Haverford Trust
Transcript Annie Duke Episode
Host: Hank Smith – Director, Head of Investment Strategy
Guest: Annie Duke, Author, former poker player

Maxine Cuffe: You’re listening to Speaking of Quality: Wealth Management Insights with Hank Smith. A podcast by The Haverford Trust Company.  

On Speaking of Quality, Hank chats with authors, influencers and wealth management experts to bring a sense of clarity and calm to the complexity and stress of personal finance. 

And now – here’s your host, Hank Smith.

Hank Smith:  Director, Head of Investment Strategy: Hello and welcome to Speaking of Quality: Wealth Management Insights. I’m your host Hank Smith, Director and Head of Investment Strategy at The Haverford Trust Company. On this podcast, we explore topics ranging from quality investing, retirement resilience, stock market trends, estate planning, behavioral psychology and more. 

Joining me today is Annie Duke, former world champion poker player, and I might add the first female world champion poker player, and esteemed author, who’s writing focuses on cognitive-behavioral decision science and decision education.  

Poker is all about making sound decision making with limited information. In this episode, we will talk about what investors can learn from poker, the power of smart decision making and knowing when to walk away when the path you’re on does not align with the outcome you want to achieve. There is much we can learn from Annie.

Although I’m no poker pro, myself along with many of my team members enjoy an occasional game of poker.
As you know poker requires patience, thought and sound decision making with limited information. Much of the same is true of investing. Well, no one can predict the future. You have to analyze the data at your fingertips, or the cards you see and the betting habits of your opponent to get the best possible outcome in poker and investing.
It may seem like poker pros and investment experts know what cards are coming, but it’s actually just about understanding risk and making calculated decisions. So, let me begin actually at the end, the end of your career, when you retired. And to use a sports analogy, athletes have a prime, varies in age, in different sports. Some retire at the end of their prime, well beyond their prime, and some in the middle of their prime. Is that true of poker that there is a prime age, and if so, did you retire at your prime?

Annie Duke: Gosh, well, so just like sports, I think there’s always exceptions for people who really do continue to excel throughout their whole life. So, Erik Seidel would be one of those people. He’s in, I think, he’s in his 60s now. And he just continues to, you know, be incredible. Doyle Brunson remained at the top of his game for a very, very long time until at least he was 80, I would say. When I was coming up as a poker player, generally you would sort of reach your prime somewhere in your 30s. And the reason for that was that there wasn’t online poker. So, some of kind of getting to the top of the game has to do with reps. You just have to see, you know, a certain number of hands and play a certain number of hands in order to get really good. And when you’re playing at a regular table that is not online, you’re getting 25 to 30 hands an hour. So, it just took a long time to be able to get enough experience to the point where you would really kind of be you know, dominant in the game, so that would happen in the 30s. By the time Internet poker really started dominating, you know, so this is going get into sort of the odds, right? Like the mid-ish OTT (Over the top). You started seeing players coming into the game at age 21, who were incredible because the number of hands that they could get in, you know, was the same as what used to be it for me probably more than what used to be able to get by your mid-30s. And so, you would see these young, young people come into the game who were just absolutely incredible. Along with that came a lot of analytical tools. So, just like in sports, where sports analytics started to really dominate the game in terms of the decision making, that started happening in poker too. There was, you know, we were sort of working some of that stuff out by hand when we were first started playing in the 90s.  But by the time you get to the late OTTS, there’s just a lot of like poker solvers out there that are really kind of going through the analytics and kind of a sabermetrics kind of way for how you might play in any given situation. So, at that point, I would have had a choice, which was to, you know, start getting a lot more hands in and start doing the work to do the analytics and I was like, no. So, I probably should have quit a little bit earlier than I did, which is true of most quitting that we do. We usually get to it too late. Because honestly, the people who were coming up, who had learned online who had all of these analytics tools, they were just way better than me. And at that point, I kind of just wasn’t willing to put in the work to tell you the truth. And that’s a signal that I’m not passionate enough about the game anymore, and so I took that as a time to leave. 

