Howard Lindzen is the founder and general partner at social Leverage. All opinions expressed by Howard and podcast guests are solely their own opinions and do not reflect the opinion of social leverage or stock twits. This podcast is for informational purposes only, and should not be relied upon for decisions. Guest may maintain positions and securities discussed in this podcast. Yo, yo, yo, Yo!

Can new tie in the house

low hour. So tired of you Likewise. No, you're saying that could I said it That didn't come out and tired of you. All right. I think you know now you're hurting my feelings. Okay? Okay. All right. We, uh, have another up death. People are in a good mood. So while they're at it because they're gonna be in a bad moon soon. Yeah, right. Death is terrible right now on the market's going up while people are dying.

It's kind of a weird thing. Markets no care about these things. That seems markets are un emotional at a whole emotional beings making up the market and caring. But the market's holds a cold place show today. Uh, this our most popular request. When I asked ah, people who they want on the podcast, from stock to it. It was someone I didn't expect, that I don't know her. And so this will be my first panic with friends That isn't a friend, but hopefully she won't hang up on us. Her name is Annie Duke Kanoute. Give a little background on Annie. I will.

Annie Duke is an American professional poker player and author. She holds a World Series of Poker gold bracelet from 2004 and used to be the leading money winner among women in W S. O. P. History. Impressive Duk won the 2004 World Series of Poker tournament in championships and the National Heads Up Poker Championship in 2010. Tude. You think what the on she hangs up or says she has an important meeting halfway to Theo? Good, good there. We've got a lot of community questions. This is because I'm not friends with her. I don't I don't want to fake it. So we're gonna ask her about panicking about. She's very much her book. Thinking in Beds is a very,

very big bestseller about behavioral thinking and process in. So I've got a ton of questions impressed, written out. And so let's ah, let's just get her on her phone on the phone and you know it's Ah, talk hyphen for a second episode is brought to you by Coy friend, one of our portfolio companies. If you want to track and analyze what's happening in the current market turmoil, Coy Finn is for you. It's a Web based platform. Let you analyze stock, C. T s, mutual funds and all other assets in one place. I use it every day. Of course,

you hear about it endlessly from me. It's fantastic. Coffin has a ton of high quality data, powerful functionality and a clean interface. The best part is it's free. You'd sign up at coffin dot com that ko y f i n dot com Let's get any on the phone. Annie Duke.

All right,

good. I I, uh, have my producer canoed on the phones. And old heightened an old college friend of mine from Arizona State. Yeah, uh, thank you. And where you today

outside of Philadelphia? In my house, where I've been for you know,

So you've been kind of self quarantine for a month?

Not quite, but it's getting close. Um, yeah. You know, we were I think we're probably paying a little more attention a little earlier than some people. Not everybody within some people and all right, just starting to prepare. I mean, I think we thought it sort of sort of saw what was going so like, you know, as an example, um, I was supposed to go to Paris, and I canceled that trip when there were there was maybe a handful of cases in Paris when they were just basically when Italy, when Italy's situation was confront, still confined to Lombardi.

Um, so it hadn't really I think there were just a couple of cases in France, like I immediately cancelled. Just like I have some sense of exponential growth and that viruses don't have borders and things like that. And so, uh, my husband more set. You know, I was slightly behind my husband in terms of alarm level, but we were both

pretty. Or what does he do for a living?

He's inside finance. So

And how is silly? How's Philly isn't as bad as New Yorker or

little better? No, actually, our governor has had a pretty darn good response. Um my county. I got put into a force lock down when there were four known cases. Um, you know, which is awfully early to the game. And they've been he's been taking sort of a rolling lock down approach, you know, like, sort of locking down as and so Pennsylvania. I mean, Philadelphia, obviously, you know,

has quite a few places, but it looks like from what I can see it from, they're the modeling work. We're gonna be pretty okay in terms of hospital beds. And I see you beds and ventilators, which is really what you care about. So it's like it's really horrible. I mean, tons and tons of people infected. Tens of people are not going to survive. But the thing that I really think about, What this is that, um, as human humanity here has a chance to toggle the death rate, the fatality rate, um,

by weather were doing what we need to do in order to make sure that we stay below capacity. Um, so you know, obviously, in an ideal world, we would have gotten ahead of this so that we have been away for for more more, you know, for fewer people to get infected. But given that the virus is what it is and it's gonna have, you know what you want to do is get to the best case scenario fatality rate rather than the worst case of Aaron Fatality rate and human beings totally have control over that piece

of the puzzle. One thing we you know, that's what pisses me off. But the federal government, that's one. I think that was the one job. Just get the rate down. You know what's coming? You know, the storm's coming. They do this for Hurricane. They overreact for hurricanes. Why was this exactly so I get it. But I don't want to talk. I mean, obviously, because you think in bets and because you are going to use some buzz words for you because we don't know each other.

I just want to be upfront with people. I told everybody your background before we jumped in here. Stock to its twitter. You know, I'm rather famous on the Internet, but not like you. So I just wanted my audience was begging for me to talk to you because, you know, they read your book, they think in bed. You know, Um, you know, I want to get into decision making, resulting. And I know this is why the virus was probably interesting to you because it's human behavior is kind of what you study.

