Transcript: Annie Duke, WSOP Champion


The transcript from this week’s MiB: Annie Duke, WSOP Champion is below.

You can stream/download the full conversation, including the podcast extras on iTunesBloombergOvercast, and Soundcloud. Our earlier podcasts can all be found on iTunesSoundcloudOvercast and Bloomberg.


ANNOUNCER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

BARRY RITHOLTZ, HOST: This week on the podcast, I have an extra special guest. Her name is Annie Duke and she’s the author of “Thinking in Bets.”

This conversation is not so much about poker although clearly as a world champion in poker and at one point the winningest female poker player for that period, poker does come up but it’s all about thought process, it’s all about not looking at outcomes but thinking about how you think about what you’re doing whether this is business or finance or investing or what have you.

There is a run of cognitive issues and there is a run of misfocus on what we do, how we do it, what we don’t know but should, our own blind spots, our own cognitive errors that really applies to everything. This isn’t just a tell-all poker book.

In fact, I would say poker is really a minor part of the book. It’s the leaping-off point for discussing human cognition, decision-making theory and how we think about the world or should think about the world probabilistically and we very often don’t.
Determine poker is called resulting, looking at outcomes as opposed to process. Anybody who manages other people’s money for living, anybody who engages in behavior whether there’s a decent amount of risk and uncertainty should really not only listen to this conversation, which I found fascinating, but get the book and plow through it. You will learn so much. It’s absolutely fascinating.

So, with no further ado, my conversation with Annie Duke.

RITHOLTZ: I’m Barry Ritholtz. You’re listening to Masters in Business on Bloomberg Radio. My special guest today is Annie Duke. At one point, she was the winningest female poker player in history. She won the World Series of Poker in 2004 and she is the author of a fascinating new book, “Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts.”

Annie Duke, welcome to Bloomberg.


RITHOLTZ: So, I was struck by some of your definitions in the book and how much they reminded me of investing. My definition of investing is deploying capital on the basis of limited information about an unknowable future. That sounds a lot like the way you described playing poker.

DUKE: It’s almost exactly the way that I describe playing poker. So, the kind of loose definition is decision-making under conditions of uncertainty over time.

So, that will be a relatively loose definition of poker where you’re — just as you said, you’re deploying capital based on limited information. That’s one source of uncertainty about some sort of uncertain future. That would be luck intervening which is the other source of uncertainty.

So, when we talk about decision-making under conditions of uncertainty, those of the two sources which are very nicely put into your definition of investing.

RITHOLTZ: And you also spend a lot of time describing the focus on results and outcomes rather than the process that led us to those results. Tell us a little bit about what led you to that analysis and why so many people look at bad results and think immediately it’s a bad process when that may not be the case.

DUKE: Well, I think that it’s really hard. So, we have this very uncertain relationship between decision quality and outcome quality. So, for example, in poker, I can have the very best hand and I can still lose. I could get dealt aces and you could have a seven and a two and the turn of the cards make it so that you win the hand or vice versa. I could have the seven and two and make terrible decisions in playing that hand and still win.

And that’s really, really similar to the kind of decisions that we make in life and investing in business. And the problem is that getting to be able to see the processes and transparent, the thing that we can see is the outcome of the process.

We can see did it work out or did not work out, did I win the hand, did I not? Did the, you know, did the stock I invested go up in value or down in value? And that’s what we can see and now working backwards from that into what was the decision process is really hard. It’s very opaque. And very often, the quality of the decision doesn’t reveal itself except over time.

So, we can see the outcome right then but very often whether the decision process is good, it takes a lot of time to reveal itself. So, what do we do under those conditions of uncertainty, we have this bias, we have this heuristic which is outcome was bad, OK, that must mean the decision was bad, I’ll take that as a signal. Outcome was good, OK, decision was good

And the problem is that that’s a really poor strategy for learning from your outcomes. It’s great if you’re playing chess, but it’s terrible if you’re playing poker, it’s terrible if you’re investing, it’s terrible if you’re running a business, it’s terrible if you’re choosing a romantic partner, it’s terrible if you’re driving.

That’s the thing about it. So, there’s very good things like that.

RITHOLTZ: I love the term for this in the book that poker players use, they call it resulting.

DUKE: Yes. So, resulting is taking the quality of the result and deciding that that tells you what the quality of the —

RITHOLTZ: And that is not the case at all.

DUKE: That is not the case at all. So, I open the book actually talking about this Pete Carroll —

RITHOLTZ: Super Bowl 2015.

DUKE: Super Bowl. Yes.

RITHOLTZ: And what was it, 4 yards to go, a few —

DUKE: One yard.

RITHOLTZ: One yard to go first down, second down?

DUKE: Second down.

RITHOLTZ: And only a few seconds left but enough for multiple play if the clock is managed right.

DUKE: Right. So, Pete Carroll —

RITHOLTZ: Down by four. That’s where the number four —

DUKE: Yes. That’s here where the number four came from. So, yes, they’re on the one-yard line there against the Patriot, of course, and it’s literally seconds to go, it’s 26 seconds left and the Seahawks have exactly one timeout.

And I think that people remember because it’s quite famous that Pete Carroll called a running play there — sorry, Pete Carroll called a pass play there.


DUKE: So, the —

RITHOLTZ: While having the best short-yardage runner in the game —

DUKE: Correct.

RITHOLTZ: — and Marshawn Crenshaw as it is —

DUKE: It was Marshawn Lynch.

RITHOLTZ: Marshawn Lynch.

DUKE: Yes.

RITHOLTZ: Marshawn Crenshaw, he’s a musician. Yes.

DUKE: There you go, Marshawn Lynch. So, everybody expected him to hand it off to Marshawn Lynch. Instead, he called for Russell Wilson to pass. The pass is very famously intercepted.

And during the game actually, you can hear Cris Collinsworth called this as — I mean, he’s just, you know, gob smacked, right?


DUKE: This is the worst thing I’ve ever seen. And the next day, the headlines were equally brutal and the argument wasn’t so much about whether Pete Carroll had made the worst call in Super Bowl history. It was more like did he make the worst call in Super Bowl history or was it the worst call in football history period.

So, we can agree that this was a terrible result, but I make the argument in the opening of the book that this is a really good example of resulting, which is just assuming that the quality of the outcome is telling you about the quality of Pete Carroll’s decision making.

There were in fact some outline voices. One of the stronger ones was from Benjamin Morris over at FiveThirtyEight —

RITHOLTZ: I remember that.

DUKE: — who argued that it was pretty statistically sound —

RITHOLTZ: How many — remind us how many interceptions were in similar circumstances during the season.

DUKE: During that season, zero.

RITHOLTZ: And historically?

DUKE: Between one and two percent.

RITHOLTZ: So, really, this was a high probability either there’s a touchdown or the passes dropped and you manage the clock and you still have time for two more running plays.

DUKE: Well, I’m going to put it in investing terms. I remember he has one timeout left. So, if he calls the running play and Lynch fails to get in, of course, the clock is running then —

RITHOLTZ: So — he has to burn the timeout.

DUKE: So, he has to burn the timeout and he only have time to run the two running plays. There are three possible outcomes from the pass play. One is this really, really tiny chance of an interception. The other two is balls dropped which happens in basically no time.

So, the clock stops immediately obviously which then gives them the two running play or it’s caught for a touchdown and you assume that the Seahawks are going to win. So, let’s say that it’s a practically free option at the same two running plays that he would get otherwise and we all know from investing that options that are basically free, I mean, it’s, you know, one percent isn’t a lot, right?


