ABOUT THIS EPISODE

My guest on today’s show once again is Annie Duke, decision-making expert, former world-famous poker player, and author of the best seller, Thinking in Bets.  I had a chance to interview Annie at The Investment Institute’s Fall Forum in Chapel Hill, North Carolina and the live interview follows. Special thanks to Andrea Szigethy and Donna Holly, founders of the Institute, for having Annie and me down for their terrific event.

Our conversation covers the challenge of separating signal from noise in making decisions, the formation and confirmation of beliefs, forming decision groups, communicating with teams, and mistakes Annie’s advisory clients have made after reading her book.  We close with some questions from the audience and end with two great poker stories of how Annie approached being a woman in the male-dominated poker world.  Annie’s irrepressible brain was on display this time around, covering a few of the same ideas from our last conversation and some new ones with different anecdotes along the way.

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English
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TRANSCRIPT

00:00:05hello I'm Ted societies and this is capital allocation show is an open exploration of the people and process behind capital allocation through conversations with the leaders in the money game we learn how these holders of the keys to the kingdom allocate their time and their capital you can
00:00:25keep up to date by visiting capital allocator this podcast dot com my guest on today show once again is any Duke decision making expert world famous former poker player and author of the now best seller thinking in Beth's I had a chance to interview any at the investment
00:00:46institutes fall forum in Chapel Hill North Carolina and the live interview follows special thanks to Andrea sick at the ends on a Holly founders of the institute for having any in me down for their terrific events our conversation covers the challenge of separating signal from noise in making
00:01:06decisions the formation and confirmation of beliefs forming decision groups communicating with teams and mistakes in these advisory clients have made after reading the book we close with some questions from the audience and ended with two great poker stories of how he any approach being a woman in the
00:01:28male dominated poker world janiece irrepressible brain was on display this time around covering a few of the same ideas from our last conversation in some new ones with different anecdotes along the way please enjoy my second conversation with Annie Duke two engine Donna specially for having us here
00:01:53I'm gonna give a very quick intro of any the study cognitive psychology at Columbia and Penn as you can imagine is the natural path to becoming a professional poker player at any was a dissertation defense away from getting her PhD got ill and needed to take a year
00:02:13off and that led to one year sabbatical trying to make a little bit of money at a poker parlor in Billings Montana and twenty years later she retired one of the most famous poker players in the world probably the most recognized television poker player and over that time
00:02:34she realized that she might not play poker forever and started thinking about what she was learning in the process and did a whole bunch of speeches and advising and earlier this year published this fantastic book called thinking about switching service third book but first for general audiences so
00:02:51if what we're saying bores you as we all have done I've been sitting there too when you take out your I. phone during this go your Amazon app like it it's fine I don't mind thinking about to buy coffee any what was it about hooker that led you
00:03:08to start thinking about decision oh gosh I feel like it's a circular so what I was studying when I was in graduate school feels I think to most people it was pretty far afield from poker when I was actually focused on was how children learn their first language
00:03:25and what you realize when you get it a poker table is actually is an incredibly similar problem which makes you think about the similarities kind of across all learning where there's noise so if you think about the problem for a child trying to learn a language there's all
00:03:38sorts of noise as the child has to pick the things that our language out of all the noise it's a like crackling papers don't count right so that's kind of hard and if you can pick those out now you've got to identify the word boundaries and that saddens
00:03:51boundaries and that's also really hard and then once you get a word boundary and then mother says something like backs what does that mean well does it mean the active pointing doesn't mean the thing that she's pointing to doesn't mean an aspect of what's being pointed to like
00:04:05the color like yellow or soft could be a state of mind like think is it in action me this is a really hard problem and it's incredibly noisy and the feedback is a great and kids do it super fast so that's what I was looking at was how
00:04:22are their constraints that are sort of built into the way that we come into the world with this language machine that allow us to reduce the noise and now I move and I start playing poker and I think well now I'm doing something totally different except that I'm
00:04:34not because you make these moves and then you get some feedback to win or lose the ham but what does it really mean is the problem because you can win a hand out of pure luck you could win it out of scale you could win it but not
00:04:47have one as much as you should have for example you could win but when too much you can win more than you should have the same thing on the losing side so it's also incredibly noisy and so when I was thinking about what are the things that are
00:05:00really causing problems with learning language which is there's information the kid doesn't know and then they're sort of lock in terms of what's paired with what that this seemed like the same problem that was occurring at the poker table at which point I realize what this is really
00:05:12the problem we have is decision makers of my freight is that there's a lot of noise between outcomes and feedback and despite the fact that when I was in graduate school I was taught that learning occurs when there's lots of feedback tied closely in time to decisions and
00:05:24actions I realize well poker really tells you that's not true because people don't play poker very well but there's a lot of feedback so at some point I realized well I'm just moved into a much better laboratory actually for studying the kinds of problems that I was interested