You study people. You, you know, you think in terms of bets. So I apologize if some of the stuff seems boring. But I gotta learn to and screw my own You know more about me than anybody else,

right? But actually, what's really good is that I think that the virus actually offers a really good way for you to actually see. Like why it is that you should be thinking about decisions this way because we really have this tendency to think that things are more invisible than they actually are that there's less uncertainty and less luck involved in there actually are is. And when something like this comes along, it's just like so in your face.

So in our face have you ever have You obviously haven't. But like, there's never been something on the front page just long other than maybe World War or World War Two.

Yeah, I don't think something. Obviously the mortgage crisis that that was around for quite a while. But, um, not it didn't. It wasn't. The thing that I think is really interesting about this is that they're basically is no other news, you know, and that's for a variety of reasons. But during the mortgage crisis, the world continued to exist brightly. The whole world was not focused on this one thing, you know? So you would watch the news and and you read the news and they're based stuff about sort of what was happening in terms of the recession And, um, you know,

banks collapsing and whatnot. But there were also other things going on in the world. This is like, this is the only thing that's happening in the world. And I keep wondering, like is Isis and locked down like, I sort of me. I don't know what's happening in Afghanistan right now,

right? Stuff that, uh you're right. We just don't have

the O, right. Like, right then people put war on because I have no idea, you know? So I mean, I think it's kind of interesting. It's like so I don't even know. I have no idea if they're fighting still happening. Do we still have troops engaged like I don't know the answer to that. You know, I could eat whatever. I mean, I suppose that could go find it out. But it's certainly not

frightened. No one's talking about it, you know, the other night, and no one's talking about that. I'm fascinated by because I was on the wrong side of this meaning. In hindsight, I'm glad they didn't was closing the markets. Looks quite fascinating. Them sports shut down. Ah, movie theaters and everything but the markets.

Yeah, so I think the reason why it's really important to keep markets open, um particularly particularly in this type of situation, is that markets are an incredibly good price discovery tool as we know. So here's the problem is that there's all sorts of stuff happening in the world, and the uncertainty is huge, rightly, how this could turn out what what the world looks like, What the set of possible outcomes is. It's just it's so there's so much dispersion right now in terms of what how things could look. And it's for a variety of reasons. One is that there's just a lot of lovers, right? So Lake Ah, lot of the weight of this kind of looks. The pens on house stricter the lockdowns. How much are people following it?

How quickly do you have antiviral or other types of remedies for dealing with it? So the models themselves are like, incredibly complicated and and we're sort of flying a little bit blind, like, you know, this is new. And so the amount of data that we have just sort of about the virus itself is low. So so there's a lot more luck involved. There's a lot more hidden information involved. There's a lot more levers that could be pulled, and then on then, on top of that, it depends on what modeling you used and how you model the virus. And what are the assumptions that you're putting into your tree to your models? Right. So you have,

for example, all these different teams of epidemiologists and depending on which team you sort of look at, you know, their projections look very different. So the question is, how does how is human beings both in terms of on a societal level and also on an individual level? How do you kind of figure out like, what are the range of possible outcomes. Like, what are the best mitigation strategies? Right. And you can see you can see that reflected in the market like the market is is reflecting what the wisdom is around, what it's supposed to look like. What is the outcome? Gonna look like? How quickly is gonna be over,

what kind of mitigation strategies does the market like right there that did it. And it looks like, by the way, the market initially was pretty shocked by the lock down. But then, interestingly enough, when the administration sort of came off of that Easter Open right, we go, We're gonna let everybody back out. By Easter, the market went up. So that's where you can kind of see that there's a lot of value in the market, kind of like telling you what's what, particularly when it's incredibly liquid, and there's a lot of trading going on. It becomes very, very good for price discovery.

Okay, I'm with you. I 100% believe it's all about price discovery. I could trade without any fundamental news, as long as I could contextually see a lot of prices over time. So I'm grateful to the people. Opposite were great for the health care workers and first in the frontline doctors. But like Jesus Christ, the fact that the market stayed open was what makes America America sometime. You know, I think the markets get enough credit stable.

They don't march is definitely don't you know the markets don't get enough credit. And I think that people, I think people underestimate how the markets, how valuable the markets are in telling you what's true of the world,

right? Yeah, That's why I started stock twits. It's why it's why I'm doing this panic with friend. Sirius is like the joy, the sorrow of this virus and cove it is. We could talk about it all day, but I don't know what the point is. We don't have good data and the only play to really see the data players in the stock market like I've been telling people you want to know what's happening. Look at the stock market like you just said, Hey ah, market went up on news that is kind of related, like you said to the to the virus slowing down, and you could see what the market wants to go up Once this virus walks away, you know? So So knowing that so obviously you do. I mean, we get to poker, but you do invest. It sounds like

so I actually so personally, my view was this that so I I obviously have money invested, but I do not do any active trading. And the reason is that the one thing that I know for sure is that I don't know for sure and that there are people who have the opportunity to be spending every single minute of every single day thinking about these issues. Um, really thinking about pricing, really Looking at what? What they're actually investing in in a way that I don't have the time or expertise to dio. And so, just like in poker, if I were to be silly enough to think that somehow I could compete against them and out decide them, that would be that would be folly. And that would be an exercise in some pretty serious overconfidence, an illusion of control and all sorts of stuff. And I also recognize sort of a second order thing, which is that because a lot of the work it that I dio is adjacent to that So I worked with a lot of people in finance, really helping them to create structures and culture within their companies. That will really improve decision making. So, for example, I'm buried Lynn Goda.

