoretically correct play
00:32:50.960
is allows you to, to deviate and make an exploit that Hannah talked about before where I made this
00:32:56.040
bluff. Like I knew that was probably a pretty dubious bluff if I was playing against the computer
00:33:00.880
and I incorrectly guessed that my friend would not be playing like a computer. And instead he made
00:33:05.500
the right play and called, but that was a self-aware, a self-aware attempt to the poker
00:33:10.820
term for it is exploit my opponent. I mean, he didn't fall for it. You take chances in poker,
00:33:16.560
they don't always work out, but it was a studied play where I knew why I was making an unusual
00:33:21.340
choice. How have you seen these solvers change the world of poker since you've been playing?
00:33:26.920
Oh man. I mean, just like the level of sophistication, at least for the top half of the
00:33:31.720
playing pool is just, is just much better. You might see some like, you know, old guy who you
00:33:37.300
think hasn't played a hand other than aces or kings in six years, right? And all of a sudden
00:33:41.640
they're bluff raising and talking about solver outputs that they're looking at. So for a certain
00:33:46.080
type of like studious player, maybe not someone who's playing professionally, although the professionals
00:33:50.860
use this too, obviously, but it really helps lift your game up if you're someone who has a busy life.
00:33:55.560
So I'm sure many of your listeners do, but wants to really raise the floor on how well they play,
00:33:59.980
like developing intuitions from playing with solvers is something that I would recommend.
00:34:05.500
Yeah. I've heard people talk about this, how, you know, AI might replace some stuff,
00:34:10.580
but artificial intelligence, like you're going to get the most out of it. If you combine
00:34:14.100
artificial intelligence with human intelligence, like chess playing, I guess like the best chess
00:34:18.140
players are the ones who like use AI and human ability. I don't know if that's true.
00:34:24.720
Yeah, I know. Look, they're, they're studying the computer sims and the computers are better at
00:34:28.180
chess than the best human players. But, you know, again, like Magnus Carlsen or someone can also
00:34:33.180
make exploitive plays. It can say, I bet my opponent won't be prepared for this line that
00:34:38.320
I'm going to take. And so even though I know this line is not optimal as a computer would play,
00:34:41.900
I think it's actually optimal against another, another human being.
00:34:44.820
Yeah. So, okay. The lesson there, just over-prepare because that over-preparation will allow you to
00:34:49.940
exploit when you need to, because it allow you to make those intuitive decisions when things are on
00:34:55.100
the line. Yeah. Look, I mean, these poker players today, they're all, you know, they're all very
00:34:59.540
smart, but they're spending a lot of time off the felt studying because you just have to be
00:35:03.560
realistic, right? You can be a smart, accomplished person. If you're going to the arena where you're
00:35:09.260
selecting for all the other smart, accomplished people who are playing the same game as you and
00:35:12.820
they're playing because they think they're going to win your money, right? You know, what makes you
00:35:16.080
better than them? Well, maybe you're not, but to have any hope of competing, then you, you have to be
00:35:20.420
rigorous and studious and not just wing it. So another habit is successful risk takers have
00:35:25.420
a selectively high attention to detail. What'd you learn about this from that, that astronaut?