00:05:37in in graduate school and sort of took it from there and merge the two together and how did you start thinking about that difference between noise and signal so obviously this is something that I was really thinking about when I think about language acquisition right like there's a
00:05:49lot of noise and there's actual noise because it's like a pet what signal to the child how are they picking the signal out so I was kind of thing about this just are trying to solve the problem for myself for about eight years I wasn't really in any
00:06:01kind of explicit way thinking about in an academic sense I was thinking about how do I actually learned in this environment figure out what's what and then in two thousand two I got asked by a hedge fund to come speak to a group of their traders they were
00:06:13having a retreat for their traders to come and talk to them about risk and I said you know I don't really want to talk about risk his and realize what I really want to talk about was this noise problem and that was the first talk that I gave
00:06:26was about this noise problem and what it does that's really where I ended up really thinking very explicitly about the way that this disconnection this kind of pulling apart this on certain relationship between decision quality and outcome quality really gets in the way in so many ways of
00:06:42good decision making so why do we get things wrong because it's such a complicated question but there is a problem for any given outcome that you have trying to work backwards to the quality of the decision is really hard so most of the time decision quality is incredibly
00:06:55opaque particularly in retrospect we don't really know what the mathematics are working and unknown probabilities right so a lot of times it's like ensemble probabilities work could be going in many different directions but at any given time that we make a decision there's lots and lots of possible
00:07:10futures that can occur but there's only one that actually does occur right trying to figure out what are the probabilities of those futures is actually really hard to do from a prospective standpoint but once we get into a retrospective stand meaning that some outcome is already occurred then
00:07:26we have a huge problem I talk about it in the book I called resulting which is the term that my group used for it which is that the result actually cast a huge shadow on our ability to come back in and actually determine what the decision quality as
00:07:39which is hard on its own but it's like this very big cognitive shadow which I think is really built into us we like things to be very connected we like things to happen for a reason we like things have a causal relationship we don't like randomness as a
00:07:52species and so once we know the outcome it's like we can't go back and kind of reconstruct the decision tree in any kind of real way and so what ends up happening is we use the outcome quality is too perfect to signal for decision quality as we're trying
00:08:09to kind of work back into that and I think part of the reason for that in terms this connection is if you think about from an evolutionary standpoint what's the punishment for a false negative versus a false positive and obviously the punishment for a false negative is much
00:08:24bigger so you're on the Savannah you hear rustling in the grass your standing there trying to figure out what that is and then you die could you get eaten or you run away and you might be wrong but who cares so the penalty for being wrong isn't so
00:08:36great because you live in your genes passed on so we have this real tendency to be sort of over fetters it's easier when you do things prospectively to not do that because you don't have anything to fit it to yet except your own ideas which is a whole
00:08:50other problem but the retrospective problem is particularly problematic because it's not just your own ideas that you're trying to over fit it too but now you actually have a result that you naturally over fed what happens with your own ideas we can think about any decision we make
00:09:03as a back my book is called thinking and bats and so this is obviously the promise of it so people don't tend to think about their decisions it's bad because they think about bats is confined like they think about it in the traditional way that we use bad
00:09:16I mean I go in a casino and I place a bet on like the craps table but all the bad is is you have some sort of limited resources you then have to invest in some sort of decision you can't invest in all decisions that are available you've
00:09:30got to go one way so you're trying to figure out given the resources that I have which they know I want to invest in that will result in what I think are going to be the best possible set of futures given the limited resources that I have to
00:09:42invest so anytime that we have lots and lots of features that could happen and we have limited resources we know that we're batting and this is actually true even if you only have one option you're still betting on that one option because of the uncertainty it's still a
00:09:57bat so once we sort of have that we say okay so every decision is about one of those bad built on whether built on our beliefs and we can sort of divide our beliefs into two categories one is like fax the earth is round another would be predictions
00:10:12the earth will be around tomorrow and so does believe that we have about fax out in the world and how those can help us to figure out what the world would look like tomorrow or the next month or the next year the next five years our weather informing
00:10:25our bats so we have this foundation for every decision that we make and what we would love as if the feedback that we get out in the world drives this foundation actually makes it so that this is how we're forming our beliefs but it turns out that that's
00:10:43not so and this is where we kind of get this overfitting problem in a prospective sense so most of the belief that we have %HESITATION actually will been into our identity about ourselves there some that aren't but mostly the things that we believe actually sort of build our
00:10:58view of ourselves and they become part of our identity this is particularly true when we get into things that have to do with tried and tried isn't just about politics it's about whether your value investor or a trend follower or whatever it might be and we all have