Lingle city. By the way, this our first fight, even though we don't know each other cover that you're underachieving, you'd be a great nothing to trade all the time. But we'll do that at the end. We'll do

the things that at the end, but

yes, I mean, it was just our first fight. I just want to go on,

right. They thank you. Yeah. So it's like I'm super lingo it up so I can talk about Alpha and Beta greatly. You know, I could talk about volatilities and fat tails, you know, keratosis, you know, so on so forth. Like I can talk about risk of ruin. I obviously will he understand risk And it's a lot of what I actually counsel my clients on. So there's all sorts of stuff that that I know that could make me think that I would be a better decider at being an active investor.

Okay, But I don't have an active. There's points where you can be active and quiet. It's like the tiger. It's like the lion that hunts. Yes, you're underselling yourself is all

of that is true, but But I take a lot of credit and an awful understanding that I'm pretty good at protecting myself from overconfidence. So I have much smarter people making those decisions, and what I communicate to them is what my values are. What am I trying to accomplish with the money that I'm putting in the market? Tell the risk. Am I willing to take on, you know, so on, so forth. And so they I'm very, very clear with them about those constraints. And and we talk about how that we're talking about how to actually in Stan. She ate my values in my portfolio and so that it's not completely passive in the sense of me to say to somebody, do what you will with my money, like I'm communicating, What I would like that you know what my risk tolerance is and so on so forth. But

and that's the lesson. You know, even if you're not active, you're actively managing the person Manning. You're you're communicating with the person. A professional. Hopefully That's your advisor. That saying, Hey, I'm laying out giving him open myself up here. This is me. Don't screw it up like I know my weaknesses. And let's set a plan based on this,

right? Exactly. So that's what I did. And then the only other three only other thing that I did was my business, Um, is very, uh, really kind of pretty dependent on the American economy. So, you know, cause I do. But, you know, I do consulting. Most of my consulting clients are in finance on and then I do what speaking, which is across a wider variety of sectors. Um,

you know, and I do have consultant clients that are outside of finance is just that the majority of number in some way involved in finances. So But it's all it's pretty much based in America, Like I'm dealing with American companies. I'm speaking to American companies. I'm goingto American Conference is not right now. Ah, and so recognizing that that my my finances already have a big biased toward America, The one thing that I do do with my portfolio is trying to sort of overreact a home country bias and make sure that my bets are spread across the world, more so maybe than other people would, because I know that my own my earning right the money that I'm actually bringing in is pretty dependent on what's happening in America.

And what we're learning is like everybody's learning in a panic. Correlation goes to one, no matter where your money is.

Well, yes, this is That's true. So that would be the tail event, right? But under normal,

right? Like that's what's fascinating. None of us know anything. I mean that in a panic because this is why did the Siri's is like, I'll disappear soon as the panic subsides. And and theoretically, we may have been their vics. 91st a record eight days above 60. We've seen all the signs that yeah, the news could get much worse. But the markets may have bottom because, you know, the market's pretty interesting Is the pricing mechanism might a price this stuff in? And I say Mike, I

don't know. It might, you know, I mean, I think that in this particular in this particular time right now, I mean, obviously one of the things that markets are really good for, um, is, you know, they're not pricing today right there praising the future. Obviously, which, Which people think. I think that the average person it would be good if they could really understand that particular fact. But the markets are giving an opinion about today. That opinion was given a while ago,

right? Like the markets are giving your opinion about what the future will look like. Yeah, you know, But what I do think that right now is that, um I'm guessing that at the moment there's a lot more retail investors that are making active decisions about about the, you know, the market. So when you're thinking about you know, how good is it right now at, um, you know, telling you something really, really good about the price. I think you do need to take that into account and you're probably going to find My guess is that the really good pricing is gonna happen in places where you know that there's more smart money trading it. And if you're trying to find the price that I would be looking, I would be looking at the sectors that smart money are trading more so like I'm guessing, for example, that that options are probably giving a little bit more truth

right now than just so much. It's just like the number one thing that I've been talking about. I don't trade options, never learned them while I'm like I've wish I did for this one moment in time. But that's my you know, my dead sea memorability e I should have been in every option trade I've put on has made so much more sense to me, and I'm using small lots because I'm learning. But I've learned from past panics, and I was just lazy to This is not my full time job. Is you the weapon of choice? Ah, where all the pro Zara's using options. There's interest. There's premiums to be collected while they wait. Ah, they understand about, you know,

the market looks ahead. So pay me now while I wait and and, uh, there's a lot of truth and options right here. So I agree with you there thinking and bets. What were you thinking? Like great title best is the title. Everything. I mean, obviously the books very much for investors, if not just poker players. But investors seem to love it. So what was the cross?