DUKE: It’s a basically free option at these same two running plays. So, I think if we think about it in investment terms, look, we can quibble, right, about whether in fact that was a good decision or not.

But calling it the worst decision in Super Bowl history when he was essentially exercising an almost free option, that seems a little much and I think that we can see how strongly this is coming from this resulting problem when we just do this simple thought experiment, what if he had passed the ball and it was caught in the end zone for a touchdown, the Patriots in what little time they had left failed to score and they won the Super Bowl. What do you think the headlines would have looked like?

RITHOLTZ: It certainly wouldn’t be worst play call of all time.

DUKE: They would have been something like out Belichick, Belichick. You know, wow, that was so unexpected, that’s what got them to the Super Bowl in the first place.


DUKE: That kind of decision making and in fact, we kind of know that’s true because we sort of just ran the experiment. We just sort of saw that it come to play with the Philly Special where everybody called Peterson brilliant for not just going for the extra three points at the end of the second down and actually throwing this weird pass to the quarterback Nick Foles in the end zone and he caught it and people said, he’s brilliant, he outside Belichick.

And I think that what we can agree is whether you think that that was a good decision or not, the quality of the outcome should have nothing to do with whether the decision quality was good in reality. It was one try. We flip the coin in one time.

So, I think that thought experiment is very revealing because you can see how much you as an individual get sort of pulled around by the outcome because it’s — we can see that it’s heavy, it’s like a gravity well.

RITHOLTZ: Hindsight bias is a powerful thing.

DUKE: Yes.

RITHOLTZ: We talked a little about Pete Carroll’s decision. Let’s talk about how this applies to poker. You wrote poker players who stand the test of time have a variety of talents but what they share is the ability to execute in the face of these limitations. Explain that a little bit.

DUKE: Well, I think that the issue that we all have is that we’re pretty good at understanding what our goals are, right? We can set those pretty. You know, I want to be — I sort of refer in the book to whatever your ER is.

Smarter, faster, healthier, richer, happier, whatever it is, you figure it out. But the problem isn’t so much this kind of like, OK, I know my long-term goal is in the sense like we can see this with New Year’s resolutions, right?

The problem is that we have all the small little executional decisions along the way and that’s where we really get into trouble. If we think about it in terms of say Danny Kahneman’s framework from “Thinking, Fast and Slow” we can think about the goal-setting is happening in system two —


DUKE: — in deliberative mind, right, and the actual — a lot of these executional decisions are happening in system one. And we know that system one is more reflexive mind is going to be subject to a lot of biases.

One of the main biases that’s going to get in the way of executing our goals is that we’re supposed to learn from the outcomes we have, but it doesn’t feel good for example to be wrong. So, we process —

RITHOLTZ: It never feels good to be wrong. What — and in fact, people hate being wrong so much that they very often will take a safe play where they don’t end up looking wrong rather than taking a risk with the binary outcome, how did that affect — how did that thinking affect the way you play? Did you see that behavior amongst other poker players?

DUKE: Absolutely. So, if you know that — here is kind of the problem is that you know that the people around you are going to act like the Seahawks fans or the pundits after the play and if you have some sort of spectacularly bad outcome particularly if it’s associated with taking a risk which Pete Carroll certainly did, you know that they’re going to come down on you.


DUKE: Right. I mean, this is the way that the world is going to come down critiquing you. So, what ends up happening a lot of times at the table is that when you have these decisions and remember your cards are faced down so people can’t see, right, they can’t really see whether you’re making a good or bad decision there, they’ll very often come down on the side of, well, I’m not going to really do the risky thing which is say maybe try to bluff here. Instead, I’m just going to quietly fold this hand away and nobody’s ever going to know.

And that’s just one of the many problems that can come where you’re sort of defending yourself against outcomes. The other way that you can defend yourself against outcomes is that when things happen to you where you lose, what’s one of the best defense is?

Well, we know that one of the sources of uncertainty that we have is luck, right? That’s one of the things —


DUKE: — that we can’t — I can choose — I can make a decision that’s going to have some set of possible futures that’s going to occur say in interception or drop-pass or catch whatever it might be, but I can’t control which one, right?

That’s what I can’t control. So, we know that luck is going to be a really good defense as well and so what we’ll do is we’ll have an outcome, it’s bad and we’ll say, well, I just got unlucky.

And the problem with that is that if you got unlucky, there’s nothing to be learned from it. And so, how are you going to improve your execution of decisions in the future because you’re just offloading that because it just doesn’t feel good, it doesn’t feel good to say, well, maybe that bad outcome came from the fact that maybe I didn’t actually play the hand that well, maybe I made poor decisions in my investment strategy or in driving — in my car down the street when I got in that accident.

RITHOLTZ: You described that process of self-evaluation of was this a good decision or was this luck as one of the more difficult things that you have to learn when you’re playing poker. Why is it so different to untangle skill and luck be it in gambling or business or professional sports for them?

DUKE: Well, again, because we generally just don’t have enough data to do it and we tend to feel the outcomes one at a time. We don’t wait around and aggregate even if we did.

So, for example, I mean, if we think about choosing a romantic partner say, you know, a spouse, how many tries at that do we have? It’s not like we’re doing a whole lot of data collection there, right? We only date a few people in our lives. The N is quite small. The sample size is small.

It’s sort of like most of the decisions we’re doing is saying, we’re going to flip a coin four times and then try to say something about whether the coin is fair or not. And it’s just hard and we can’t see — nobody is sort of pulls back the curtain and says to us, you know, this portion of the outcome was due to luck and this portion of the outcome was due to skill.


DUKE: We just know that we sort of live in this noisy system where sometimes we drive through red lights and we get through just fine and sometimes we go to green lights and we get in an accident and it’s just not perfectly linked together, like it is say in a game like chess.

If I play poorly, I probably lose. If I play —

RITHOLTZ: Not a lot of random luck involved in the outcome of —

DUKE: Not a lot —

RITHOLTZ: — poker.

DUKE: Of chess.

RITHOLTZ: Of chess. I’m sorry.

DUKE: Exactly.

RITHOLTZ: But poker and investing, there is a lot of a lot of random luck.

DUKE: A lot of random luck and we can’t see it. We need like a big sample size in order to be able to get down to say something —


DUKE: — about those statistics and even then, we’re probably making some assumptions as we’re doing our analysis and that’s why it’s so hard because, again, all we can see is the outcome, right? We can make a bad decision and it can converge on a win. We can make a good decision and it can converge on the same win.

So, how then do you just take this thing and now try to work backwards and untangle luck from skill when it’s very hard to see down into it and we generally don’t have a big sample size.

RITHOLTZ: So, let’s talk about that untangling. Undergraduate, you go to Columbia University. Graduate school, you go to University of Pennsylvania. You almost get a PhD in —

DUKE: Almost.

RITHOLTZ: — Psychology. How far away were you from a degree?

DUKE: I needed to defend it.

RITHOLTZ: OK. And you ended up —

DUKE: Like I was done.

RITHOLTZ: But you — so, you know, you’re practically — you go to the ninth inning with that one-yard line so to speak.

DUKE: Yes. I was on the one-yard line.

RITHOLTZ: And then you moved to Billings, Montana. So, two questions, A, what motivated the move and, B, how important is Psychology to your successful track record in poker?

DUKE: Well, let me say, you know, there’s been a lot of moments of luck intervening in my life which I think have been pretty interesting. So, one of them is the moment that I moved to Montana which came from what might look like an unlucky event but I guess that it turned out pretty well for me which was that right at the end as I was going out for my interviews to become a professor, I have been struggling with some stomach issues the last year in graduate school and they really came to ahead right at that time and I landed in the hospital for two weeks with this very bad stomach problem.