00:11:12these tribes and we believe these things very strongly as part of our identity but we also believe things that aren't part of identity that also drive the way that we look at the world so an example that is a part of your identity would be how do you
00:11:24tell the man's going to go bald and when I ask people in the audience they'll raise their hand you look at the mother's father and what do we do with that information do we go out and take a random sampling of men who are going bald and find
00:11:38out where and their family tree date life no what we do is we notice men who have gone bald they say yes it was because my mother's grandfather was bother with a hot this must be true so this becomes this problem of the circularity that what happens is
00:11:53it's not that the information that we get in the world actually informs our belief is that we formed believes in a relatively haphazard way and then those police actually drive the way we process information so what ends up happening is kind of two fold one is that we
00:12:06notice information that confirms the belief that we already have so you're looking through Google news and you're seeing the staff that agrees with you and you don't see the stuff that doesn't agree with you so much that's confirmation bias that's pretty well known but a bigger problem that
00:12:21people don't talk about it as much is that when we are confronted with information that disagrees with us we work very hard to discomfort so what happens is that you know I'm in the morning I'm reading political articles I see something that agrees with me I practically don't
00:12:35get past the headline I just go you gave me I'm so right says this person who's just written as I when I see something that disagrees with me that I read I'll write a dissertation on this is why it's wrong these are the fact they're not including this
00:12:47is Haidar biased so I work very hard to make sure it's not true and then the other thing is that when information comes from out of tribe we don't trust it so it can actually cause us to entrench more so what happens is that instead of the information
00:12:59in the world driving I believe for may so what happens is that the police we have actually drive the way we process the information and they drive it in a particular way to reinforce the police we already have and we get the circular pattern called motivated reasoning so
00:13:14this is where the prospect of problem comes in as the as we're trying to figure out what are the possible futures that might occur we have to have a very clear idea about how much luck is in the process which we try to reduce because we don't like
00:13:25to think about like it doesn't feel good to us that we don't have control but then also the belief that we have are going to inform our predictions about the future and our predictions about the future are going to actually be motivated to essentially affirm and confirm that
00:13:40the police that we already have and so we're not gonna get a particularly good view of the future that way other isn't suffering from resulting confirmation bias motivated reasoning and just about anything else anything we can do to marginally improve the quality of our decisions so we can
00:13:58end the important word in there is marginally I think that what people generally think is like well I'm super smart and everybody super smart because of the better than average of facts that were all super super smart and now I know about this someone's told me about motivated
00:14:13reasoning some of told me about confirmation bias they told me about resulting they've told me about that so yeah knee I'm clearly not gonna do it anymore and the answer is yes you well and in fact will be worse for you so I'm just going to be in
00:14:28the low bad is before I get to the goodness so there's actually two really good pieces ones in my book is a study by Dan behind that show the people who are really numer at really good with citizens for example being able to work correlational tables that are
00:14:40difficult because the raw numbers kind of point you in the wrong direction but the correlation points when the right one the people are really good with those tables when you give them tables that have to do is something that is politically motivated for them like gun control their
00:14:52works are better at spending the data to fit their police because they're better with data like could you put a spin room the dumb guy or the smart guide for the smart guys that he can do to mine for you so that's number one and there was also
00:15:05went solving syllogism so syllogisms have internal logic they don't have to relate to the wheel world but we know that people get tripped up when a syllogism comes to conclusion that doesn't comport with the real world like all frogs are blue and then you fall apart can you
00:15:18can't see the internal logic anymore so again they look at people who actually like had degrees in logic they were really good at it and they were worse when it didn't comport with their with their political beliefs this isn't helping I know it's really sad so being smart
00:15:34actually makes it worse so that's number one so don't think that that's going to solve it I think that that's what's really important so now here's how we get marginally better just serving in the room how good do you think you all are in this room it's fighting
00:15:45when other people are being biased like really good right right like I was screaming at the television all the time okay so we know that we're very good at spotting it and other people in fact were so good at it that there was a great study that was
00:15:59just on where they had people solve logic problems and they had to write down their answers to lots of problems and rate their own answers which of course they rated quite highly that and they had them rate other people's solutions that a lot of problems will guess what
00:16:13one of the five that they were reading was their own solution which they had previously rated quite highly and now when they side and they did not know what was their own they were very critical of it they wrote the dissertation on why it was so bad so
00:16:26even when it's our own answer and we think it comes from someone else were much better at spotting bias okay so let's use that to our advantage and I can say Hey tad I can see that you're really highest and so why don't we make a deal because
00:16:38I imagine if I can tell you're really biased you can probably tell when I'm really biased so if we make a pact between the two of us that you're gonna watch my bias and I'm gonna watch your bias and now we can form kind of a decision group