Yeah, the book isn't isn't actually particularly meant for poker players. There isn't very much poker in it. So I mean, I think that a poker player might benefit from reading it because it would give them another way to look at thinking about the world. But if somebody wants to learn poker, I've got another book.

What do you recommend again? Business? What?

I wrote a book called Called Decidedly

Great Poker. Decide so

And that's that's kind of like the mirror image of this book in the in the sense that this book is saying, there's this kind of thing, this framework through which you can sort of think, you know, you could be thinking about poker That's actually really helpful for thinking about every decision that you make decide to play Great poker is you can learn a lot from decision theory, decision science game theory that you know what, not a cognitive science about the way the frameworks, which you might look it. You might want to look at poker, so it's kind of it's sort of the mirror image, if you can think about it that way of this book, but people seem to really like it. It's rated very highly on Amazon. A lot of people have read it who want to learn poker. Um, and one of the things that I actually inspired me to write this book was that I had a few people in business who said I heard your book not to learn poker, but to learn how to do business better.

Yeah. And I was like, Oh, additions for decided, play great progress. So that's interesting. Maybe I should actually specifically, like, actually write that book. So which I did. Yeah. I think that the title I think that the title is kind of everything as long as you get to the subtitle, Um, which is making smarter choices when you don't have all the facts. And the only reason why I think that the subtitle is important is that this book does have a lot of practical advice, innit?

Um, and I just want to emphasize that. So because it is one thing to say the world is a very uncertain place. We tend to be very uncomfortable with uncertainty. Um, we don't wrap our arms around it really well. We tend to think that we can predict the future much better than we actually can. We think that the range of possible futures is narrower than it is. We have more control over it than we d'oh! And ultimately we all still don't recognize what that specifically What about, really, is this saying, given that there's a lot of uncertainty about the way that the future might unfold, which is derived from the influence of love but also the influence of him in perfect information? The question then becomes, if I have limited resource is how do I figure out in that kind of situation,

how I might want to allocate my resources to to a variety of options, since since I can't I don't have infinite, you know, I don't have infinite resources or in particular infinite time, Mom and right. And I'm not Amish int so that that's the thinking of bets part and then the making smarter decisions when you don't have all the facts that's about okay. So given that that's the case, how do you actually approach that problem in a way that's gonna make you better at it?

Yep, exactly. I tell investors all the time. It's like if you don't have to beat any index you're investing. If you're investing for yourself, reassess Now the markets rallied. Calm down and and reposition yourself. Who cares what you paid? Now it's a time to position your portfolio for the next 10 years, and you can't look back at your bagging ago. I mean, some of the stuff just goes out of style and the bear market. You know, you get warnings, and now you've got to reassess. You shouldn't think about the past. You should think about how to position yourself going forward.

So I guess that's like thinking and bets. I'm just trying to teach people to, like, you know, use these calmer moments to make bigger decisions. You shouldn't make humongous decisions. When the vics is at 90. You should be making humongous decisions when things calm down and reposition yourself. Obviously, it's not always possible, but that's, you know, in a panic. That's what happened. So So, um, the word resulting means a lot to you, So can you walk people through that?

Yes, I think actually, this is what you just said. Um is really wise, and it actually relates to resulting, which is, you know, you can't just look back on the past and say that wasn't a dump, its decision or why did I do that? Or why was I advised to do that? Uh, and Natasha True. But how do you look toward the future and recognize that that tendency is going to exist? So think about think about in advance. So basically, what here's here's the issue with resulting is that it's very, very hard because of the amount of uncertainty to figure out based on a single outcome,

whether or not a decision with good or bad. So, uh, if you think about for example, um, if I buy a particular stock, I have some sort of thesis and I buy a particular stock, uh, and the stock and I'm going down. That doesn't necessarily mean that the decision to buy was bad. Um, and that's actually built into portfolio theory because the whole point of portfolio theory is that you're operating within perfect information and there's a lot of luck involved. So what, you want to do it across your portfolio? All of let's say, Just think about equities.

Let's not worry about bonds right now, more cash. But let's so let's assume we're just talking about equities that across all of the all of the stocks that you buy that you're positive expected that your positive expected value. In other words, you're gonna win across the set, but that if you looked at any individual stock, you don't know whether that particular stock is gonna go up or down. So the idea is, I would like all of my stocks to be positive expectancy. But what I recognize is that in real life I don't get to run a Monte Carlo of every single one of those stocks. And so some of those doctors some you know, gonna go down, some of them are gonna go up. But if I can spread my bets across all of these stock, then I should make money across all of them. So that's the basic. So so portfolio theory is kind of like protecting you against the uncertainty. But what ends up happening to us as we look at her portfolio, we focus in on the stocks that lost were like, Why did we own those?