So, I needed to take some time off and during that time-off, I discovered that, OK, now, I don’t have a fellowship, I need money. The man I was married to at the time had a house in Montana and said, let’s go — we’ll just go to Montana for the summer and you can recuperate there. And during that summer, I started playing poker and that’s kind of how that happened.

RITHOLTZ: Now, when you say during that summer you started playing poker, I’m going to correct you slightly because you grew up in a household, your brother is a multiple poker champion —

DUKE: Yes. Yes.

RITHOLTZ: — and you grew up in a very competitive household where there were card games and other things going on that you played competitively within the family, am I wrong in assuming you’re playing poker at home against your future champion brother?

DUKE: Well, not exactly wrong but also not exactly right.


DUKE: I would say that the poker chips came out in the house maybe once or twice a year and it was some games like I don’t know if you’ve ever played past the trash.


DUKE: I think the more common name — my dad called it past the trash. I think the more common name is Anaconda.

RITHOLTZ: OK. That I’ve played.

DUKE: That you played. So, there has to be like three cards, the right three cards.


DUKE: You would never play this in the casino, of course.


DUKE: So, we’d play things like that. So, mostly actually, we’re playing games like Hearts, Oh Hell which is sort of simplified version of Bridge. I played Bridge starting when I was a teenager, a lot of like Gin. And the thing about that is while you don’t necessarily have this kind of ongoing betting element that you do in poker, you have a lot of the same elements of uncertainty and luck.

So, being able to reason around those kinds of games certainly helped me with poker. So, that was, you know, that was the first — definitely the first moment of luck.

The interesting thing with how does Psychology help is that when I first started praying, I think that people thought that I studied Clinical Psychology which would be like understanding like why are you depressed or why are you anxious. So, those kind of things and they thought that that would be really helpful because I would have some sort of analysis of your personality.

I suppose that might have been helpful but I’ve never taken a class in Clinical Psychology in my life. So, I know no more than from my own going to a therapist.

Where it actually was really helpful was in Cognitive Psychology, what you’re studying is these issues of how do you learn in uncertain systems, how do we process information, what are the biases and heuristics that get in our way.

Now, that was incredibly helpful for understanding not only the learning problem that I was about to face in terms of, you know, I’m getting this feedback at the table and these outcomes are coming my way and how do I actually become better, how do I figure out how to be a better decision maker in this game, but also how might other people bias be expressed at the table in a way that I could strategically use to my advantage, and that was incredibly helpful.

RITHOLTZ: Let’s talk a little bit about your actual poker career because you’ve obviously won a lot of money and the World Series of Poker is a big event each year. At what point in your casual poker playing did you reach the understanding, hey, I could earn a living this way?

DUKE: So, when I was in graduate school and I, you know, I was living on my little fellowship, my brother was already a professional poker player. So, he would bring me out to Las Vegas maybe once or twice a year and, I mean, I enjoyed watching them play, but when he was in tournament, you can’t actually sit behind somebody.


DUKE: And so, you’re just sort of standing on the rail and that’s pretty boring. So, I told him I was kind of bored and he actually gave me a tiny bit of money, I mean, it was like $300 or something and —

RITHOLTZ: Go play.

DUKE: — sent me off to play with a little napkin of hand rankings, basically, like literally written…

RITHOLTZ: A cheat sheet.

DUKE: Yes. It’s was written…

RITHOLTZ: Four of a kind beats a straight.

DUKE: Well, I knew that part. It was — here are the hands you’re allowed to play, right?


DUKE: And it was written in a key — on a — with a Keno crayon —


DUKE: — like literally on a napkin because it’s what I had and I walked over to like the Fremont Casino. You know, the poker room I think was next to the Carl’s Jr. and that’s why I played.

So, that certainly — you know, that was when I was in academic so it never occurred to me. I would say that pretty early on in sitting down at these tables in Montana I figured out that I could make a living but, you know, my reference was to what the starting salary of a professor was, which I think at the time I was applying for jobs that were about $23,000 a year.

So, that’s, you know, was a low bar for what you felt the living was going to be. I had this really big advantage, of course, which is that I had these great mentors. I mean, my brother among them, Erik Seidel was one who was really, really amazing and very generous with his thoughts.

And that cut a few years off the beginning of my learning curve I would say. I had a big leg up and I was playing against people who weren’t, you know, who weren’t world-class players. They were playing in a game where you had about $300, maybe $600 at risk —

RITHOLTZ: So, you’re playing with ranchers and farmers and truckers and all the people —

DUKE: Yes. Exactly.

RITHOLTZ: — just passing through.

DUKE: Yes. And I have world champions coaching me.


DUKE: So, you know —

RITHOLTZ: You’re the ringer at the table.

DUKE: I mean, as it turned out, yes. So, I mean, I think the first month that I played I remember I had a little notebook and I made $2,800 that month. Obviously, that doesn’t mean that that was my expected value. But it looked pretty good to somebody who’s applying for $23,000 a year jobs.

RITHOLTZ: That’s right. So, already, you’re up to 30,000 plus.

DUKE: Right. So, I was like, wow, I’m in — I’m going to make it. You know, it felt like —

RITHOLTZ: So, from that point when you realized, hey, I can make some money doing this, how long was it before you realized, I’m a world-class player, I am a poker expert? What was that timeline like?

DUKE: That was never —


DUKE: I retired in 2012 and I never — I don’t — I still don’t think that.

RITHOLTZ: You never thought — even if you won, you never thought, I’m a world-class player or were you thinking, well, that was a decent amount of random luck and this could have not been my skill?

DUKE: So, I think that this is actually really important for anything that you do in life in terms of what my mindset about it was, which was that I think that there’s a difference between sort of being humble in the face of the game that you’re playing and humble in the face of the opponents that you’re facing.

RITHOLTZ: That’s very interesting to the economy.

DUKE: Yes. So, the interesting thing with poker is that, you know, certainly for a human being that the more that you play, the more that you kind of realize that you have no idea what you’re doing at this table that it’s such a complex decision problem, right?

I mean, all the cards are faced down and there is a lot of luck and it’s an incredibly hard learning problem and you’re really just trying to get a little bit better. You’re trying to get closer to understanding what the primary line of play is and it’s very different than in chess.

In chess, you can really go back and you can deconstruct with great certainty, you know, what the possible lines of play were, what your responses might be and you can really kind of work that game to the end. In that sense, it’s more of a mathematical calculation.

RITHOLTZ: But isn’t recognizing the degree of luck and randomness in outcomes and a certain humble uncertainty of your own skill set, that metacognition, isn’t that — as to channel Dunning-Kruger affect, isn’t that a wrecking — an acknowledgment of your own skill that you reach a point of saying, there’s this much randomness in it and I’m aware of it.

DUKE: Absolutely. And there’s this much that I don’t know and can’t now and, I mean, even toward the end of my career, so, I retired in 2012, I think it was 2010 I won the NBC National Heads-Up Championship and…

RITHOLTZ: What was the prize?

DUKE: I think that was $500,000 I think was first — I don’t really remember.

RITHOLTZ: Who can remember each half million dollars they win. I mean, it’s just 500,000.

DUKE: Well, the thing about poker is it’s not really about the money. It’s about like how do I make the best decisions to get to where I’m going.

So, you actually sort of — it’s actually a necessary factor to separate yourself from the money because otherwise the money can cause you to —


DUKE: Right.