00:16:51together we make rules about what the interaction is supposed to be you can set me straight I can set you straight and now we can have a commitment to essentially reasoning to be accurate verses reasoning to be right and I'd like to really make that distinction reasoning to
00:17:07be right is I believe things I want those things to be true that is reasonably right reasoning to be accurate saying there is some objective truth and I should be working to build the most accurate model of the objective truth because we go out back to the idea
00:17:20of decisions as bad who wins in back the one who has the most accurate model of the objective truth or the one who just thinks there right well that's an easy answer so let's make a commitment to do that together and watch each other's backs hard to envision
00:17:33that you start doing that and they can be a little bit mostly charts for trying to tell me that something I think is that wrong are there ways massaging the language so that it's easier to deliver that message yes so certainly there some people have a personality where
00:17:49when I just say like you're out of your mind it's fine but not everybody is kind of like in that way so there's a few things you can do one is you can say well I think there's another way to look at it so notice I haven't in
00:18:02anyway invalidated your way to look at it I'm saying could you consider this other thing let's look at this other way and then like we can compare and contrast and so all the sort of ways you can do it have to do and not invalidating the thing you
00:18:14sat so another thing you can do is to actually be very future focused so if you say something that I think is really biased about something that happened in the past what I can do is instead of saying don't you think that's not why that's actually true instead
00:18:30I can say well how do you think you to prevent that from happening in the future now notice that in order for you to actually reasonably answer that question you must go back and look at where you went wrong in the first place because you can't answer that
00:18:42question without doing that but I'm not the one making the challenge to you I'm just asking how you could fix it in the future so example with my kids right my my child will come home and say oh I you know I got such a bad grade on
00:18:54that task because the teacher put a bunch of stuff that wasn't on the past and it was really hard and everybody to really poorly on it and also he hates me and you can ask anybody in meanwhile I saw a lot of two K. being played so instead
00:19:10of saying to him hold on a second I saw you on two K. the whole time what I say is %HESITATION that must be really frustrating how do you think you could do better on the next test and we get to the same places if I said you
00:19:21were playing a lot of two K. is is that we would do it without the confrontation because I would just validate so think about how do you say yes and you know that old improvisation thing of yes and you're starting one of these discussion groups how do you
00:19:34start honing in on these are the observations that I'm gonna try to make for you where I see you have a bias when I'm not experience of doing that yeah one of the things that I really ask for people to do what I'm doing trainings with them is
00:19:47to start to really write down a list for themselves of things that are really good shoes that are probably thinking in a biased way as an example whenever you sort of off load to the world when you're socializing something to the world completely that's usually a really good
00:20:04example actually I saw something interesting as recently as an interview with cliff Asmus and he said this he said when the market goes down because of humans panicking people say the market went down so that's a really good example of socialized into the world as if this has
00:20:19nothing to do with people but when it goes down because of algorithmic trading people say it was the quotes fault so that's privatizing to people so that's a good example of when you see yourself socializing out to the world that's what my son was doing it wasn't my
00:20:33fault it was because the teacher doesn't like me for example so I know that for me that's a really big thing when I listen to that structure in that structure of the language where I know I'm socialized into the world another one for me personally is like all
00:20:44my gosh it was so unfair it feels really unfair what it feels like things like this always happen to me when I'm speaking in extremes of like there are a hundred percent I'm totally certain or you're wrong or I am right or I should have seen that coming
00:20:59that's another good one for me so anyway for everybody is going to be a different less I really ask people to write these things down and then I would share that with you and then you would help me to start completing that list so we would start somewhere
00:21:12where you take a look here the things for me that are really bad things for me to be saying here's a type of category where I think that I fall down please watch for this and we're gonna share this list together and then can you help me add
00:21:24to it I think that that's always a really good place to start a lot of the people listening are leaders of their organizations and yeah you could form a discussion groups probably great thing to do how do they go about communicating with their teams in such a way
00:21:40that improves the quality of the decision of the team let me give you two of the many many many that you can do that the first has to do with it really understanding that when you're in a leadership position in particular there is this problem of contagion that
00:21:56becomes really exacerbated so contagion is basically this it's that it's not only that I will try to reason toward my own beliefs but that if I tell you what my beliefs are I have infected you with them and you will now without knowing it also try to reason
00:22:15toward my beliefs so most of us kind of want to be on the same page with the other human beings that we talked to assuming that you're within tribe if you're not with an try we have the opposite motivation but that's then I'm also infecting you in a
00:22:28different way but let's assume more and tried so given that you want to sort of be on the same page as I am without knowing it unconsciously once I've stated my belief which could be a factor prediction it doesn't matter you're now going to start to resent toward