We focus

in on the stocks that one and we say we should have had more of those. And so we're using the actual, like the specific results of that particular innovation, to try to work backwards, to try to figure out whether it was a good decision in the first place. And of course the answer to that is, but it's because you couldn't know in the first place that that particular stock was going to do that thing. If you could, I would have bought Google in 2000 or whenever it went public, and I literally would have never owned another stock just

for a while. I told people that was better than the S and P Index because it was diversified in a better way than that. It was less diversified than needed to be. And I could talk about that all day long. America over diversified. We're just sold. We can't help ourselves. We're just walking the law greens and you see 7000 band aids or shampoos. I mean, how many did we need? So it's it's happened in our portfolios, you know? This'll mantra of only S and P 500. What? Why don't I need 500 stocks? Can I get the same diversification with 12 and sleep better,

all right, And that has to do with. So that's kind of a meta scale of sort of understanding. You know, what's the volatility, right? Because you can sort of think about it this way that the more information that you have and the last luck were involved, the fewer stocks you would need to own, right? So imagine there's no luck, and I have perfect information right now. I can own the one stock. It would be the stock that will return the most if I have perfect information and there's no luck. So basically, as we sort of move away from that so you can think about it as a scale, right? As we kind of move away from this anchor point of perfect information and no luck, and we're thinking about how much luck is in there, How much do I know or don't I know? As that happens, you have to expand the number of holdings that you have in order to realize your games

so doesn't know how to get out of bed, knowing all this because you and I know the same thing at some level and know that the market and the markets not rig because some people do have perfect information, including the president and the people that I'm not saying he cheats. But the incentive to cheat is so high because he has perfect information and the people around him that why people just cheat in those positions.

So I think that that I think that you have to price that in

great. That's what I tell people. If you're going to invest, assume that that's happening. Yeah, Number one rule, I tell people, is like, Hey, stop worrying about it. You can make fun of it. You can talk about it all day, But if you're making investment decisions because you're like, assume that that's who you're up against to start,

right? Exactly, and I think that's I think it's I think it's actually really important. You know, there were some. There were some old, more old time poker players who, uh used to tell stories about playing in home games and in home games. I think that you know when you're playing in my poker in home games and you're not in a casino and there aren't cameras and kind of people watching the game and what? Not that. I think it was much more likely that some shenanigans were happening in the game, and they used to say that they knew that and they priced it in right like they understood that when I was playing in this game that they're just they had to judge. Are they better enough in the game to overcome the fact that there might be people who are cheating in the game and that was part of their decision making process? So I think you're exactly right. I think that sometimes there are things that we can't control is individuals on. We allow ourselves to get really emotional

about. It only feels like

justice. But the fact is that yes, like you can try to do things you know, outside of your own decision making t change the system and t make it so that that doesn't happen. But but given that it is happening, your best strategy is to say it's happening, so I need to price that into my decisions. I need to recognize that they're going to be some people who are trading with unfair advantages. Andi, I need to take

that into account, and what I've done is just lower my size. They keep complaining and everybody thinks something like an American, because I make fun of Trump. But I'm always saying he just acts like he doesn't care, like he acts like the markets are a toy to him and he's getting his jollies moving the futures and stuff around. That's just my perception, and I'm trading with that. I'm not saying it's really true. I'm just saying That's my belief and therefore I'm lowering my position size until the storm passes because I wouldn't put it past him, even though it and I don't begrudge anybody for doing it. You know Bill Ackman coming on CNBC and crying. There's always a bigger game at play, but you have to take these things and factor them in

the market. Yes, Oh, so basically, what what I think is I mean, I think that this is a really good sort of forecasters mind Andi, I think that it it actually fits in with, you know, we hear this accurate from strong convictions, loosely held.

Yes, really, That's my life,

which is basically to say this whenever we make a decision, we're making it within perfect information. So so no matter what, we're making assumptions about what's true of the world. And so, essentially, when you make decisions, you make some sort of assumption about what's true of the world on DSO. The decision is decisive, right? You're deciding that at this moment in time, given what I know, this is my best guess of what's true of the world, and I'm going to decide accordingly. But you also think very clearly about what would I have to look for signals in the world that this thing that I believed to be true when I was trading off of isn't true, right? So So you want to think in advance like,

what are the signals that might exist out in the world that would show me that that wasn't true? So you're not actually ever making a choice about, um, I think that this is 100% that somebody is trying to move the market to their own gain or that somebody is just enjoying watching the money market move or whatever. It might be your saying. I think this is a strong enough possibility that I need to build this into my decisions now. Obviously, the most sophisticated thing to do is to say, You know, I think it's 60% of the time. This thing is true and 40% of the time this thing is true. List say there's only two things that could be true, which is rare. But let's assume that that's the case, then what you can do is then build your portfolio on, and that's exactly what a hedges is to say.

I believe I believe mostly that this is true, but I think there's some chance that this other thing is true. And so I'm gonna I'm gonna balance my portfolio so that I have a position that benefits if the other thing is true as well. Um, and that's kind of the whole point of, like, this sort of standard position that we all take up. I'm gonna own some equities and that owns the bombs, right? So So if you believe that in den role is always the case that the market is gonna go up and America's gonna do pretty well, um, obviously you wouldn't really be ever. Why would you have bonds since that would make it, But given that we aren't sure. And we don't know. And sometimes it's gonna go down.

We want to be able to head to comes that on DSO That's actually kind of the best way to put To put that into play and that keeps your convictions is loosely held. It's possible, right? Because you're saying, um, you're actually now in Stan. She ate in the uncertainty into your investment strategy.

That's awesome. So let me go back and just do a little poker for my own knowledge. Who got you into poker And what was that? What? Got you excited about it?