RITHOLTZ: To why surgeons don’t operate on their own family, either has to be some…

DUKE: Right. Exactly. Like you need a separation. So, you actually kind of don’t about things like money. So, I mean, I could look it up for you what I won.

But I think that even then like right before that tournament, my game had made a big change. Like I discovered new things about the game. So, it’s — I think that it’s this paradox which is that in order to get better, you sort of have to recognize your actual lack of expertise, again, in relation to the game.

Now, that different than me feeling like if I sat down at a poker table that I would be better at this problem, you know, which I do and then also I think that allows you to recognize when you’re sitting at a table with someone who’s probably better than you at this problem and in fact, the NBC National Heads-Up Championship gives a good example of that.

I ended up facing Erik Seidel, my mentor —


DUKE: — n the final and I kind of — and I knew he’s going to outthink me. I mean, he’s just a much better player than I am.


DUKE: So, I injected a lot of luck into that match because I understood that if I have to execute a lot of decisions against him where he has an edge on every single decision, right, I’m going to be in big trouble. But if I could get my money in one time hoping to sort of get close to a 50-50 that I would be better off because I could just win that. So, he couldn’t just sort of chip away at me with his edge —

RITHOLTZ: Your play was, let’s go for the random outcome and I have a much better shot.

DUKE: Yes, because you’re a better decision maker than I am and so, if I let you make 100 decisions against me, that’s a sure loss for me. But if I — if we just go for one big decision, you know, you can get lucky on the one coin toss.

RITHOLTZ: In investing, we call it relative and absolute returns and you are making —

DUKE: Exactly.

RITHOLTZ: –you’re making a bet that way. Let’s talk a little bit about blind spot bias and —

DUKE: Sure.

RITHOLTZ: — you actually write in the book as of other people, blind spot bias is greater the smarter you are. Why is that?

DUKE: Well, let me ask you a question. If you had to bring somebody in to argue your case for you, do you want like the smart guy or the not-so-smart guy to do that?

RITHOLTZ: You want the most accomplished successful Harvard Law school professor who can argue that case —

DUKE: Right.

RITHOLTZ: — as opposed to a person who is not very good.

DUKE: OK. So, this gives us the reason why being smart makes it worth. Let’s think about as all —

RITHOLTZ: I’m the best. No one is better than me.

DUKE: Yes. We’re all arguing our case. That’s the thing. We all have beliefs that we think are true or false, right? We all make predictions about the future and we are really good at making a case for our stuff.

And in fact, we kind of know that because we can see when other people are like clearly just like arguing their side and leaving data out —


DUKE: — and spinning the facts and putting a particular frame on it. So, here’s kind of the problem when you’re really statistically adapt to your very mentally agile is that we all want our beliefs to be true. We all want our predictions to be right.

And so, we will argue in order to make our case. We’re kind of our own best PR agent and the smarter you are, the better you are at the spin. So, if I have to go and say make a statistical case for say gun control lowers crime or gun control increases crime, give me those two cases to make.

Depending on what my beliefs are, I can go and find lots and lots of support for either side and if I believe the first thing that it lowers crime, I’ll go find lots and lots of reasons why that might be true and I’ll give you very good arguments and I’ll show you studies that show it and it will be a compelling case and I’m going to be pretty good at it the smarter that I am.

Likewise, if I think that gun control increases crime, I’ll go just find lots of stuff for that. And the interesting thing about it is I won’t know I’m doing it necessarily.

RITHOLTZ: So, that confirmation bias is completely subconscious and you’re unaware of that.

DUKE: Well, there are definitely people who are spinning. I mean, it’s not like people aren’t sometimes purposely doing that.


DUKE: But I think that the really insidious part of this is that we generally don’t know that we’re doing it and that’s where I think that — you know, I think that we have this idea that if I tell you about confirmation bias or the larger problem that motivated reasoning which is reasoning toward a conclusion that you already believe is true, which would mean both finding confirming evidence but also discrediting evidence that disagrees with you.

If I tell you about this problem and you’re pretty smart person that you’re going to walk away thinking, well, now I know about this problem and I’m really smart so now I won’t do it. But the thing is that that’s just not the way the brain works.


DUKE: These processes are very deeply embedded, again, System 1 or reflective mind and we can’t do that and that really, I think, gives us this really good clue, which is if you’re doing it, I spot it right away, right? I’m like, Barry, like come on. You’re missing this study or you’re clearly spinning this and you’re distorting this fact.

So, if we know that what we can do is use that to our advantage and bring other people in essentially to watch our bias back, right? And if I can get — if we can make an agreement and I can say, look, I want to have this kind of charter with you, as my friend, that when you spot me in this place where —

RITHOLTZ: Call me out for spinning.

DUKE: Call me out for spinning. If you have information that disagrees with me, please offer it to me. I will try my hardest to not be defensive. If you think that I’m being defensive, you’ll call me out on that too. And we’re going to really help each other.

And then I’ll do the same for you. And get some people to go do that for yourselves because we’re good at seeing it in other people.

RITHOLTZ: Right. We invest so much time and effort and energy creating a model of the universe around us that it’s always a challenge when something undercuts that belief system. In fact, here’s a quote from the book. Instead of altering our beliefs to fit new information, we do the opposite, alter our interpretation of that information to fit our beliefs. Also known as cognitive dissonance. Why are we so hell-bent on not changing our minds even when confronted facts to the contrary?

DUKE: Well, so, I think — again, I think Kahneman really has a lot of great stuff to say about this. Generally, So, again I think on him and really had a lot of great stuff to say about this. Generally, we want to have a positive narrative of our lives.

Now, surely, this kind goes back to that long-term goal versus, you know, what we doing on execution? We can recognize it in the long term. The more accurate representation we have of the objective truth. In other words, the more that were willing to change our beliefs as we get new information, probably the better our long-term return is going to be and that means that our —

RITHOLTZ: Better decision-making. More accurate model.

DUKE: Yes. And then we’ll have a better narrative of our lives. But again, remember, I said we’re not very good at aggregating, right? We like to do things as it comes in.

And when we get outcomes that come in, either information that disagrees with us or a bad outcome or whatever it might be, it’s this momentary. It’s like in the moment. It’s a hit to our self-narrative.

Because being wrong feels bad. Finding out that our belief might have need to be altered, feels like being wrong, finding out that a prediction that we thought would come true doesn’t come true feels like being wrong. And all of those are hits to our positive self-narrative.

So, what do we do in the moment? We swatted away in whatever way we can. Either, we say that something was because of luck, that it wasn’t our fault, that we couldn’t have known. How could we have seen that coming? That was out of our control.

Or we discredit the information that disagrees with us. You know, we’ll say that incredible or that study doesn’t have a big enough sample size or the statistics that they ran on it were bad. When we see the things that do agree with us, we hold no critical eye to it whatsoever. It’s just like, yes, that’s right.

So, you can think about, like, I think about this like if — let’s say that you’re, you know, your big opponent of trend following. And you really think the trend following is a ridiculous investment strategy. What are you going to do when you see something that’s very critical of trend following? You’re going to go, yes, great. Absolutely.

And when you see something that suggests that may be incorporating some trend following, ideas into your own investment strategy might be a good idea and it has all sorts of reasons for that, you’re going to literally pick it apart and talk about why the author is incredible and everything that’s wrong with it. Because, otherwise, you have to update your own belief.

And when you update your own belief in sort of you downgrade it, right, it doesn’t feel good. And I think what you need in order to kind of get around this, and this is where like having people to help you really is good, is to have your identity not be driven so much by this idea of right. Meaning, I have these prior beliefs and I want to — I want those things to be right. I just want to reaffirm the things that I already believe.