00:22:41that that's a particularly big problem if you're in a leadership position so when you're trying to get high fidelity advice from your team it's really important actually that you keep your beliefs yourself as you're trying to work a decision and allow them to sort of speak freely that's
00:22:56kind of number one and it's actually really hard to do think about this for yourselves like when you share like an opinion piece like you read an opinion piece in the newspaper and you want to find out what somebody else thinks about it do you do this or
00:23:08that hear'say hate Ted I read this opinion piece we read it let me know what you think and stop B. Hey I read this opinion piece and I think this this this and that's about it I'd love to get your opinion will you read it we all do
00:23:25the second thing because we think that our opinion is somehow really important it's like an important piece of information like I think I'm giving you really valuable data but in so doing I've ruined you as a partner in crime because you are now going to read that to
00:23:40the frame of what I've already told you and we do this in little ways every single day and its leadership we have to really be careful about this infection problem so that's number one is like keeper beliefs yourself keeper predictions yourself try to keep your leans yourself if
00:23:56you're trying to work through decisions are when you're doing a post mortem or whatever it is let them speak freely and then the other thing that I would say is that the group will infect each other so as much as you can give them at first to give
00:24:08you independent advice the better off you are so that they're not also in fact each other because sometimes the more charismatic people in the group will be the bigger and factors or whatever so so that's number one I tried in quarantine and the number two is you have
00:24:21to lead in a way that really allows people to not be afraid of outcomes and I think this is really hard I think there's a lot of really bad decision making that happens in the world because were really afraid of how it might turn out and so we're
00:24:34trying to anticipate what's the decision in which I can make the best case for why this isn't my fault and when we start to reason and that way our risk profile starts to get really really distorted because we're not aligned with what the long term best interest of
00:24:54anything is were aligned with what trying to protect ourselves against what the short term downside might be and I think that in general that's sort of a leadership issue and it's because the problem is that human beings now %HESITATION that people blame them for the way that things
00:25:11go right it's kind of going back for this resulting problem and given that human beings know that you get blamed for that then essentially just try to avoid the things you get blamed for and then all of a sudden you have a sales person who's closing a hundred
00:25:22percent of their sales and by the way if you can't change that use fire them which is counter intuitive so I think that's another thing is that you really have to communicate away to your team that you don't need to be afraid with me that I care about
00:25:36the quality of the decision but I'm not as worried about the quality of the outcome not in the short term I recognize that if we work together to make a quality decisions the outcomes will realize in the investment world this world of uncertainty we know that we're going
00:25:51into a decision and we don't know the answer no we don't how do you go about talking about what you do know and you don't know in a way that makes the people on your team more comfortable to fall through the process without the reliance on the outcome
00:26:08so there's a few things that I think are really helpful in terms of getting people to that place number one is as you're trying to work through it really having people work through what are the possible scenarios and have them start to try to really put probabilities on
00:26:25those and when they say well the probabilities are unknown you say fine but we know it's not the whole range of zero to a hundred percent so let's try to create a range on that and once you do that when you tell them is I understand I'm not
00:26:37asking to be right I'm asking you to start to narrow it down and thinking this probabilistic way and give me sort of what you think is the best view of the future and obviously in order to start narrowing down what those ranges are the probabilities that you start
00:26:51to ask the right questions of what are the things that we could know that would allow us to actually get this to be an even narrower range you start to get people really comfortable with being willing to not say I think it's fifty five percent being willing to
00:27:03say I think it's somewhere between forty and sixty five percent how can we get that better so that's a good way to communicate the process matters to you because even saying at seventy five percent that's an outcome right there that people feel like they're sort of going to
00:27:14be paying too and so they're afraid to give you anything at all think that's number one number two is to allow people to understand that the point is to again be accurate not right so I think this idea of doing these pre more items are really important because
00:27:29it shifts what it means to be a team player into something where you're willing to explore the way that things can go wrong so there's kind of a pair of exercises that you can do one is a back past and one is a pre mortem so a back
00:27:43test would be things are good right or it's a year from now and our portfolio is that fifteen percent why do we think that that happened so this is a really natural way for people to think now you're sort of working backwards it gets you out of thinking
00:27:58about just what's right here and thinking a little bit more long term about what are the things that could have occurred in the last year and you do that happy exercise but doing this other exercise of it's a year from now in our portfolio is down fifteen percent
00:28:11that's a pre mortem and have people actually engage in that exercise allows people to know that you're thinking about the fact that things don't always work out what matters to us is that we first see the landscape much more than that we get a good outcome right because
