People will hedge against disaster with fire insurance but are less likely to hedge against their marriage with a prenup (only about 5% of married couples have a prenup).
We have this idea that if we do hedge against something, somehow if the bad thing happens, we caused it. And this is particularly problematic in situations that do have very high emotional valence.
Books such as The Power of Positive Thinking and and The Secret by Rhonda Byrne teach readers to think positively because their outcome is dependent on their thoughts.

It’s Hard For People To Make Bets That Hedge Against Their Identity

In order to really succeed at the top levels of the game, you have to be so open-minded. You have to be so willing to ponder on a daily basis the idea that you might be wrong, the idea that the things that you think to be true or what you think about an opponent — that it just might be inaccurate.

It’s hard to be happy playing poker because the losses hurt much more than the happiness you gain from winning. Instead, focus on the process.There’s this huge asymmetry between how sad people are when they lose versus how happy they are when they win. It’s one of those things that, unless you’re really focused on the process. This is a lesson for all of life, the way to happiness is to focus on the process.Be aware of the self-serving bias: We tend to attribute good things to our own skill, and we tend to attribute bad things that happen to us to luck.

Lessons From Poker

The top 500 poker players tend to be brilliant in game theory and in making real-time, high-stakes decisions.Just because you’re smart doesn’t mean that you can become a great player. you have to be smart in a very particular way.You need to be curious about being wrong and stay open-minded and you have to be so incredibly hungry to collide with corrective information. You have to be open-minded to the corrective information.Open-mindedness is the number one trait of a top poker player.

Traits of Top Poker Players

<ul>
<li>If you’re in savannah and you hear rustling in the grass, you don’t want to spend time thinking about the probability that it’s a lion.</li>
<li>When making bets with friends, it’s probably best to not make any bets that can be interpreted as negative, such as betting your friend’s kid won’t get into a certain school, people can interpret that as you think that that’s what’s going to happen.</li>
<li>When betting on sports, sometimes you can hedge the emotional downside with a monetary upside such as betting against your home team because you know they will likely lose.</li>
</ul>

Can Thinking Probabilistically Make Our Decisions Worse Rather Than Better?

I do think that one of the things that poker teaches you is that you shouldn’t assume that just because people are really skillful in one domain that that’s going to transfer. Because I think that that ability can be very, very domain-specific.

For Annie Duke, the poker table is a perfect laboratory to study human decision-making — including her own. “It really exposes you to the way that you’re thinking,” she says, “how hard it is to avoid decision traps, even when you’re perfectly well aware that those decision traps exist. And how easy it is for like your mind to slip into those traps.” She’s spent a lot of time studying human cognition at the poker table and off it — her best-known academic article is about psycholinguistics and her forthcoming  book is titled How to Decide: Simple Tools for Making Better Choices. Annie joined Tyler to explore how payoffs aren’t always monetary, the benefits and costs of probabilistic thinking, the “magical thinking” behind why people buy fire insurance but usually don’t get prenups, the psychology behind betting on shark migrations, how her most famous linguistics paper took on Steven Pinker, how public policy would change if only the top 500 poker players voted, why she wasn’t surprised to lose Celebrity Apprentice to Joan Rivers, whether Trump has a tell, the number one trait of top poker players, and more. Follow us on Twitter and IG: @cowenconvos Email: cowenconvos@mercatus.gmu.edu Follow Annie on Twitter Follow Tyler on Twitter Facebook Newsletter

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For Annie Duke, the poker table is a perfect laboratory to study human decision-making — including her own. “It really exposes you to the way that you’re thinking,” she says, “how hard it is to avoid decision traps, even when you’re perfectly well aware that those decision traps exist. And how easy it is for like your mind to slip into those traps.” She’s spent a lot of time studying human cognition at the poker table and off it — her best-known academic article is about psycholinguistics and her forthcoming  book is titled How to Decide: Simple Tools for Making Better Choices. Annie joined Tyler to explore how payoffs aren’t always monetary, the benefits and costs of probabilistic thinking, the “magical thinking” behind why people buy fire insurance but usually don’t get prenups, the psychology behind betting on shark migrations, how her most famous linguistics paper took on Steven Pinker, how public policy would change if only the top 500 poker players voted, why she wasn’t surprised to lose Celebrity Apprentice to Joan Rivers, whether Trump has a tell, the number one trait of top poker players, and more. Read a full transcript enhanced with helpful links, or watch the full video. Recorded June 24th, 2020 Other ways to connect  Follow us on Twitter and Instagram Follow Tyler on Twitter  Follow Annie on Twitter Email us: cowenconvos@mercatus.gmu.edu Subscribe at our newsletter page to have the latest Conversations with Tyler news sent straight to your inbox.  

Tyler Cowen engages today’s deepest thinkers in wide-ranging explorations of their work, the world, and everything in between. New conversations every other Wednesday. Subscribe wherever you get your podcasts.

ANNIE DUKE

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