And switch to this idea of I want to be accurate. The accuracy is what feels good. In other words, building the most accurate model of the world which requires that you view your beliefs is in progress and once you view your beliefs is in progress, you can’t really be right or wrong anymore.

RITHOLTZ: They’re just provisional until the next upgrade comes along.

DUKE: They’re just provisional until the next upgrade. And you’re going to help me do that because when you see me start to get defensive and start to discredit something that you know disagrees with a belief that I might’ve had, you’re going to say, hey, don’t — do you think maybe you’re doing this thing and don’t — remember the belief is in progress and how much would you change your belief now.

And, you know, this is going to help you have a more accurate view. And this is where this — the title “Thinking in Bets” really comes from because the person who wins in a bet is not the one who affirms their priors, it’s the person who has the most accurate model of the world.

And so, thinking about, you know, decisions as bats as — as you said, you have some limited resource that your investing based on limited information on an uncertain future, allows us to view our beliefs more in progress because that just wraps the uncertainty into the whole process and allows us to be more accurate in the long run.

RITHOLTZ: Some of the — my favorite writings on probability theory and cognition and our own internal models mention something that you mentioned early on in the book which is if you want to be better at any probabilistic exercise, be it gambling or investing or what have you, you have to be willing to say I don’t know or I am uncertain. Explain why that’s so important and why so few people are willing to do?

DUKE: Sure. So, on the why it’s so important, is I think that top of the list is that it’s a more accurate representation of your beliefs and predictions.

Predictions, by definition, even if you have all of the information, even if everything is known, predictions have to be uncertain just because we don’t know how the future is going to turn out.


DUKE: So, the best example I can give of that is if I have a fair coin, I can tell you, for sure, that it will land heads 50 percent of the time. That doesn’t mean that I know it’s going to land heads on the next try.


DUKE: So, that prediction must be uncertain. And beliefs are uncertain as well. There’s all sorts of things that — what did believe when you are 20, that you are 100 percent sure of, that now you look back and you say, wow, 20-year-old Barry really had that —

RITHOLTZ: You don’t have to go back to 20. I’d go back to 40 or 50.

DUKE: Right.

RITHOLTZ: Yet it seems every five years you look back, at least if you’re trying to evolve, and you look back and say, man, I believed a bunch of junk or I could downgrade some of those beliefs and maybe they weren’t nearly as important as I previously thought they were.

DUKE: That’s exactly right. So, that’s the thing is that saying I’m not sure is just — it’s just a better representation of the world. It’s just more accurate to what the state of our beliefs is. So, that’s number one.

And then number two, acknowledging uncertain — here’s the big problem. Making decisions when you don’t have all the facts. We can’t control luck, right?

Luck is — OK. You know, it’s going to land heads 50 percent of the time. I really can’t control the coin on the next flip. What I can do, though, is get more information. So, how do I do that? I have to make sure that I’m open-minded to the information and also that I’m information hungry.

So, once you start not acknowledging uncertainty what does that do? It creates this information hunger in you. Because if I’m certain about a belief, why am I doing research on it? Why am I going and seeking out information that might help that belief? I’m already sure.

But if I acknowledge my uncertainty, this is why it’s so important. It makes me information hungry. It makes me want to go find — it make me open up Google.

Not only that, but here is the great thing is that when I acknowledge my own uncertainty in the way that I speak, it gets you to start telling me what you know. Because when I say, for sure, like let’s say that — we’ll go back to the trend following, let’s say that you’re somebody who’s a real trend following person and I — and I just say I don’t know that about that and I just say with certainty with people who are trend followers, they’re just idiots.


DUKE: I can’t believe they think that that’s a good thing to do. Do you think you’re going to share with me any information that you have about why you think trend following is a smart strategy?

RITHOLTZ: I like to argue. So, perhaps.

DUKE: Perhaps. But I’m probably shutting you down. Right? Because why — either you don’t want me to think that you’re an idiot or maybe you just don’t want to embarrass me and so you don’t speak up. Either way, you’re probably kind of mad that I said it.

But if I say, you know, I’ve always been a little bit of a trend following skeptic, you know, but I’m not like — I’m just — I’m not sure.

RITHOLTZ: Not etched in stone.

DUKE: Not etched in stone. Now, you trend-following enthusiast, you’re now going to start telling me all the things about why you think that it’s a great thing and we’re actually to get into a discussion where both of us are going to benefit from it. Because you’re to learn from my skepticism, I’m in a learn from your enthusiasm, and we’re going to find — we’re going to get closer to what the actual truth of the matter is because I’ve opened the door wide, to say tell me what you know.

And that’s the thing. That’s we have control over. We can’t control luck. We can’t control the quality of our decisions which means getting more information and refining and calibrating our beliefs which I can only do through information coming my way.

RITHOLTZ: We have been speaking with Annie Duke. She is the author of “Thinking in Bets,” how to make smarter decisions when you don’t have all the information. If you enjoy this conversation, be sure and check out our podcast extras where we keep the tape rolling and continue discussing all things probabilistic. You can find that whereever finer podcasts are sold,, iTunes, Overcast and SoundCloud.

We love your comments, feedback, and suggestions. Write to us You can check out my daily column on or follow me on Twitter @ritholtz. I’m Barry Ritholtz, you’re listening to Masters in Business on Bloomberg Radio.

Welcome to the podcast. Annie, Thank you so much for doing this. I was taking notes which I never do or rarely do —

DUKE: I love it.

RITHOLTZ: — because I have some things to share with you which are hilarious.


RITHOLTZ: You mentioned trend following as a sample. Are you familiar with Michael Covel’s book, “Trend Following”?

DUKE: Well, I am. I’ve actually been on his podcast three times.

RITHOLTZ: You have?

DUKE: you have I really enjoy the conversations with him.

RITHOLTZ: He’s a fascinating guy.

DUKE: He is.

RITHOLTZ: — his background. Everything with Vietnam is amazing. Have you seen the most recent addition and who wrote the foreword to it?

DUKE: No. Is it you?

RITHOLTZ: Yes, it is.

DUKE: I love it.

RITHOLTZ: How hilarious is that?

DUKE: That is so hilarious. So, I actually picked trend following as an example because I kind of follow financial, you know, somewhat. And I see that there seems to be a lot of emotion around it.

RITHOLTZ: Totally.

DUKE: So, I like to pick topics that are emotional because if I ask you your opinion about skin cream, it’s like you’re probably going to be pretty rational.

RITHOLTZ: I have opinions about that also.


RITHOLTZ: But the whole thing around trend following is —

DUKE: It’s like people seem to really — it’s like the Jets and the sharks and they’re going to meet and have a riot.

RITHOLTZ: There is something to the concept that if you have a systematic approach to investing and it’s mechanical and you follow it with tremendous diligence that, you know, if you go back to the original book — God, I’m drawing a blank on it — that the — one of the — the turtles that were mentioned and “Market Wizards” is the original book by Jack Schwager, the turtles that Mike Covel talks about all the time, if we could raise traders the way they grow turtles for export out of — out of Asia, you know, can we teach them mechanically? And it turns out, you more or less can assuming people are willing to do that.

DUKE: Yes, well, I — you know, I think it’s interesting. I think that when markets — when there’s some wit in the market, in particular, that becomes very easy to kind of do these — kind of mechanical strategies.

So, the way that I relate it to poker which I always thought was very interesting was — so I used to teach a lot of poker seminars. In fact, I’m a big proponent of if you want to get better at anything, try to teach it.

RITHOLTZ: Hundred percent.

