I’ve spent the last few years interviewing some of the most successful gamblers in the world, and it’s, not just because I, like spending my time in casinos, I ‘ Ve got a hunch that there’s, a special kind of intelligence for thinking about risk and uncertainty, something I call risk intelligence.
So if psychologists study gamblers at all, they tend to focus exclusively on problem gamblers, but that’s like studying obesity and neglecting odd cuisine or studying, alcoholism and neglecting fine wines.
Not all gamblers are fools. Some of them are experts, and I think we can all learn a lot about how to make better decisions by studying the way. These expert gamblers think the very idea of an expert gambler seems odd to some people.
Surely gambling is just a matter of luck, they say, but that’s, not true sure slot machines and roulette our games of pure chance. So there’s, no room for expertise there, but poker blackjack and all kinds of sports betting up offer the opportunity to exercise skill and expertise.
Expert gamblers outperform novices in these games and their expertise can make them very rich and it’s. This ability to earn money to earn a profit from gambling that sets the expert gamblers. Apart from the problem gamblers and the leisure gamblers, the problem gamblers and the leisure freecredit gamblers both lose money over the long term.
The main difference is that the let the problem gamblers bet more than they can afford to lose, while the leisure gamblers bet and lose relatively smaller, but it’s, not really the money. These people are planning for.
In the end, it’s more, the thrill of winning the adrenaline rush of the game with the expert gamblers, things are very different for them. It really doesn’t thrill them that much to win. Think of it. If every time you pulled the arm of a slot machine, it paid out soon it wouldn’t be fun, it would be work, and for these gamblers, these expert gamblers, it is more of a cold, rational pursuit of profit that motivates them that and A certain degree of intellectual satisfaction, so, as I learned more about the world of the expert gambler, I discovered that it was comprised of three distinct tribes.
First, you have the poker players, the rockstars of the gambling world, who earn win fame and fortune on the tournament circuit. Then you have the poker players: more private, austere, somewhat dismissive of the glitzy celebrity of the poker players and finally, have the sports bettors, who gamble on everything from golf and horse-racing to football and college basketball and each of these tribes exhibits and requires a distinct skill Set the poker players are skilled, amateur psychologists, skilled at reading people at telling when people are bluffing and at bluffing themselves.
The blackjack players are dedicated, determined, focused systems, players without much need for psychological awareness, and the sports bettors can be further subdivided into two distinct subgroups. On the one hand, there are the computerized sports bettors and obviously they what they need.
Most of all is the program and, on the other hand, you have the what I call the old-fashioned intuitive sports bettors, the people who do it all in their heads and those are the people that most interest me and what got me interested in this group was A fascinating paper I read some time ago by two American psychologists called Steven ceci and Jeffery Lika and ceci and Lika back in the 1980s fresh out of grad school.
They visited Brandywine Raceway, a horse racing venue in Delaware and they interviewed 30 avid racetrack patrons men. They were all men, they went to the racetrack every day of their working lives. They didn’t make their money from gambling.
It was just fun, but they were absolutely obsessed with it. They would go to the racetrack and seccion, like I found that they fell into two distinct groups. 14 of them were just incredibly good at forecasting the odds.
The final odds that would be offered on the horses just prior to the race, which is a pretty good guide to the probability of the horse, actually winning and the other 16, were no better really than the average punter.
So over the course of four years. Talking to these guys studying them interviewing them session, like a figured out that the best way to model what the expert gamblers were doing when they were thinking about predicting the horses chance of winning the race was to model it as a complex linear equation, consisting of Seven variables, each of which related to the horses performance in previous races, like his average speed, its average finishing position and so on.
But of course, these expert gamblers – they didn’t, know anything about linear regression. They never heard of statistical modeling. They were doing it all unconsciously in their heads they okay, they knew what information to pay attention to.
They would gather the information consciously, but then, when it came to mulling it around in their heads, there kind of just literally think about it. Somehow they didn’t know what they were doing, but then out of nowhere, a number would pop into their heads, and that number was always remarkably close to the horses actual chance of winning the race and it’s that that I Call risk intelligence, it’s that ability to gather information from a wide variety of sources, Mull it over in your head and come out with an estimate, a probability estimate now by now.
I hope you’re, all wondering what your risk intelligence is like and I’ve created an online test where you can find out it’s free and anyone can take it. You just go to WWE action point comm or just Google risk intelligence, you’ll, get it, and the test is what it asks you to do.
It consists of 50 statements, some true some false, and your task is to say how likely it is that you think each statement is true and to express that as a percentage. What we’re doing here is: we are using percentages to express our own degree of certainty or uncertainty.
So if you think that the sentencer is definitely false, you’ll, give it a 0 % chance of being true. That means you’re completely certain that it’s false. On the other hand, if you’re completely certain that the statement is true, you’ll express that by giving it a hundred percent chance.