00:35:29.900
Well, I mean, her phrase is the most important thing is to know what to pay attention to,
00:35:34.440
right? She put it in a more eloquent way, which I'm spacing on, no pun intended for a minute. But,
00:35:39.280
you know, if you literally go in like a space shuttle, there are like 84 different dials and knobs and
00:35:43.680
bleeping indicators and things like that. And understanding what you're focused on, you have a mission,
00:35:48.880
but when something goes wrong, you have to pay attention to that. And when something goes wrong,
00:35:53.380
while you're trying to solve the thing that goes wrong, you have to know kind of what
00:35:56.220
demands the most of your attention at any given time. I think you also have to learn how to,
00:36:00.440
how to pace yourself, you know, in poker, you might only face one really important decision every hour
00:36:07.720
or every half hour, every two hours, but that one decision might have a hundred times or a thousand
00:36:12.980
times the value of a, of an ordinary kind of low stakes decision. And so learning how to like pace
00:36:18.280
yourself again, that can involve, you know, mental and even physical health to some degree,
00:36:22.840
but, you know, understanding that like, you know, if you play in a poker tournament,
00:36:26.200
especially when you get toward the end of a tournament where it might just be two or three
00:36:29.140
or four players left, you know, it's quite draining. You know, I'll have situations where
00:36:33.260
I've been playing in an intense tournament. I'm like, okay, I finally got knocked out,
00:36:36.700
but I won some prize. That's great. I'm going to go, you know, meet my friend for a beer and relax,
00:36:41.780
right? You kind of make it halfway back to your hotel room and you're like ready to fall asleep
00:36:44.400
because you kind of left it all on the line and paying attention is physically, is physically
00:36:48.260
taxing. No. Yeah. You talk about a lot of poker players talk about the game being hours of boredom
00:36:53.960
punctuated by moments of sheer terror, because yeah, most of the time it's just like, you're
00:36:58.080
nothing's really happening. And that can lull you into this sort of complacency where you stop paying
00:37:03.100
attention and then you, you miss, miss something where you could have won big for sure. And, you know,
00:37:08.380
picking up on physical reads on your opponent. I mean, one thing that you'll discover is that
00:37:11.580
if you are in a situation, because poker, if you're just playing a low stakes game,
00:37:15.780
you're chatting in between hands, you're checking your phone, right? You're watching sports on TV,
00:37:19.640
et cetera. You're killing some time. When you do play a high stakes game or get deep in a tournament,
00:37:25.720
all of a sudden you find that all this other stuff that you're ignoring, there's a lot of
00:37:29.180
information there about the way people are putting their chips into the pot. And you're thinking ahead
00:37:33.840
toward what if they bet this amount of this card comes. And all of a sudden when decisions really
00:37:39.020
are high stakes and they matter, then you find there's lots of things that you're kind of
00:37:42.680
shutting out most of the time in everyday life. And that's, that's okay. I mean,
00:37:46.640
we can't all be going at full speed 24 seven, but knowing how to pace yourself and knowing when you
00:37:51.440
have to turn on and be at a high attentive level is, is being prepared to do that and healthy enough
00:37:57.380
to do that is, is important. So another habit that I liked was successful risk takers are good
00:38:02.140
estimators. And with this habit, you say that good risk takers are Bayesians. What do you mean by that?
00:38:07.940
So Bayes theorem comes from the Reverend Thomas Bayes. This is like a 17th century who came up
00:38:13.260
with a formula called Bayes theorem, which is about updating information based on incomplete
00:38:18.540
information. So if you go to like a dinner party or some social event with someone you don't know
00:38:24.480
very well, and you're trying to be a sympathetic, friendly guest, this is an example of kind of a
00:38:30.320
Bayesian process where you start out knowing not very much at all. You're probably being pretty
00:38:35.920
cautious and pretty polite, but then you found out that actually you went to the same high school
00:38:40.140
or you were for the same sports team, or maybe, you know, your wives or partners have something in
00:38:45.220
common or you, or, or you have a shared interest. And so you adapt and adjust in a very natural way.
00:38:51.280
In some ways, it's like actually a very intuitive process in poker. It can be a little bit more
00:38:56.440
rigorous where you are actually trying to estimate a probability. You know, if you, if you're,
00:39:00.260
if someone goes all in on the river and you have to write 35% of the time to make the call,
00:39:05.560
well, then knowing if you're right 40% or 30% is important. So developing practice at like
00:39:10.460
mathematically estimating things, right? It's an annoying habit. If I go to like a NBA game,
00:39:15.900
I'm a Knicks fan, for example, I can estimate pretty well. The Knicks are down five points with
00:39:20.100
six minutes to go in the fourth quarter. I can usually estimate pretty well what their chances are
00:39:24.180
of winning. Not well enough to necessarily bet blindly at FanDuel or something, but, but enough that
00:39:29.860
I'm always thinking in terms of probabilities. Is this a skill that you can get better at?