Yes. And my brother got me into poker. He actually

been playing for a bunch

of work. Oh, my gosh. We're such good friends. Um, yeah, he's one of my best buddies. Um, So, uh, so he got me to broker. He was actually playing for about 10 years before

I came along. How old were you?

But when I started playing, I was in my late twenties. Um, he started playing when he was 18 and finally twenties. What I mean is, I had played some before them, but not not in any kind of serious way because You know, obviously my brother had been playing, so I had watched him play a lot. And when I was in graduate school at U Penn, Um, I could, you know, I was gonna state phone, so I couldn't really afford any vacations. And he would fly me out to Vegas like, once a year.

And he kind of taught me howto know He taught me how to play so that I could, like, amuse myself. But it was, you know, it's pretty was pretty recreational. So, um, so then what happened was right at the end of graduate school, Um, and I went to graduate school in cognitive psychology. So I was studying, learning, in particular, learning decision making, like how how we process the world and understand the world,

mental models, things like that. And, um and I got sick right at the end of graduate school, and I needed to take some time off. And then I also been at that time I needed money, and I couldn't really take a full time job that I was planning to go out onto the academic job market, become a professor, so I kind of needed a meantime gig and he suggested. Actually, he's the one who suggested that I might choose to play poker. In the meantime,

did he ask her to dance for Carrie?

Well, he actually invested in me in the beginning.

So she's 20

$400. He did? Yeah. Hey, 70 $2400. And I think initially, initially? Well, yeah, initially are split was, like, 60 40 or something. So he got, like, 60% of what I made.

No, don't.

Which, by the way, I was probably stealing from him getting with that deal, But, uh, but anyway so, yeah, he did. He sort of took me on as an investment. And so, you know, I started playing and what I realized was that. And so I got really into the gate because it was kind of like, if you think about it, the expression of what I have been studying cognitive psychology in this really, really, really,

really time, high stakes way. I'm sure it's a lot of what attracts people. Thio the markets and trading is that you're putting money where your opinions that, um in a place that's actually quite difficult to do because there is so much unknown on. There's so much luck on Dhe. If you think about this, this problem like for yourself in terms of Victor looking back and you're trying to figure out like you know, why did I lose? Why did I win? In a system which has so much luck involved, that becomes really hard to do because our tendency as human beings is to protect her identity. And that's where a lot of our Kardashian is driven from. So once there's luck involved, it's like when you lose. I'm sure you see this in the market all the time.

Like when you personally lose It's wide Says it was unlucky and how you know, how could I expect that to happen? Ready, for example, Like I didn't know Corona virus was gonna come along. Like, of course, I lost Rachel. You could you sort of put it on these things that are sort of outside of your own controlling and poker, you know, it's like I got unlucky because whatever they were the turn of a card

with a coat of

exactly. But when you win,

it's always your Now I'm doing the postmortem because I write every day and I have this thing called Momenta Monday. Do a show every Monday with my friend Ivan and we I went back to look at what's on my videos from January and February, which I never do. But you have to do it in a time like this to see how you were thinking and Jesus Christ if we didn't have great information. You know, with China's airport's closing in the hospital being built in three days and China, I mean, what the fuck were we thinking? Behaviorally, we had the data. Now I'm not saying I knew how to put the bed on, but to use this Christ is latest March 1. I saw people saying, Guys, the bed is short and the markets were still cruising along at all time highs. Uh, so it's It's just it's not easy.

Yeah, so and I think that I think that one of the things that's that I think that one of the things that's really important to understand its first of all like this just you know, this identity protection is so strong. Um, and then the other thing is just status quo bias. I mean, this is a human beings that means that we're very programmed to think that the world is as it is now is the world as it will be on that things really aren't ever gonna change that much. Um, and I think that one of the exercises that we assume and being really need to go through if you want to become a better decision maker, a better investment investor, or whatever it is, is to spend some time in the future and to say and just suggested it was an exercise. Let's imagine that six months from now, you know, and the market from way down, like, what are the reasons that I think that that might be true.

So So if you're doing that kind of exercise, say on a monthly basis, right, and you're in February and you say, let me imagine. It's six months from now and there has been an economic dislocation, right? Like the markets are are way down. What? Why do I think that that has happened and you're in February Now you actually discover that information, right? You're like, Oh, wait a minute. I've been hearing all of this stuff about like it'll please kind of starting to look kind of bad, and

you won't forget that. But now that same trade won't happen, Annie Now. But the point is, this is the wall of worry that this is why I'm so excited until people just survived. Because now the markets can climb against this wall of worry for 20 years. Meaning will always have cove it in our models. Yeah, which will lead to unbelievable opportunity for people that look forward. I'm a venture capitalist. I'm like looking my chops and I'm getting yelled at every day. Why are you so optimistic? I'm Sam sore and paid to be optimistic. I'm not being I'm not being stupid. I'm just trying to, like, think about six years ahead,

because unfortunately, aye. For now I'm alive. And, um, the world's gonna look different and we're gonna have a wall of worry like we've never seen before. In the words of Trump, we've never seen a wall of worry like that. So, So selfish. I have a 1,000,000 more questions. Hopefully, you'll come on. I know you have five more minutes. Can I ask you some questions from the community? Yeah. Okay. So Andy Solomon is a great BC ask, How do you think about profit taking if you do? And the endowment effect and its role in better psychology at tour psychology?