So, my — when I started teaching seminars, there were a whole bunch of things that I was doing, poker, that I actually ended up throwing out because I realized that I couldn’t actually explain it coherently to another human being such that they could execute the strategy themselves.


DUKE: But one of the things that, and these were generally intermediate players, would it would come up and — one of the common questions they would say to me is don’t you hate playing against beginners? Is it — don’t you hate that?

RITHOLTZ: Why? Because of the potential random outcome or —

DUKE: I think because there was more — it was more unpredictable.


DUKE: And I would say to them, what? No. I love playing against beginners.

And my question to them was always this, if you like to play, like, a tennis match for your life, like someone’s literally going to shoot you in the head and kill you. If you don’t win, do you want to play against the beginner or an intermediate? And they would say, well, beginner, of course.

And I said, well, it should be the same for poker. And what I figured out was that the reason why they felt that way is because there’s this thing you can do in poker called bluffing. And bluffing is really exciting, right? It’s like, “Ha! I outsmarted you. I had the worst hand and I made you fold the best hand and Ha-ha!!” Right? I’m great.

Well, bluffing can be very hard to do against beginners.. And the reason is that beginners kind of don’t know enough about the game yet, that they understand that your action should cause them to fold.


DUKE: So, this will be —

RITHOLTZ: So, the takeaway is don’t bluff against beginners.

DUKE: Right.

RITHOLTZ: Except that means that you’re playing an incredible — incredibly mechanical game.

So, essentially, what you’re doing is you’re just kind of waiting for certain kinds of hands, you’re waiting until your hand is pretty good, and then I’m just getting you to bet way more money than you should. And, you know, and then that’s the way of winning. It’s mechanical.


DUKE: And what I discovered was people don’t like winning in a mechanical way.


DUKE: It’s almost like they feel like —

RITHOLTZ: They’re cheating.

DUKE: No. I don’t think it’s that they feel like they’re cheating. I think it’s —

RITHOLTZ: It’s not them making the decision the cheating no I don’t that they feel is not it’s not them making the decision they’re just following the rules.

DUKE: Right. So, what I would try to do it for, yes, it’s not that they are not the ones outthinking anyone.


DUKE: Like, they’re not playing spectacularly. So, what I would try to do is get them to a more meta-place which I think brings us to this — what you said about trend following to this more meta-place of if you view your job in the game to make the best decisions that you can against the way that the market is behaving, right?

Because the poker table is just the market, right?

RITHOLTZ: So, the market is behaving in a certain way. Let’s say I’m at a table full of a lot of beginners. It’s going to behave different differently than if I’m at a table full of experts, that my job is to come up with the best strategy given the market that I’m playing in.

And if I understand, that then it’s a form of outsmarting my opponents to move to this more mechanical version of the game in the same way that when I played against Erik Seidel, I was willing to say I’m not going to try to outthink him. I’m just going to go with luck. And I’m pretty proud of that as a strategy because it’s a meta strategy, it’s like, OK —

RITHOLTZ: What did he say to you after you — you beat him with that strategy? What was the subsequent conversation?

DUKE: I think he was really proud of me.

RITHOLTZ: Really. That’s a great —

DUKE: Well, he was mentor.

RITHOLTZ: That’s a great mentor who says, so now the student has become the teacher and —

DUKE: Well, sort of because I was admitting that I still cannot think of it. But yes. But he was — he was very proud of the, I think, of the fact that that was the strategy that I —

RITHOLTZ: You looked at the lay of the land and you chose the smartest route —

DUKE: Sure.

RITHOLTZ: — to give yourself the best possibility of winning. It’s still going to — could have come up against you, but you think playing the other way, you would had no shot.

DUKE: Yes. And by the way, I get it. When I — when I play against beginners and they win with some hand that, like, no reasonable person on earth or whatever, I have that feeling of, like, life is unfair. And, you know —

RITHOLTZ: Even though you know better.

DUKE: Sure.

RITHOLTZ: There is that blind spot bias rearing its head.

DUKE: Yes. I mean, one of the things I really try to get across in the book is that I know all of this stuff and I still do it. It’s just that I do it a little less and a little less, as you know, just compounds over time into —


DUKE: Such a higher probability of good results. The other thing is because I know him accountable to the people that I have around me who are to hold me accountable to bias thinking, who are going to say, “no, no, no, that’s not okay,” that are much more likely to catch an error, and are much more likely to get it faster. Right?

So, instead of looking back on 20-year-old Annie and say, wow, that was a really crazy decision that she made or that was a crazy belief that she held. I think that I can get to that conclusion a lot more quickly because of other people helping me get there.

RITHOLTZ: I like that you go back to 20-year-old Annie and not 30-year-old Annie.

DUKE: No, listen. Seriously, like, how about just like 45-year-old Annie? Like, yesterday Annie. Like, yesterday Annie was doing really stupid stuff, you know.

RITHOLTZ: It’s amazing that if you stop and look back at your life, honestly, every five years — the one thing I could say about being in my 50s, when I went through that exercise in my 30s and 40s, it was just mortifying.

DUKE: My gosh.

RITHOLTZ: And now it’s merely like, that was a bad decision. That was a bad process. But it’s not like, “oh my God, what an idiot you are” which was what the experience was in the 20s and 30s.

DUKE: Well, I think maybe part of that is because I think that if you manage to survive a long time, whatever it is in poker or anything else, by the time you’re 50, you have — I think you probably have developed some more humility around the rightness or wrongness of your decisions in the first place.

And that’s one of the things that I try to point out in the book is that when you view your beliefs is under construction under construction, you know, in progress then you don’t end up with these full on reversals to, “I’m an idiot.” Right?

Because you kind of didn’t view yourself as a genius in the first place. And so, I think it’s a place where you’ll end up, first of all, being much more compassionate to yourself. Because you sort of realize. It’s, like, OK, but I was only like 62 percent on it, anyways.

So, now, all right, I’m 47 percent. OK. Right?

RITHOLTZ: It’s a modest adjustment.

DUKE: Right. It’s like an adjustment to what your level of confidence in the — in the whatever the belief is that you hold. And I think that that’s just kind of a nicer way to be to yourself. And then I think that what follows from that, once you sort of view your own beliefs is under construction is that you are much more compassionate toward other people for their own playballs (ph).

RITHOLTZ: I’m still — I’m still waiting for that to come along. At least what I’m driving. I’m waiting —

DUKE: Well, that’s different.

RITHOLTZ: My wife and I — so, I don’t do New Year’s resolutions for the exact reason you’re implying.

DUKE: Yes.

RITHOLTZ: The decision is in — it’s all about the process.

DUKE: Yes.

RITHOLTZ: But there were processes I wanted to try and spend a little more effort with. One was just being nicer on Twitter because there are some people on Twitter who were — that started this year around the holidays. People are — some people are just jerks on Twitter and it’s like, you know what, that’s a bad luck. Let me see if I could be less of a jerk.

And then the other thing was, in real life, hey, can I be a little nicer on the highway? Just pick up whatever karma points, letting people in, or — but I still find myself constantly going to say, “your left direction has been on for about 3 miles, either make a left or shut that off.” And my wife is like, “I thought that was going to stop.” And it’s so hard to make those little changes.

DUKE: It is. But do you think you’re doing it slightly less?


DUKE: And that’s what matters.

RITHOLTZ: I think I am doing it less.

DUKE: See? And that’s what matters. See, that’s the thing. Is that I think that, in general, it kind of goes along with that idea of there’s only right and wrong. So, that if you present me with information —

RITHOLTZ: It’s not lock and…

DUKE: — that disagrees with me, I can — the only choice I have is right to wrong, right? I have to do a full-on reversal. If I’m like I am 62 percent and you present me with information, now, I’m like, OK, I’m 47 percent, it’s just an easier way to be right, right?