00:28:27we assume that if we foresee the landscape and we go through these exercises and we're willing to do this together that we're gonna end up on the good side of the outcomes much more and it redefines for people what being a good team player means because now they
00:28:40get to say well we made this mistake and we did this wrong and then you think about the things that have to do with luck like the president did such that we we don't have control over that and you start to think about what do I have control
00:28:50over what don't night and that gets you much more focus just on how good of a forecaster are weak and now the outcome you're looking for is good for Cass as opposed to good or bad outcomes and if you can get people focused on good for casting as
00:29:04opposed to the quality of the outcome itself people believe much more that the outcome will come you've now written the book and there's the definition of the problem some prescriptions and you go out and you start advising organizations who have read the book what if you found so
00:29:26when I was reading the book and I was talking about this disconnection between outcomes and decision quality I was thinking about two problems that come from this problem number one is that you can make a really really good decisions and have them not work out even if it's
00:29:44ninety nine percent of the time it's going to work out like sometimes that one percent hit so there is definitely that side of it but the obverse of that is that you can make really really terrible decisions and have those work out just fine I haven't run red
00:29:57lights in my life by mistake and I'm alive thank you very much and both of these are really huge problems for learning really really been problems for learning because in one case obviously you don't want to think that just because it worked out well that I should now
00:30:10be go from running red lights it's pretty bad I mean I've actually heard people say like I drive better when I'm drunk it's like great because you got home safely once apps we all have that there's so many things in our lives where we think we drive better
00:30:24when we're drunk just because like stuff worked out so we don't want to have that happen but what's interesting is that as much as I emphasized that side of the coin which I think is actually the worst problem good stuff happened I think it's because of me solely
00:30:39I'm just going to repeat all that stuff and the reason why I think it's a worse problem is number one you don't want to repeat it but number two when you go down that line you tend not to explore whether you were like on the tertiary line yeah
00:30:51okay you had a great result that maybe were supposed to have a result that was twice as good but we leave those things relatively unexamined because we just think we did a great job I think that's the bigger problem what people latched into was the other thing that
00:31:03which isn't surprising given at our own biases are believes in the things that we believe about ourselves and our own decision quality or so wrapped up into our identity isn't that surprising that people latched on to them well I can have bad outcomes and it's not my fault
00:31:16part well I suppose not I suppose that isn't that surprising because that fits in with reasoning to be right I thought I'd emphasize it enough in the book that I was really really scared of this other problem I don't know if I could have emphasized it enough maybe
00:31:32and so that I was really surprised about was that that particular line of reasoning about what happens when things work out well and why is that so problematic for learning and so then what goes along with that is that what I found was that one of the biggest
00:31:46problems that I was seeing was that people who are in finance no this process language they know it really well like they understand you're supposed to speak in process but when I actually looked at what they were doing they weren't they were really we're just worried about the
00:32:02downside unexpected downside outcomes so they would come in and take out any you know we're really process oriented around here but I'm having this problem because I feel like my desk heads or not managing their risk for awhile you know and I don't understand why because I tell
00:32:17them I don't care all the time because we're process oriented and then I would sit in on their meetings and they were all why did we lose so I was like well what do you think you're telling them you're telling them you you really really care when you
00:32:31lose one was the last time you had a meeting about why did you with the example that I give is like your real estate investor and you invest in a property and the appraisal comes in super low and it's just it's all hands on deck what's wrong with
00:32:44our model the appraisal comes in super high and it's literally like yeah and obviously in reality that's like as big a problem right like if your model is forecasting low that's been a problem for your ability to actually allocate capital in a really smart way is if your
00:33:03forecast is coming and run the other way if this whole side of the world remains an examined so unless you're willing to examine both sides of the world how can you actually be process oriented right then you're really just outcome oriented with a bunch of process language it
00:33:17wrapping around it which is why I go back to this problem of being smart makes it worse because when you're smart you're really good at rapping processing language as a pretty package but what's inside is a pilot bad outcomes when you open the present it just looks really
00:33:35pretty and it sounds really good and your really convincing to the people around you it's something you're not actually behaving in that way it's just that you can spend a better story about how your process oriented I'm sure we're gonna have a few questions people ask before we
00:33:49do I want to give a little patch for your block so first of all thank you if you if you're looking at your phone and haven't bought the book just for us to do that then you should go to any Duke dot com there's a wealth of information
00:34:02and one of them is in east and putting together a weekly blog of things see season read where people are consistently making these types of mistakes and as she said you're fine %HESITATION I I read the book in for about three days I'm thinking incredibly well about my
00:34:16decisions and then you go back and I found this to just be a fantastic way of refreshing your mind of %HESITATION yeah gotta remember every week every week every week yes it's a newsletter and you can just go on there and and subscribe to it it's so how