Hank Smith: That makes sense. It’s interesting, as a football fan, that sport was late to the game in terms of analytics, but boy, they’re certainly using it now.

Annie Duke: I mean, I think this goes to like, why are we late to things? So, have you heard of the concept of loss aversion? Comes from Kahneman and Tversky? Yeah, so it’s basically, and I’m sure you’ve experienced this with clients, that when we’re considering two options, we’ll prefer the one that has the lower chance of having some sort of loss associated with it. So, this is independent of, you know what the return on investment might be. So, essentially, we can think about it as like you prefer low volatility to high volatility even if the high volatility or even the medium volatility would have a much higher expected return. So, this is an error that we make, and I’m saying this is separate from like stated risk tolerance. Right? If we’re so worried about the regret, that might be associated with a loss that it stops us from starting stuff that that maybe could go wrong. So, an interesting thing about loss aversion though, is it really only gets recruited for starting decisions, not for continuing decisions. So, if we think about the way that people used to play football, like punting on fourth down, the way that it’s always been done, we don’t think about the losses that would be associated with that strategy in the same way we do as the losses that might be associated with going for it on fourth down.

So, what that means is that if we punt and that makes us lose the game, that doesn’t hurt as much as if we go for it on fourth down, we fail, and then they get the ball and score a touchdown. That feels much worse to us. And that actually is very much a lot of the reason why you know the NFL was so late to adopt these like fourth down choices, but even like the NBA, it took them forever to really adopt the three-point shot as a dominant choice, right? So, you see this really across sports, and we see it across our lives, too. We see it in investment decisions. It’s kind of that problem is all over the place.

Hank Smith:  And of course coaches have to face the fans on Monday and they don’t want to have a riled up fan base because they didn’t do the expected thing to do.

Annie Duke: Well, and that’s the thing is that when we when we think about these issues for ourselves, like when are we worried about potential losses? When are we recruiting that, you know, sort of aversion to the regret that we might, we sort of anticipate we might experience and it’s more for the new choice, the thing that we might be starting them for the status quo, that that’s true of the fans as well. So, you know if the status quo, if the thing everybody does, is punt on fourth down and you punt on fourth down, and the returner, takes the ball back for a touchdown, you’re sort of like, “Ah, that was kind of unlucky, uh how’d that happened”. But if you go for it on fourth down, and you miss and then they get the ball at midfield and score it, then the fans are like going bananas because they have the same type of biases that you as an individual do. And you know, so then it’s like now that’s going make you sticky because you don’t really want to hear the FM radio on Monday morning, or the AM radio.

Hank Smith:  So, let’s start with the basics. How do you define sound decision making?

Annie Duke: So sound decision making really has to do with process. So, one of the mistakes that we make is we think about sound decision making as having to do with the outcome. So, you’ll hear people say all the time, like they make a particular investment and it turns out really well they’ll say, “Oh, that was such a good decision to invest in that”. Or they’ll make an investment and it turns out really poorly, and they’ll say, “Oh, that was such a big mistake. What a stupid idea to invest in that”. But that actually, in anything where there might be luck involved and also hidden information where you might discover things after the fact, that’s actually a very bad way to figure out what a good decision is or a bad decision is because imagine that, you know, in the first case where I won a lot, I got a tip from my plumber, who, who literally like heard it from some guy, right?

Hank Smith: That’s kind of like gaining a stock tip from the cab driver.