So, I think that to say, I’m good — I have this idea that I want to be nicer on the road and to hold yourself to a standard of perfection, you’re just setting yourself up to feel bad and to lack compassion for yourself and for self-incrimination. If you say, you know what? I’m doing a little better. Like, that’s great!

RITHOLTZ: I don’t want to make it too easy on myself.

The other — the other two notes —

DUKE: You’re more likely to succeed if you do, though.


DUKE: Because it’s the baby with the bathwater. It’s like the what-the-hell-effect which —


DUKE: — Dan Ariely talks about. So, it’s the difference between, OK, I’ve decided I’m not going to eat any bread and then one morning, like, there’s donuts in the break room, and the whole day is shot or maybe…

RITHOLTZ: Right. You cheat one calorie and it’s the —

DUKE: Right. And that’s —

RITHOLTZ: — diet soda.

DUKE: — because you’re viewing yourself from the point of perfection. So, once you make a little mistake, it tends to — it tends to sort of break apart. Whereas if you say, this is — this is a work in progress. And all right, I ate half a donut this morning, that’s OK. And you just have salad for lunch.

Because you’re not — you haven’t broken from the perfection that you expected yours — of yourself you. All you were doing was trying to do it less. And it’s actually a better way to get there, I think.

RITHOLTZ: I love the Ariely’s research facility at Duke is called Institute for Advanced Hindsight or something like that.

DUKE: Yes. Yes.

RITHOLTZ: It’s just — it’s just a hilarious issue. You also mentioned that I’m fascinated by this. If you want to learn something, teach it. And over the past — I don’t know, let’s call it a decade, I’ve been giving presentations around the country, around the world, and each presentation, almost, always leads to the same sets of questions. And it makes me realize, I’m doing a bad job teaching this if I get the same questions over and over again.

And so, each presentation leads to the next presentation and the different set of questions and I’m kind of coming to the point where I’m not sure if it’s that I’m a bad teacher or that I’m just provoking people’s thoughts that they’re going to ask. But when you consistently get the same questions, it makes you think there’s something about this presentation which often has elements of cognitive issues and confirmation bias in it that leads people to the same sort of spot. It’s kind of fascinating.

DUKE: So, yes. I think that that is and I think that the analysis is really interesting because it could be that there are some concepts that are hard to get to within the presentation and you’re kind of anticipating that those questions will come and planning to handle them in Q&A. I do that some.

RITHOLTZ: I should look into that because I don’t.

DUKE: And sometimes, it’s that — I mean, this sort of comes to, OK, I could anticipate this question.


DUKE: So, let me see if I can fit that in with the key concepts. But if there are these big concepts that I’m trying to get across and trying to go down the tangent that — where I know this question is going to be coming my way, it’s actually going to distract from the larger concept.

Maybe, it’s your getting those questions because you’ve given those — them the large concepts —

RITHOLTZ: (Inaudible).

DUKE: — in such a great way. I’m not saying that that’s true, I’m saying, like, we want to sort of think about it from both sides.


DUKE: What I’ve been finding lately is I’ve been opening my talks with the video of the Pete Carroll play.


DUKE: And so, my questions tend to be people telling me that I’m an idiot and that Pete Carroll actually made a really horrible decision.

RITHOLTZ: Even after you spent a half hour explaining why statistically this was not a terrible decision and you’re just focusing on the outcome.

DUKE: Well, that’s interesting is that — what I — what I didn’t say is that Bill Belichick thinks it was a good call. He —

RITHOLTZ: Not because he won —

DUKE: No. He said that the formation — that they had the same defensive formation earlier in the game and it was actually a run protection. And so he suspected the Pete Carol had seen that and so called a pass.

Mike Lombardi who is a great analyst. He actually has worked with Belichick and Bill Walsh and all these guys, he has a book coming out.

RITHOLTZ: Has a book out also. Yes.

DUKE: It’s coming out in September and it opens with the same play and it discusses it from a formation standpoint as well where he sort of comes to the same conclusion and I kind of mention that, so I sort of get myself all there. It’s usually people who are Seahawks fans.

RITHOLTZ: Of course.

DUKE: I mean, so the thing is that — I mean, this is why I said, you know, when you asked me, well, why did you choose trend following? I said, well, I try to think of something in investment that has a lot of emotion attached to it, is that when people are really emotionally invested in the beliefs that they have, and particularly in the outcome in this case, right, because the Seahawks lost.

RITHOLTZ: There’s no objectivity, whatsoever.

DUKE: It’s very, very hard when — even when you’re presented with the information that might moderate your belief, it’s just hard to do it. We’re just too emotionally lit up to do it.

RITHOLTZ: It’s that system one doesn’t let it get the system two.

DUKE: Yes. So, there are sort — I think that there are many things where someone could go get up and give a talk and say all the things that I said were maybe I would go — your dumb. That Pete Carroll was an idiot. It just a matter of, like, trying to do it less. But I do find that I seem to be getting a lot of that people, people who are sort of writing into my website and being, like, no, that was a horrible call.

RITHOLTZ: Are you seeing these all coming from the Pacific Northwest or is this —

DUKE: It seems to be.

RITHOLTZ: Yes. What a coincidence. All right. So, I have a ton of my favorite questions to ask you.


DUKE: And I know I don’t have you forever. Let me jump into some of these things because I think your answers to this are going to be fascinating. Tell us the most important thing that people don’t know about your background?

DUKE: The most — OK. So, well, about my background are about me now?

RITHOLTZ: Sure. You —

DUKE: I’ll tell you about me now is that I think that I spent so much of my life in this really competitive environment. So, when I was younger, when we would play cards, my brother was two years older than me which when your seven is, like, they might as well —

RITHOLTZ: It’s big. Yes.

DUKE: Yes. And my dad, of course, is a middle-age man. And both of them are very competitive and never let me win. So, I would literally, like, almost every night that we’re playing cards, the cards would end up getting thrown against the wall by me, at some point.

And that was actually my biggest challenge when I was playing poker was trying to get that emotional component under control, trying to get that competitiveness to a place where I can be smoother and sort of like except the outcome because I would just get — I mean, when I was young, I would just become completely unhinged by it.

RITHOLTZ: Right. You don’t want to be rattled at the table.

DUKE: Right. I’ve gone so completely other way that since I retired, if I were to go out and play tennis with you, I would ask you if we could please not keep score.


DUKE: Yes. Because I just want to play and, like, have both of us get better. The people that I play with, I always bring to my tennis lessons because I that want — like, I’m so much more focused on this kind of win-win which is one of the reasons why think I love the process of writing the book and giving talks. Because it feel — it’s like so not competitive, you know?

And I feel like I’ve sort of, like, shed a lot of that now. I mean, I don’t know if people around me would agree, but I’m certain — it’s certainly less.

RITHOLTZ: That’s very interesting. You mentioned some of your early mentors. Give us a little background on them.

DUKE: Yes. So, I got plugged into through my brother. This amazing group of players in New York. So, they all — they all started off playing in New York. They had all come from these games background.

Something — like Erik Seidel was an amazing backgammon player and he was also options trader. And then, you know, my brother came from, really gotten there through chess.

You know, Dan Harrington who was a — who won the World Series of Poker Main Event. I mean, World Champion. Amazing player, has written some of the most incredible books on poker that you can get. “Harrington on Holdem.” If anybody’s interested in learning, go get those books.

A guy named Jason Lester who was one of the best backgammon players and I got plugged in to them as mentors.