00:39:34.660
Oh, a hundred percent. I mean, it's drilled into poker players heads through playing tens of
00:39:40.680
thousands of hands. And it's a hundred percent something that you've learned through practice.
00:39:44.480
Yeah. I've, I've, something I've been thinking about lately is I wish I was better at thinking
00:39:48.240
more probabilistically. I mean, I think I might do it intuitively. I'm not very explicit about it.
00:39:53.040
I'd love to be able to take sort of those intuitive, probable decisions that I make and make it
00:39:58.440
explicit. Any advice on how to do that? I mean, again, it's partly having a practice
00:40:03.440
where you've kind of experienced both the good outcomes and the bad outcomes. So you kind of
00:40:06.700
see where your expected value winds up or the long run. And by the way, this is meant for decisions
00:40:09.960
that you are able to make repeated times when it's things that are one-offs, like who should I get
00:40:14.340
married to or things like that? Should I make a major life altering course of action? Then I'm less
00:40:19.760
concerned about how people make their decisions, but things where you get more than one crack at the
00:40:24.420
apple. If you're, if you're a, an investor in Silicon Valley, you're going to make dozens and
00:40:30.020
dozens of investments over the course of your career. And so again, being process oriented and
00:40:34.440
learning from that and, and, you know, and trusting the process. Yeah. So another one that you talked
00:40:40.420
about is successful risk takers are conscientiously contrarian. What do you mean by that?
00:40:45.900
So a lot of people in the river being kind of lone wolf types tend to be contrarian. They say,
00:40:51.180
if you want vanilla, I want chocolate and vice versa. That can sometimes get them in trouble.
00:40:56.620
I mean, sometimes these like founders can be jerks, assholes, even they can be difficult people.
00:41:02.300
But what you want is you want to have a sense for like, why are someone's incentives different
00:41:06.820
than mine? That's the conscientious part. So I talked to one friend of mine who works for a hedge fund
00:41:11.880
and they try to find out when people have like bad reasons for making stock trades. So if for example,
00:41:18.480
you have a company where an equity founder has a bunch of equity locked up until X date,
00:41:23.540
until August 1st or something like that, then on August 1st, they're allowed to sell their shares.
00:41:29.320
If you know that they're making a non plus EV expected value, I shouldn't use the EV jargon,
00:41:34.360
a non expected value-based decision, then that creates an opportunity to like exploit them
00:41:38.360
potentially. Or I find this in like politics a lot as I will get in battles with people on Twitter
00:41:43.300
and whatnot. Because I'm trying to forecast elections. I'm trying to understand what the
00:41:49.020
likelihood is that Democrats or Republicans will win. And they're trying to be partisan or
00:41:53.220
something, which is fine, but we're playing different games. I mean, if someone's playing
00:41:56.100
a different game is when you can be better at what you're trying to accomplish.
00:42:00.780
Well, Nate, this has been a great conversation. Where can people go to learn more about the book
00:42:04.380
So the book is called On the Edge, The Art of Risking Everything. And my newsletter is called
00:42:07.820
Silver Bulletin. It's on Substack, natesilver.net.
00:42:10.640
Well, Nate Silver, thanks for your time. It's been a pleasure.
00:42:15.460
My guest today was Nate Silver. He's the author of the book On the Edge. It's available on
00:42:18.660
amazon.com and bookstores everywhere. You can find more information about his work at his
00:42:22.220
website, natesilver.net. Also check out our show notes at awim.is slash risk takers,
00:42:27.140
where you find links to resources. We delve deeper into this topic.
00:42:36.940
Well, that wraps up another edition of the AWIM podcast.
00:42:39.780
Make sure to check out our website at artoothmanliness.com, where you find our podcast
00:42:43.500
archives, as well as thousands of articles that we've written over the years about pretty
00:42:47.080
much anything you think of. And if you haven't done this already, I'd appreciate it if you
00:42:50.800
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00:42:58.360
or family member who would think you'd get something out of it. As always, thank you for
00:43:01.800
the continued support. And until next time, it's Brett McKay reminding you to not listen to the AWIM podcast,