If you have absolutely no idea, is it true or false? You express that by giving it a 50 % chance it’s. 50/50. You ‘ Ve got no idea, you might as well toss a coin, but if you’ve got a hunch that it’s.
True, it’s, probably true, but you’re, not absolutely sure. You would express that by giving it a 60 percent chance, a 70 % chance, eighty or ninety, depending on how sure you are and if you think it’s – probably false, but you’re, not entirely sure.
You express that by saying it’s: 40, 30, 20, 10 percent, again, depending on how sure you are so when you’ve done the test. The website figures out a number between zero and a hundred, which is your risk intelligence score.
Your RQ, your risk intelligence quotient, just as IQ, is a measure of your general intelligence. Rq is a measure of your risk intelligence and the interesting thing about this test. The unusual thing about it is that you can do quite well.
Even if you don’t, know much and that’s, because this test it’s, not measuring your knowledge. It’s. Measuring your self knowledge. If you like it’s, measuring your ability to know how much you know and to judge accurately your own degree of certainty or uncertainty in each situation and that’s.
Why? I think some of my brightest students often find it more challenging than some of my more average students, because the brightest ones have been rewarded all their lives for knowing stuff and praise for knowing a bunch of facts and as a result, they ‘
Ve. Often become overconfident, and this test punishes overconfidence, it also punishes under confidence. The point is not to be, you know ridiculously humble either. The point is having the right amount of confidence in each situation, depending on how much you know or don’t know in each situation.
So how can all this help us make better decisions? Some people, even if they find the subject interesting, they say well, look. How can this help me actually make better quality decisions, and I think the puzzle for these people arises because we’re all used to knowing how to make use of categorical information.
If someone says to you, it’s going to rain. Tomorrow there’s, no brainer! You take your umbrella, but if someone says to you, look there’s, a 60 % chance that it will rain tomorrow. What do you do? Do you take your umbrella or not? We’re, not really taught how to make decisions on the basis of uncertain information.
So I want to finish off by just describing three simple ways in which you can use probabilities when making your decisions. The first way is simply to set a threshold. So, for example, you might say well, I’m, only going to ask this person out on a day.
If I think that there’s, a 60 % chance that they will say yes and the great thing about this method is, of course, that everybody can set their thresholds differently at different levels. Depending on how desperate you are to go on a date and and how much you hate being rejected, the second way to make decisions on the basis of probabilities is bet sizing, and this means betting, an amount that is proportional to your confidence.
So, for example, you could decide to buy more or less shares and various companies, depending on how strongly you believe that each company was going to do well. But this of course depends crucially on having an appropriate degree of confidence.
Overconfidence is going to be fatal here. So again, you can only use this method of decision making. If you’ve got good risk intelligence. The third and most complex way of using probabilities when you make decisions, is to use the concept of expected value.
An expected value is an abstract concept. It doesn’t refer to any actual, win or loss. It refers to the average amount that you would win or lose if you place the same bet an infinite number of times, but this ethereal, abstract figure, takes on an almost physical nature.
For the expert gamblers, the fact that I’ve interviewed when they look at a roulette table or a blackjack game an X, the x-bow cameras, don’t, see the maximum amount that they could win or lose. They’re.
Not hypnotized by this like the rest of us, they just see the average amount that they could win or lose per bet. The expected value that’s. What really is at the forefront of their mind and by placing their decisions as it were in the compass decision in this way, in terms of expected value, they place their decisions in the context of a much longer time horizon, so they kind of rise above the Moment now, one of the in the long run as Keane said, we’re all dead, so even expert gamblers are mortal and they have finite number of decisions.
But you know, despite what the guy said in the video that we just watched before we broke about the importance of you know, remembering we’re mortal. That does have a disadvantage. It tends to make people reckless.
If you think this is the last race, the last roll of the dice, you might bet everything on it. The expert gamblers, in a sense, by seeing things in a much longer time, horizon almost act as if they were immortal and because of that they kind of gain a certain coolness about the decision-making they can take it or leave it.
As one expert gambler told me, there’s, always another race. I don’t have to bet my bank roll on this throw of the die or this horse race. Now I can come back tomorrow and it’s when knowing known when not to bet that is really one of the crucial things that sets the experts are part from the leisure gamblers, the problem gamblers.
Now, of course, luck can always go against you. There’s, no guarantee that, even if you have excellent risk intelligence and even if you use these decision-making methods that you’ll always win.
But if that thought upsets you, then you haven’t yet come to terms with the irreducibility of chance, as Nick pulovski says, the character played by Clint Eastwood in the rookie. If you want to guarantee buy a toaster.
So I want to end this lecture by saying I urging you to make your peace with chance. Just accept that you can’t control her or cajole her, except that she doesn’t care about you and she never will. But don’t despair, as Damon Runyon once said, the race is not always to the Swift nor the battle always to the strong, but that’s.
The way to bet thank you.