Annie Duke: Is that Yeah, right. Exactly. They were like “Oh, you know, I heard” and then you literally just invested in it and it turned out well, that doesn’t make it a good decision. Now I’m not saying that your plumber might not have had a very good stock tip. But once your plumber gives you the stock tip you ought to go and do some more work with somebody, right? And if you don’t do that work and you’re just literally going by the word if someone you like met at the dog park, then that’s not a good process, right? Even if you had a good outcome. And likewise, we all know that you can think about what the fundamentals are. You can have a thesis about how the market is going to move. You can think about what your risk tolerances, and you can go through all of that and try to figure out for example, do I want to be 60/40, 65/35, 70/30 and really think that through and then be in a situation where you know as an example, recently, like bonds haven’t been a great hedge against stocks, but like historically they have it doesn’t mean it’s a bad decision to have been holding bonds as a hedge against stocks, right? But we’ll think that, we’ll say, “Oh, why did I do that? That was so silly”. And it’s like no, given the information that we had, given what the market has done historically, and you actually went through that process to think about it, then that’s what makes a good decision, not the outcome.

Hank Smith: So, making sound decisions isn’t a skill we’re inherently born with. How have your experiences shaped your ability to make decisions that led to continued success?

Annie Duke: Well, I think that I mean, well, first of all, I you know, I mean, I studied cognitive science for five years at the University of Pennsylvania and then have continued to do so since then. So, I think that that has been really helpful, both in terms of understanding the ways that decision making goes wrong, which I think is actually really important to under you know, to understand things like overconfidence, confirmation bias, the ways that we fit facts to our beliefs, as opposed to fit our beliefs to the facts, you know, that this is well known. And, you know, obviously, like Thinking Fast and Slow by Daniel Kahneman is such a seminal book on this topic. So, I think just kind of understanding where your weaknesses might lie is just really, really helpful for being better decision making, not because if you know about the weaknesses that will fix it, but because you’ll then start thinking about strategies to be able to fix them, they won’t go away on their own, you actually have to think strategically about how to do it. So, I know within the science, a lot of what the best practices are for doing that, for example, one of them would be to decide in advance.  

So, a simple example of decide in advance would be a stop loss, right to say, once I’m holding a position, if I start losing in it, that’s going to make me a bad decision maker about it. So, I’m going to decide in advance like before I buy, I’m going to decide what the stop loss is and that’s going to help me be better at it. So that would be a good example of how do I overcome this problem that I might have that I am now aware of. And then it’s, you know, having played poker you really learn, I think so deeply first of all, the probabilistic nature of the world, right? Because you’re just running so many variations of, you know, I was 60% to win, and you start to get a very good feel for what 60% really means, and that 40% is a lot. Right? And then and then you also learn like it doesn’t really matter whether I win on a particular hand or not. It’s really about the long run, am I getting a positive return on my investment? And in other words, if I’m 60% to win in that situation, do I have to lose less than 60% to be profitable, right? Or when less than 50% or 60% of your profit. So as an example, like if I play a hand where the pot tells me that I only have to win 30% of the time to be profitable, if I’m 60% to win, that’s pretty good. And 40% of the time, I’m going to lose, but that’s fine. And you really start to sort of think about that sort of long termism and when you can get a longer time horizon on these types of investment decisions, which is what poker as you become more rational about them.  

And then you start to really think about pretty deeply the cognitive biases because there’s so much uncertainty in poker that you can really see them kind of front and center in your decision making, particularly as it relates to trying to close the feedback loop, I made decisions, I got a particular result on a hand and what does that mean. And I think that I was just forced and any poker player is forced to come up with really good strategies to solve that problem, in particular, to not start blaming losses on luck and wins on skill, which is really the main error that we’ll end up making.

Hank Smith: Right? In the game of poker, it’s easy to fold when you don’t feel your hand is strong enough to compete anymore. That’s not always the right decision. Similarly, in the investment space, some people are eager to change their portfolio when volatility comes into play and the market isn’t going their way. How do you balance knowing when to walk away from something such as a financial investment, and when to stay the course?