Now, what’s amazing is how much money collectively that group of players has made. I have it in a — in an endnote in the book. But just so that you know, Erik Seidel alone has earned $38 million in tournament poker.


DUKE: So, these were my mentors. And Erik, I think, is particularly prominent in the book because when I talked about how do you have people watch your back, he’s the one who said this thing to me. I had known him since I was 16 when I wasn’t a poker player and we were just like friends because he was friends with my brother.

Then all of a sudden, I’m a poker player and I walk up to him, like, he’s still my buddy one day. And I just start moaning to him about this horrible luck that I had had and, “I can’t believe this, I got so unlucky. It was such a bad beep. Blah-blah-blah, blah-blah-blah.”

And he laid it out for me. Boom! He said why are you even telling me this story? Like, do you think I need, like, your emotional hard luck story, like, foisted upon me? I’ve lost good with hands, too. Like, do you have a question? Because if you have a question, I’ll talk to you all day.

But I just don’t want to hear about your bad luck stories, like, literally, there’s nothing to be learned from it. And while it sounds a little bit harsh, that was the most important —

RITHOLTZ: Tough love.

DUKE: — moment of mentorship that I’ve ever received in my life.

RITHOLTZ: Yes. That’s quite interesting. So, anyone else influence how you approached the art of gambling?

DUKE: Yes. I mean, I just — obviously that group and then within poker, there was also a guy named John Hennigan, who’s actually mentioned in the book. He was someone I watched really carefully.

Some, I think, that some of the things, most important lessons I learned from people who didn’t — who probably didn’t understand that they were mentoring me in some way, where I was just learning from them. And in particular, the important lessons for me were people who played in ways that my group had not taught me to play.

So, they were playing strategies that were very different from that kind of strategies that I was being sort of taught and they were being fostered in me. And this initial feeling on my part of, they must be really bad. Like, clearly they’re just idiots. And they’re winning because they’re just getting lucky. Just simply because I didn’t understand their strategies.

And that shift of learning to sort of dig into their strategies and figure out why it was working for them and what they were doing even though it wasn’t something that I was coming in thinking what’s sort of the right play was really, actually, important. It’s that openness to things that you don’t understand, that just because you don’t understand them or they’re not within your wheelhouse, doesn’t mean they’re bad. Sometimes it does, but it doesn’t always and that was, I think, some of the most important mentorship that I received and I don’t think those people know that they mentored me.

RITHOLTZ: Tell us about a time you failed and what you learned from the process?

DUKE: Oh, my gosh. Which time? I mean —

RITHOLTZ: Pick on in random.

DUKE: –many. I mean, you know, I feel like for a long time I sort of carried around not finishing my Ph.D. is a failure, for sure. I think that that was a lesson in compassion toward myself. You fail all the time at the poker table. I think you have to learn how to process that.

I had a startup that I was a partner and called at the poker that we started right at the end of the poker boom, right? So, this was right around, I think, we started the company in 2010 and we were trying to create sort of the PGA of poker. And that company failed. And it was — it was awful. Like, obviously, I really wanted it to succeed and whenever a company fails, there’s vendors that are angry, some of the players were angry, and that was certainly a lot to process.

What I tried to take from every single time that I fail, whether it’s the company or failing on a particular poker hand or feeling like I failed in a tournament because maybe there were decisions that I could made, would’ve been better, I made a big mistake that cost me to lose or whatever it might be is to say the only real failure is to not to take lessons from it, to figure out. To start trying to parse out what was luck, what was skill, what can I change in the future? How do I find compassion for myself? How I find compassion for other people?

And that’s what I’m always trying to work on, is that. And hopefully, I’m doing an OK job at that.

RITHOLTZ: That’s quite interesting. What do you day to stay mentally or physically fit outside of work?

DUKE: Well, I think that — you know, for me, I think that mental and physical fitness actually go hand-in-hand. I think that the average view of a poker player is someone who’s, you know, overweight with a visor and a cigar, or something like that. I’m not sure.

But, actually, most of the really top poker players are not that at all and they’re actually in pretty good physical condition. So, I play a lot of tennis. I do a lot of yoga. Id o something solid core which is like sort of Pilates on steroids. And I spin.

So, I’m working out actually more than seven times a week because I’m often layering yoga on top of that and I think that that’s just really important for mental fitness.

When you’re sitting down at a poker table or doing work, like, what you doing investing, it’s like you’re doing math problems all day. You go open up a textbook and do math problems all day. It’s really tiring.

RITHOLTZ: It could be physically exhausting.

DUKE: It’s physically exhausting. So, I think if you’re physical self isn’t in good shape, then your mental self, you know, you can’t be sharp.

RITHOLTZ: If a millennial or a recent college grad came to you and said they’re thinking about a career as a professional poker player, what sort of advice would you give them?

DUKE: I think that now, the advice I would give because it’s been on television, so I think it’s considerably a little more glam, is to know what you’re getting into. I mean, it’s a grind. You have to put in your hours because the amount of money you’re going to make is going to be tied to how many hands you get.

So, it’s long hours. It’s tiring. It’s physically exhausting to be in a casino. It’s, obviously, piped in, stale air. There aren’t windows. So, you’re not getting any sunlight. And it’s mentally really grueling. So, that’s number one.

And then number two, to recognize that it’s a very small portion of people that can really make their living at it. I think that, probably, the advice I would give would be the same as someone who came and said, I’m going to go make my living being a day trader. It’s, like, great. There are some people who are amazing at that and they’re amazing at high-frequency trading, and they do an incredible job of it. Just understand that most people don’t, right? And they go broke.

And so, just go in there with open eyes as to what you’re getting — as to what your chances of success are. It’s not that I don’t think that you personally can succeed, just know, and be prepared for something that’s physically and mentally really grueling.

RITHOLTZ: And my final question, what is it that you know about poker playing, gambling, statistic, and luck today that you wish you knew 20 years ago?

DUKE: I think, essentially, everything that I wrote in the book. When I first started playing, I think that I was — I think that I thought that I was much better than I actually was. I thought I was hot, you know.

RITHOLTZ: Fill in the blank.

DUKE: Yes. You know, I described this scene in — and which is I remember so well, you know, so I remember I said my brother wrote all these hands down on a napkin, and my brother was a world champion player. And I somehow thought like I was, like, way better than these people in the game that I was playing with because I had my napkin from my brother. That’s like as Dunning-Kruger as you can get, right?

And people — when I saw people play hands that weren’t on my brother’s list, I was just like, wow, that person must be an idiot. They’re playing a hand that isn’t on my brother’s list. And I just sit — I’m so embarrassed by that. Oh, my gosh.

So, when I first started playing, I wish I had known how little I knew. I wish I had known that I was not even close like I was 17 universes away from being any kind of expert, and that here’s a really important thing that I wish that I’d known, that the worst player at the table has something to teach you and that thing that they’re going to teach you is really, really important. And it took me a long time to figure that one out.

RITHOLTZ: That’s quite fascinating.

We have been speaking with Annie Duke. She is the author of “Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts.”

If you enjoy this conversation, be sure and check up an inch or down an inch on Apple iTunes and you could see any of the other, at this point, almost 200 podcasts that we’ve had previously.

We enjoy your comments and feedback and suggestions. Write to us at I would be remiss if I did not thank our staff who helps to put together this podcast each week, Medina Parwana who’s our producer and audio engineer, Taylor Riggs is our booker, Mike Batnick is our head of research.

I’m Barry Ritholtz. You’ve been listening to Masters in Business on Bloomberg Radio.


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