Yes. Oh, um, so the first thing. So if I understand what the first part of the question is, Um uh, and then awful endowment. The second part of the question. So one of the things is that and I'm seeing this a lot. Is that when we have, like, paper gains way generally want to make those into realized, gains weight, book them, and we'll do it much too quickly. But what's interesting is that the reverse is true as well on. And I think that's actually kind of a really interesting place to look.

Is that when we have realized losses, we actually want to delay them. So so it like, for example, one of the things that you can think of is here. Here's a Here's a paper loss right now is what's happening with people's businesses. Okay, so at the moment, there are particular starting businesses that are not gonna do well in this environment, and those businesses now have painful choices to make about. For example, you know, really big austerity measures. Those aren't fun. They're painful. And once you lay somebody off,

it's a realized loss. Before then, it's just a paper loss. So what will happen is that people will want tohave a tremendous amount of certainty that they must do that thing before they actually do it. And generally they have delayed too late, so you can see both sides of the problem right? You had to take your gains too early, right? And you tend to wait to take your losses too late. You like to leave the gamble on. And so that's also something that you want to think about. And it's also solved by the way, by getting six months ahead or your head and asking your swept 12 questions like if it's a year ahead and I regretted Tate, you know, uh, profit taking What are the reasons that why would I Why would I regret that?

Correct. I tell people. Trend Follower, I said, Guys sell when you can. I just, um, more like So when you can see I'm a trained for

exactly exactly like look back and say, What are the things? And you can also say, What are the things I wish I'd done earlier. What are the places where I wish I could save money? One of the places where I wish that I had taken taken money in order to give myself more runway What? You know, and you can actually get ahead and sort of imagine the scenarios and that sort of a way to get yourself out of it. And Dalman effect. Actually, Inter plays with status quo bias, so we tend to think that things were gonna be the same. And we also become a doubt and dad to our own decisions, decisions that we've made in the past on it makes it really hard for us to then change decisions. And that's true of models. So you mentioned you can sort of look through time and say, You know,

for example, you know, was gross stocks a good investment, right? And that's changed over time, you know, value investing, growth, investing, those of you know, moved around in terms of how applicable those models are, too good investment decisions. But what we know is that one to have a very strong model of the world, it's very hard for you to climb out of that trench. So So that's really the endowment effect that you become very endowed to your own model. It becomes a big part of your identity,

and you'll tend to process information to fit your model as opposed to the other way around for your bottle to the relevant information. So again you could do the same thing there. And you can imagine it's if it's six months from now on. My model, you know, turns out like the decisions I made off off this model turned out to be abject failure. You know, why might that be? And then you could bend from that. What you'll do is you'll put you'll be ableto list off a bunch of signals in the world that would signal you that you should actually have some flexibility and rework your model. And because you thought about them in advance and you've actually listed the off, you're gonna be more attentive to them and less likely to rationalize them away.

Awesome. Eso couple fast ones, too, from some ladies. Why don't I keep losing with a pair of aces? That's just

and well, because you're gonna lose quite often with a pair of aces So, uh, so the thing is that so there are some things that have to do with your own skill that can cause you to increase the number. You know, the percentage of time that you'll lose, what you get out that hand, What in them is not pushing people out of the pot. So the larger, the higher the number of people who are playing the hand with you, the more likely that you'll lose the hand. And that's obvious, of course, pretty much any him. But mostly it's that aces aren't 100% toe win. And so this is just like portfolio theory, except that you get to play the same stock over and over again.

Right? So Asia's a prize of expected value. You know that sometimes they're gonna lose. Sometimes they're gonna win. But over the long run, they're gonna win more than any other hand. And so you should continue to play that understanding that when you lose with them and could literally think of it as well, you know, sometimes I'm gonna flip head sometimes gonna flip pales. I guess this was the tail.

I wonder. I hate poker now. I used to watch it on TV for a little bit, but I was fascinated by it. But then I got so bored of it is Thio isn't over match, is it? Oh, no. Ah, big over. Do you think a lot of professional poker players love the market just cause they need the action in a human behavior? They think there's some control there or vice versa.

So I think that so there's a lot of poker players. There's a lot of crossover with poker players and traders, in particular a lot of crossover with poker players and opulence traitors there. There's a big cross there. I think it has to do with in order to be a really good poker player, but some of it is the action, but I think it's mostly in order to be a really good poker player. You asked, actually have to think about the world in these frameworks, right where you have to really be thinking about lock and what is an individual outcome. Me and and how do I get control over my emotions and all the things that you would really want of a very good trader, someone who's really did it sort of forecasting and thinking I had on, you know, figuring out what it means to have a variety of positions on and what you want those positions toe look like That's really what you're doing in poker, anyway. Um, and poker players are also very good at reading markets,

right? Did you have to? Because you're playing against opponents. It's a little bit more in your face, actually. So I think that they're attracted to it simply because it's a way for them to express sort of the kinds of skills that they actually have developed at the table, in it in another, you know, in another forum that that has a lot of crossover similarities.