Annie Duke: So, in poker, people will generally, amateurs, will generally hold their hand too late, in a variety of ways. They play too many hands to start with, so that’s folding your hand too late because they’re continuing with hands that they should have pulled it in the first place. And then once they start to have money invested in the pot, it becomes very hard for them to walk away from the hand. So, you’ll hear a player say things out loud, like “Well, I couldn’t fold, because I put too much money in the pot”. And they’ll actually say that out loud. And in that particular situation, of course, that’s very classic sunk cost fallacy, which is they’re thinking about the money they already had invested as opposed to whether it’s worth it to continue going forward. So that’s generally what you’re going to see in terms of behavior from poker players. Now we know that when you look at retail investors who are investing in individual stocks, you also see that type of behavior. So, what you’ll see is that they will cancel their stock losses, in order to hold a losing stock trying to get their money back. And they will also cancel their tape gains in order to sell early to make sure that they get they don’t keep their gains at risk, so that’s like on an individual stock right. Now when you start to have these kinds of dislocations in the market, that’s what people will really overreact to it. This is not talking about like an individual decision. This is talking about in general, the market is kind of chaotic, and imploding and it’s going down and then you’ll see people start to say I’ve got to sell here and try to get back in later, and we know that that’s pretty bad for long term returns. Now, it’s interesting that both problems, the holding too long or the selling too early, are solved with the same types of strategies. Those strategies are essentially twofold, piece number one is I previewed this with stock losses, think about what the conditions in advance are, that would make you sell, or would make you for example, change the balance of your portfolio so you can kind of think about those things in advance and then the second piece is to get somebody to help you with the decision. So obviously, that could be a therapist or friend or financial adviser, who’s been there done that and isn’t kind of in the problem with you because the issue that we have with whether we’re blowing through stock losses or selling in a panic, whichever one it is you know, one is a hurting problem because there’s something big going on the other is an individual kind of decision making problem, is that we’re in the decision, right? So there’s some sort of force that’s working against us whether it’s panic, or whether it’s I don’t want to convert this loss of paper into a realized loss. So therefore, I want to keep sort of the gamble on I want to keep the bet on. When you’re in it is when you’re going to make a bad decision. But if you decide in advance, you’re going to be much more rational so you can work out like for example, if you have a particular balance to your portfolio. You can work out well what might change that would cause me to rebalance. For one thing, it might be your age Right. So if you say like I’m going to have a plan and I would like to have a 70/30 portfolio because I’m only 25 and I’m going to have a 70/30 portfolio until I have children. Right, so, like you can set those kinds of deadlines for yourself, but you can work that out with your financial advisor who’s going to understand like what the effect of those things are. An example I’ve been given recently, is like some people decided to that they wanted to get into crypto, right and the thesis behind that, one of the theses, there’s lots of reasons I’m sure to get into crypto, but one of the theses that I heard was that it would act as a really good hedge against inflation and market chaos. So that was which I’m sure you heard as well like so when people were talking about it like 18 months ago, they were saying well, you should you should have some crypto in your in your portfolio because it will hedge against inflation and hedge against market chaos Well, alright, so if that is your thesis going into it, then you could very easily set kill criteria, which is okay, this is a new financial instrument. This is what I believe to be true about it. What are the signals that I might see in the future that would tell me that the reason that I’m in it does not did not actually turn out to be true because we’re getting into it under uncertainty, right. So, you could say if I see a certain level of correlation with inflation, so as inflation goes up, I see something that doesn’t look like a spurious correlation then maybe you might get out of it. If you start to see it go down with the market in some way, but you could figure out what those criteria are. And then you could sell it because otherwise what will happen and I’m sure you’ve seen it, is that you get into it, because you have this you know idea of it as a hedge. But then once you’re in it and it starts to go down. You’re like, no, but now it’s really cheap. And also, that’s not why I was in it in the first place. Actually, it’s a different thing. And you start to have all these rationalizations that will cause you to hold on to it and that’s the thing that we’re wanting to avoid.