00:34:30S. you spend your time the newsletter takes a lot of time so I just sold another book with the third book behind that so I'm gonna be working out of work book actually to help people be able to instantiate some of the lessons in the book and then
00:34:45another book that's a little bit more on the line of what we just talked about actually in terms of this real problem of late how do we actually get people away from being outcome driven in their decision making going back to do my PhD with felt headlock trying
00:35:00to fit that in some been slow because I'm a little busy and outside of like my children which take a lot of my time and other things I'm doing a ton of this I do a lot of key noting trainings half to a full day trainings coaching and
00:35:17consulting thanks question so I would love to spend the last five minutes allowing people the audience to ask you some questions if that's okay before yeah recurrence rate questions please raise your hands everyone in your is invested with either an individual point the trigger on whatever investment workgroup
00:35:34making a decision how do you expect those tune to be different and I think interleaved thank the individual would have far wider outcomes either really good really bad versus a group but in the us your view so it's so completely depends on how the group is constructed most
00:35:49groups become individuals on steroids kind of you tend to stick with people who agree with you people don't really like conflict very much generally dissent is not well represented and so in some ways the group can actually be worse than an individual if the thought stylus confirmatory now
00:36:07if you have a group who's really developed a good culture around exploratory thought then the group is going to do much better in general and the reason why is that the group will have a disciplining a fact and a pretty strong disciplinary affect on the bias of any
00:36:23particular individual in the group but you have to really query if you want to understand whether a group is the better choice than a particular individual you've got a query on what that culture looks like and you have to be really careful because you may have someone tell
00:36:36you about how process oriented they are and how open to dissent they are I would want to sit in on those meetings and listen to how they actually communicate with each other because in reality it's incredibly hard to actually put into practice and when you do that you
00:36:49have a bunch of people who are cheerleading each other and and actually becomes worse because the individual will tend to have more doubts because they don't feel like they have natural consensus and so the individual will discipline themselves better than that group will discipline them if the group
00:37:04has a confirmatory thought style so you know I would say it's sort of if you had to rank order like the worse is a group that has a confirmatory thought style Dan would be an individual investing and that would be a group with an exploratory thought style I
00:37:16think that we tend to think that putting a group together is just better and it's not true it really depends on what the culture of the group as what you said really resonates with me I really enjoyed your comments and I'm curious there's so much talk in executive
00:37:30ranks about being results oriented and I'm curious about when you go out and talk to people how that language of I'm results oriented gets in the way of what you're talking about I think it's one of the worst things that somebody can say I think that if you
00:37:47say %HESITATION long term results oriented that's totally fine because we all shall be long term his calls for it to write like give me ten thousand points let's all tell you a whole bunch about the coin but I don't want to know on one result that's a language
00:38:00that I actually try to get rid of right away because I think that that's actually directly communicating to people that they really need to defend themselves against the result of a particularly bad results so I think that when you say results oriented you think that your motivating people
00:38:14to give you good results and the fact is that you are but not the right kind what your motivating them to do is to choose consensus choices to stick with the status quo to choose the lower volatility choice rather than the higher volatility choice to try to sort
00:38:30of keep the swings low I actually I'm hearing it more in terms of therefore I'm not process right yeah better not be processed right because I %HESITATION that's really interesting so generally what you're telling people is that your decision making is a black box to me so you
00:38:50are saying I'm not process oriented and in fact what I think goes along with that is very often what you hear from people who are saying I'm results oriented is that they have a big belief and got as well is this idea of like well we can't really
00:39:02open it up to a process because like I have my secret sauce and so if you ask me why I made the decision I did it's just because I'm me and what I really try to get people who are thinking that way to think about is that it's
00:39:13really good to open up the black box because I'm a big fan of what Feynman said like if you can explain it to an eight year old you probably don't know what you're talking about and so when someone says well I did it because of my god I
00:39:25think it's a cop out and what I'll generally say to somebody like that is what okay I know what was your got so that's great and I'm really happy your guy is so good but would it be great if the rest of your team could sort of learn
00:39:36from your guy and so what what I can do is I don't challenge that their god is really good I just tell them to be really good if they had to teach it to the rest of their team because otherwise what happens is that you're not actually bringing
00:39:50your intuitive choice is up to the light of day against a rational process so I think that those two things go hand in hand is that they're a big believer in black box decision making so you have to sort of pull those two things out the way I
00:40:02do it is like that's great but you got to teach him how and then that will generally get them to start thinking a little bit more about process but it's tough we have a group of very experienced women back here and we not if they're not others throughout