Last I know if you're okay. I'll call you in a few weeks. Mabel do apart, too. If Isa will you play casino poker anymore at Capo or how Karen? No, But in terms of, like, virus and stuff, is it about like, do you think

it'll really so Oh, I think that it would be insane to do anything that a casino right now. I mean, just because if I had to think about a vector for disease chips and cards, right, I mean, people are touching the chips and cards, and it's like going through so many hands,

common sense,

right? So I think I'm not really involved in the poker community anymore. But I think that the poker community is I think I read something that they were pretty quick to recognize this stuff on, and at least the people who were kind of in the know we're not touching chipped like they were. They were limiting how much they

were actually. Do you miss it, miss the grind of it or No,

not one bit. No. Again, because I think there's different ways to express that. That type of thinking and those types of problems and I get to do that through my consultant

isn't insulting a mark in the market. Just fun anyways, compared My God, it's so much bigger and interesting.

It's so great because I gets us think I get to apply the exacting set of skills without actually making the person that I'm interacting with fat right? In order for me to be a successful at poker, by definition, have to make the people I'm playing against. Sad right By definition, I'm taking their money so when I consoled I'm actually

creating your bigger size bigger,

right? Exactly. So I'm making, you know, get to interact with if I'm doing my job. Well, now I get to make people happy, So Oh, my gosh, Is that not the greatest way to live your life? Like I did love it?

Can you give me one more question or no? You got your heart

say

yes, I can give you one more answer is the worst The worst you've ever felt Playing like the pan like a moment of panic or you just like I fucking up dead.

So the worst, the worst waas So in the in the Tournament of Champions, which I ultimately want, Um, I had a situation where, um I was there was a very key hand that I actually folded where I was gonna have to put all of my chips in. And it was a situation where I had the other player narrowed down Thio, um, aces, kings or asking. And, uh so I had to sort of figure out like where I fell on that because of the amount of money it was in the pot compared to how I how much money. I was calming. I had to sort of eliminate Ace King is a possibility in order to make the fold. Right. And e spent a really long time thinking about it and was gonna leave me relatively short stacked. And it was on television.

So if he was bluffing me, it was gonna be, like, really embarrassing. People were gonna see this.

Television played a factor a little bit.

So it did, because I was thinking about the fact that people were watching me, which was really this was early when you had it, sort of got I wasn't necessary, Practiced that getting that out of my head yet? So, anyway, I ended up deciding. I ended up eliminated in eighth. Kate and I folded. And then it was about two hours until that player was out on our of which involved a dinner break where I just had to marinate in my own doubt, which was something else, and and so it's just really awful like it was this really horrible, like, did I do the right thing or not like a lot of second guessing myself. Anyway, I ended up actually knocking that player out of the tournament.

And then he came around and relieved me of my doubt and whispered in my ear that he had indeed had kings. And, um, I had had tens. And so it made it a very good fold. And I was very pleased that that he actually relieved me of my stress. I consider that one of the great kindness is that has ever been done had

the least hygiene. Doesn't want that look like a lot of that, huh? Oh, you wouldn't know.

You wouldn't know their names. But there were a few people that, you know, if you were across the room and like in the early days when I was playing in the Mirage, you knew they had entered the casino.

Helps me is one of my best friend. I don't know how to break it to him. What's the

proper with here is a really bad thing. Do you remember? And then I gotta go. Do you remember in the nineties that those like silk those silk shirts were really sure? So the problem with a silk shirt is that there's nothing better for retaining. So imagine these players who may be good, you know, So it was a handful of them who did not necessarily have the best hygiene. But we're really into these silk shirt.

You've seen a lot. You have a good sense of humor. You gave me a heart stops. I'm gonna honor it. I really appreciate you coming in. And I'm a hit him if it get an hour of your time. Another time, I think part

too. Oh, gosh. Absolutely. Like, let's definitely do this again. That's with a Superfund combo.

Okay. Thanks, Annie. Be well in Philly.

Oh, well, thanks. You be well, too. Okay. All right.

I had on her heart. Stop. I feel like I'm friendly with her. What do you think? Do you think we could be friends? I think so. Yeah. I think she said let's stick together. Is my coach Yeah. No kidding. Right. Okay. Well, uh, made me smarter, remember? Remember,

gambling trips to Vegas like you and I used to go in the $25 T w way Yeah. Of 7 47 that would stop in Phoenix from New York. Exact. Go to Vegas to get refilling our 11 p.m. At night. Get on a Vegas light for 25 bucks and flew back 6 a.m. The next day we stayed up all night and occupy the whole black tie table on it was wondering. I'm 19 years old. They're flying me out free because we were the idiot giving away money every night. Drunk animals would just sit down at the table. So anyways, at least I've done that because that life may be gone. Right, Ryan? Like, I don't want to go to a gross casino. Ah, you know,

I stopped gambling years ago, but, like, go for the food. I don't know. Why do I need to go to Vegas? I definitely don't wanna gamble. I haven't been in years. You anyways. Ah, a lot of changes. All right, Andy, that was cool. Very cool. Ah, thanks. Everybody will see you soon with another panic with friends.