So, when you set those, particularly with someone who’s an expert to set along with you, this is going to help you actually be very rational about it. The good news is that if you didn’t do it at first, you can do that amid the chaos. So, let’s say that you go to your advisor and you say, Okay, I’m panicking I want to sell everything. You know, essentially, it’s like okay, but is anything really bad can happen in the next 24 hours? Or the next two days? So usually the answer is no, like, it’s not going to get that much worse than it already is. And so, you say okay, so let’s take a minute, right, and let’s look at what why do we think this is happening? Let’s go look at the base rates. Let’s see what’s happened in the past. In these situations when the market has gone down and we look at what happens to the five-year returns. How do people do who sold versus how do people do who held you know, let’s tell us your risk tolerance changing maybe instead of selling everything we can change and we can rebalance it to more suit your risk tolerance. But let’s just take a minute and say we’re not going to do anything for the next three days. And what does the world look like in three days? Right? And if it looks a certain way, then these are the things that we will do and it just gives you a moment to sort of get out of that moment of panic into a place that’s more rational.

Hank Smith: Well, the good news is we have a buy thesis for every new position we buy and we update that and a red flag occurs when that thesis is violated. That often results in selling.

Annie Duke: Right so that’s a good example of kill criteria. So, I’ve done this with portfolio management for before where obviously they have like a lot of quant analysis. They have a thesis, and they make the assumption that when the thesis is somehow violated that they’ll actually react to it rationally. And what I point out to them is no, that’s not true. I understand that you sort of that is intuitive, but it’s not if you don’t set up the systems in advance that say, okay, you know, the fundamental has moved out of a particular band. So therefore, we have to assume that the thesis was incorrect and you’re making that decision in advance. So this is something that I think is so important for people to understand, is that it feels a little bit like a distinction without a difference to say, I’m going to say in advance what the signals are, that would tell me that I ought to sell and then I’m going to commit to doing that in the future or maybe even put more risk on right like you may want to increase your position depending on what those signals are. So how is that different than but if the signals occur, I’m obviously seeing them. And if I didn’t do this work in advance, and I see the signals, obviously, I’m going react the same way and the answer is the science shows so clearly, that is not what will happen that if you haven’t said it in advance, it’s very likely that you’re going to sort of fall prey to all these cognitive biases that are going to make you make irrational decisions about what to do in that moment.

Hank Smith: Annie in your recent book, Quit: The Power of Knowing When to Walk Away, you talk about this desire for certainty. Why is this desire a dangerous strategy when it comes to reaching your goals?

Annie Duke: So, the desire for certainty of such a danger and helping us reach our goals, because that desire for certainty causes us to stick to things that aren’t getting us to our goals, at least, either not as fast as we would like them to or maybe even causing us to lose ground. So how does certainty come into this well, so when you make a decision to start something, you’re making that decision under conditions of uncertainty, we know very little in comparison to all there is to be known. And obviously, there’s the influence of luck, right? Like, you could have made a very sound decision that didn’t include the chance of a pandemic and then the pandemic hit and you didn’t have any control over that and that’s just bad luck. So, what we know is that once we start something, that we’re there’s going be a lot of information discovery that occurs after we’ve started it. So that seems like a really hard problem, right? Like when you’re starting something you don’t know very much and then you’re going to find out all this stuff afterwards, which is that feeling of “I wish I knew then what I know now”, which everybody has like every day, Alright. So, if that’s the problem we’re in what’s the solution to it? Well, lucky for us, we have the option to quit. Isn’t that great? Because what the option to quit affords you is that when you find out that new information and that new information is bad news, you can change your mind you can sell, you can quit your job, you can shut the project down, you can stop climbing up the mountain, whatever it is, you could stop doing what it is.