00:40:16the road twenty six percent as I counted their roster but we were talking as you were talking about how we are constantly feel like we're wrong when we're in a group meeting and we've often been the only woman in the group is just so consistent I think for
00:40:32women and a lot of these meetings is there something about we should be aware of in those meetings or try to grab on to or the way that we were taught to do things can we close this by you telling a poker story of how you can take
00:40:48advantage of being a one oh yeah sure that's an interesting way to close it sure absolutely okay so your point I think that one of the problems that I have found when I talk to women it just to give you an idea in an average program three percent
00:41:03of the people playing a women not too many of us so you're sitting at the table and by the way there's no H. R. department and there's a real sense like if someone said something completely outrageous you at the table and you look at the floor person who's
00:41:20supposed to be sort of controlling the game it's that way you can leave so are eight okay I guess I could so this idea like you're here voluntarily so there for whatever abuse you're taking your choosing a lot of what's happening is that what's coming at you is
00:41:34a real difference back for your abilities and your intellect I think that everybody has a need to be liked and respected but there's a time and a place for that and when you're sitting across the table from an opponent it is not in any way shape or form
00:41:50manage to be proved that you should be liked and respected as much is it doesn't feel good when someone says something really nasty to you in this respect you as an opponent that's an advantage so what I used to try to think about when I was playing was
00:42:06that in terms of the structure that I was sitting and there wasn't a whole lot that I can do about it right like I couldn't look at the floor man and say could you make the stock that wasn't going to happen and that maybe just by my presence
00:42:18in me being in this world that maybe the culture would change over time but that certainly in any given moment I couldn't do a whole lot to change the culture so what I started to think about was well how can I take the fact that you have this
00:42:32attitude toward me and not everybody but a certain subset of the people as planned guns would have this attitude toward me and how can I actually create agency for myself in that interaction in order to turn that to my advantage so here is to really simple examples I
00:42:49know that you think that I'm capable of thinking that's only one level deep that's as far as my little girl brain will go so therefore that must mean that if I'm betting I probably have a strong hand and if I'm not then I probably have a weekend and
00:43:05so you're going to give me a relatively one to one mapping between my actions and the quality of my cards so once I know that I can say well you don't think too much of me that's fine but because you don't think too much of me that means
00:43:18I can bless you all the time because you're of the opinion that I'm incapable of putting a lot of money in the pot and less I have a very good hand so that would be a way that I can use that to my advantage another example would be
00:43:29there's a certain type of opponent who would consider it a total assault on their masculinity if you were to bluff them that would be the worst thing that could ever happen to them yeah and what goes along with that is they want to kind of assert themselves over
00:43:45you all the time as well so the way that that tends to manifest is that they're highly aggressive of you because they're trying to bless you all the time and if you try to bless them they call you because the only way you can stop someone from ever
00:43:57bluffing you is actually just check them out every single time and not ever folding folding to a woman doesn't feel very good to them so obviously again somebody like that well there's no use and bluffing but what I know I can do is that I can take my
00:44:10very good hands and I can just bat like way more than I normally would be able to because you're just going to be what we call looking you up all the time you're going to want to see my whole cards to make sure I'm not tricking you because
00:44:21that would not feel good to you so I remember actually one of the very first time that I played in the biggest win that I had at this time I was playing a two dollar five dollar pot limit hold'em game I think my biggest win up to this
00:44:34point was probably eighteen hundred dollars and I played against a particular gentleman who was of this variety who really just wanted to assert himself over me so he kept adding and I kept calling him and I would call him would like ace high and I would call him
00:44:48would like to choose at ten I mean I was just calling with these ridiculously bad hands and he would move on to the next fan and tried again and it would move on to the next and then try it again ended up winning seventy five hundred and again
00:45:00but the biggest when I'd ever want and for anybody that knows anybody about that two dollar five dollar limit right like a huge win in that game should be a thousand dollars so like this is a good example kind of the best revenge is not for me to
00:45:13try to convince you otherwise it's the figure out what the best way for me to take strategic advantages of the way that you're sort of viewing me as a human being then I can walk away from the table because I wouldn't be friends with you if this is
00:45:26your attitude toward women anyway so what do I care was kind of the way that I looked at it so why am I trying so hard to make you my friend and I wanted to say really really clearly that this is not the majority of people I played
00:45:39against there is just a certain sector of the people that I played against you behaved in this particular way and it was super Yummy when that happens okay face yeah before you take off I've created three different ways for you to stay updated on the podcast and my
00:46:07blog according to your preference first you can sign up to receive a monthly email with a few great things I've read and listen to over the month second for more prompt delivery you can subscribe to my blog and receive emails when each podcast episode in a blog post
00:46:24come out and last you can access the full library of transcripts by signing up for a premium subscription all three options are available on the home page at capitol allocator podcast dot com thanks for your support

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