So now where does the desire for certainty come in? The problem is that the decision to quit is also made under uncertainty. In other words, it’s a forecast which says, “As I look at the road that I’m on, and I’m thinking about what that looks like in the future, compared to other roads that I might take, I don’t think the road that I’m on is getting me to where I want to go fast enough. So, either on its own or in comparison to the other roads that I might take”, but you’re looking into the future. It’s a forecast. So what that means is that when it’s the right time to quit, it’s not going to be a dead certainty that you should quit because when the right time to quit is when essentially the expected value goes against you, meaning I’m no longer feeling like I’m getting a positive return on investment measured however you want, whether it’s money or happiness or whatever, on the road that I’m on, and as soon as that happens you should switch, which means nothing particularly dire is going to be happening in that moment. It’s that the probability of something dire happening in the future has now gotten too high. But we don’t like that. Because when we do that, we’re left with all these what ifs. But what if I had stayed, maybe I could have turned it around. Like I have a startup and if I kept going because I heard the story about this one person who got down to their last $100,000 and was you know, couldn’t raise any money. And they turned it around, so maybe I can turn it around to and you know, what if I just stayed. So, what happens is that with the path we’re on, we have desire to know for sure, which means that we have to butt up against the dead certainty that there’s no other choice but to walk away. So, when do we do it like when our work situation has become so toxic that we’ve used all our vacation days and sick days that we don’t want to go in anymore? Or we’re going up Everest, and we’re near the summit, but now we’re in the middle of a blizzard? Well, obviously then you have to turn around, right? When you have a startup and your startup is out of money and you can’t raise anymore, well then, we’re willing to quit. But if you think about it, when we’re willing to quit under those circumstances, it’s not even a decision anymore. Because we already know for sure, we’ve already achieved certainty. So why does this stop our success? Because that desire for certainty that causes us to want to butt up against the edge of dead certainty of no choice whatsoever, but to walk away, causes us to stick with things that aren’t working for us. That are causing us to lose ground. And there’s opportunity costs associated with that, which means we can’t get on another path that would get us to where we want to go in the same sense that if you’re on the Schuylkill Expressway, that’s in Philadelphia, for people who know, which often has traffic jams on it. And you know, you’re in a traffic jam, you want to look to exit the road, because staying on that road is slowing your progress towards your ultimate goal. If you get on a new road you can get to where you want to go faster and that’s true with decisions about investing or career fulfillment, or relationships or projects or products or businesses that you’ve started. If you don’t quit on time, you’re slowing your progress down. It’s going to be harder for you to be successful.

Hank Smith: And as you point out in the book, it’s challenging because we’re taught and trained from an early age never,  never quit.

Annie Duke: Like never ever, right, like quitters never win, winners never quit. Right? And it’s like no, no winners quit a lot. That’s actually why they win. Why? Because we’ll look at something like we’ve all heard about agile development, right? Like that’s just quitting. So it’s just saying like, we’re going try a bunch of stuff and we’re going to quit almost all of it. But we’re trying it all to find something that works. So the idea is, look, stick with the stuff that’s working and quit all the rest.

When we teach people you know, quitters or losers, basically, what we’re telling them not to, you know, try a bunch of stuff and stick with the stuff that’s working and quit the rest,  we’re saying once you try something, stick to it because that means character. Those are the heroes of the story, the ones who persevere right, and the quitters are just losers. But the quitters are winners, right and no more can we see this than then in investing. Right if you if you looked at the companies that would have been wise to hold, blue chip stocks in 2005, if you held those forever, you’d be broke. So, we have to we know that we have to change according to the new information that we have today.

Hank Smith: I have an expression that just because you’re a blue chip one day, doesn’t mean you won’t be a cow chip the next day.

Annie Duke: That’s such a good example. Of course, in those situation we want to switch right and so the thing is that the faster that you are to recognizing that it’s no longer blue chip, the better off you’re going to do. Right? That’s the thing that we have to remember. So, the ones who sort of stick until they know, they know that there’s no turning around. They’re losing time compared to the ones who have automatic red flags, right? Like I’ve thought in advance about what’s going to tell me that this is no longer a blue chip. Once that red flag goes, I’m done. I’m not looking back. I’m switching the money into something else.

Hank Smith: Yeah, that’s another good piece of advice is don’t spend too much time looking backwards. Stay focused on the future and present. 

 

Annie Duke: Well, yeah, so when you think about the sunk cost effect for example, it’ a problem of confusing waste with a backwards looking problem as opposed to a forward-looking problem. So, what happens is that we say, actually, so I saw this with I saw an exchange on Twitter just the other day, where someone posted that they had bought Bitcoin at $50,000, I think and it was they had sold it at $26,000. And somebody wrote back and said, “You can’t do that because now you can’t get your money back”. So I was like, Okay, well, that’s weird because it seems to be I’m sure that $26,000 went somewhere else. But the issue there is that this is very classes so classes, they’re thinking about the $24,000 that that they’re already down. As if when you sell it that’s wasted, it’s gone. So that sort of thinking about that and like if you like leave a job and you’re like but if I leave now, I’ve wasted all the time I was onboarding and learning the ropes and all the training that I put into it. But again, that’s already gone. Waste is actually a forward looking problem, which is does it make sense for me to have my money to be, you know, to continue to be in this position? Is that still positive for me? Does it make sense for me to spend another year in this job? Right? That’s the question that you want to ask. But what happens is that because we think about waste as a backward-looking problem, it actually compounds because that backward looking feeling of not wanting to have wasted something or wanting to get that money back causes us to stick in situations that we really should leave, which then causes us to waste, right? That’s the actual waste that’s occurring.

Hank Smith: So, what are some tips when it comes to making informed decisions, especially ones that can impact the trajectory of your professional and personal life? Do you have any strategies that worked well for you in your own life?

Annie Duke: You know, I mean, I would say, definitely, definitely get, you know, advisors, right like find yourself some coaches that can really help you, definitely do a lot of thinking in advance. And then the other thing I think, is that whenever I’m thinking about doing something, I’m trying to test it. So, I think this is really helpful because if we think about the problem of decision making under uncertainty, which is so hard, it’s a good way to sort of gather more information to try to figure out what you’re doing in a situation where you have the mindset of this is made very easy to quit, so you’re much less, less likely to get stuck in it. So, there’s a variety of ways that I do that. One of the things that I try to do is think if I’m thinking about doing something sort of what’s the big unknown, what’s the hardest thing, where I don’t know the answer about whether this would be something for me or whether it’s something for pursuing. And let me try to tackle that first. So, just as an example, if I’m thinking about a book that I want to write, you know, we have lots of thoughts about books that we could write, but do you really know it’s a book? Is it a blog post? Is it an article is, would anybody even be interested in the topic? You know, is there enough meat there? These are all questions that are actually quite hard to figure out. So, what I do is the first thing I do is I talk to my editor, so she’s obviously acting as my coach, to just sort of try to say, “is this something I should even be thinking about further?” So that’s the first thing because that that allows me to abandon course, like really fast if it’s not worth pursuing. And then the next thing I do is I always write a proposal. And I think people are pretty surprised by that because I’m in a position at this point where I don’t need to, because I could just sell the book. But for me, that’s the hard part is can I actually map out what the chapters would be? Can I think about what the narrative drive would be? Can I think about what the scientific work would be that would be supported the claim, like what’s the order that I would put things and that’s the hard part of figuring out whether you have a book there, and writing a proposal is a lot sort of more targeted than actually starting to write a book and then figuring out somewhere in the middle, that it’s not really a book, but then you’re in the middle and you feel like you have to finish it, right. So that kind of tactic that I that I use, just for my own writing, I actually use kind of across the board, so I’m a big overlapper of careers as an example. So, while I was playing poker, I started doing speaking and consulting in the decision-making space. I still do that. While I’m a speaker and consultant in the decision-making space, I also started writing books, I also started doing research at UPenn. I also got back to teaching there. And so, I’m doing all of that kind of in parallel where I’m sort of testing out you know, do I love this? Is this something that I want to continue doing and then I’m abandoning things pretty quickly that I find are no longer making me happy, but because I explore so many things, it’s not scary to me because I have something else to come in and replace it. So that’s been like a big strategy for me of how to how to make a successful life at least for me.

Hank Smith: Fun fact, Annie Duke is probably one of the very rare university professors who’s also in graduate school getting a graduate degree as well.

Annie Duke: So, this is actually an important point about quitting. I think that both for starting things and for quitting things, we think about the decisions as last and final, which makes it really hard like it’s really hard to start something particularly under uncertainty if you think that you if you don’t take into account that you can change your mind because you want to get it exactly right. And then we get into that paralysis by analysis problem, right. But also, for quitting, we think, Well, if we quit, then it’s like we closed the door, we can’t go back. So, I left graduate school to play poker. And then just a couple of months ago, I went back to graduate school. So, I’m finishing up my dissertation, I should be done in early 2023. And so that’s the thing we have to remember is most things that we do are reversible, and you can go back to stuff.

Hank Smith: That’s great. Let’s wrap up with a fun question. Speaking for myself, and many of my knucklehead friends, when we play poker, we’re having beers and cigars. I assume that doesn’t happen on the pro circuit in poker, but in just casual games of poker, have you consumed adult beverages and has that impacted your decision making?

Annie Duke: I have played occasionally for fun, where we really for fun where there was alcohol involved. It didn’t impact my decision making in the sense that I had different values in that game than I would in a game where I might be playing for real. So, in those games, like they usually devolve into a game called guts. Have you ever played guts? So basically, like, everybody just sort of gets dealt two cards, and then you’re betting about who like who has the best hand It’s like there’s no skill basically, there’s a little bit of skill, but not a lot. You know, or like, you know, games with wildcards in them and things like that, which are just really silly games. So, so I consider those things, social situations. And so, when I go into them, I’m playing for an amount of money that I don’t really care about, because that’s not the point of why I’m playing. And I think, that’s something that we have to remember in general, right. Like, I think that a lot of times we think that people have the same values that we do, and then we get like, kind of judgy about them. So, when I was a professional, you know, obviously I’ve played in a decade but when I was a professional, if someone came in on a Saturday night, who was just like, you know, visiting Las Vegas or something, and they came in and we’re drinking and not playing well, whatever. Maybe I might have a you know, somewhere a tendency to judge them and say, Oh, look at how bad they are, and they’re drinking. Everybody knows you shouldn’t drink and play poker, except that I have to remember that they have different values than I do, they’re on vacation. They may be playing for an amount of money that doesn’t matter to them in the same way that if I were in my basement, it would just be social time and the same way that I might buy an expensive bottle of wine one night to celebrate with my friends. Maybe this is like what I’m trying to accomplish in this particular situation. And I think that we need to be more tolerant that way, right? The things that I want, you know, their decision making might be perfectly good in that situation, not the decisions that I would make. Now if I were trying to win, and that was my intention, and I drank, that would be a very bad decision because the decision would absolutely 100% affect my ability to make good decisions at the table so I did not do that.

Hank Smith: And to our listeners, thank you for listening to this episode of Speaking of Quality, Wealth Management Insights with Hank Smith. If you have any questions for Annie, please visit www.annieduke.com. Make sure to take a look at her latest book, Quit, the Power of Knowing When to Walk Away and my personal favorite of her books, Thinking in Bets.  

Make sure to subscribe and listen to our upcoming episodes – we have some great conversations in store for you this season! Until next time, I’m Hank Smith – Stay Bullish.  

Maxine Cuffe: Thank you for listening to this episode of Speaking of Quality, Wealth Management Insights with Hank Smith.  

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