What Can We Learn From Expert Gamblers?: Dylan Evans at TEDxWestlake
Summary
TLDRThis script delves into the concept of 'risk intelligence,' exploring how expert gamblers utilize this skill to navigate uncertainty and make informed decisions. It contrasts problem and leisure gamblers with experts who profit from their calculated approach. The speaker introduces a test to measure one's risk intelligence quotient (RQ) and discusses three methods for decision-making based on probabilities, emphasizing the importance of assessing and acting on uncertain information.
Takeaways
- 🎯 The concept of 'risk intelligence' is introduced as a special kind of intelligence for dealing with risk and uncertainty.
- 🔍 The speaker differentiates between problem gamblers and expert gamblers, with the latter using skill and expertise to outperform novices and earn profits.
- 🃏 Expert gamblers are categorized into three tribes: poker players, blackjack players, and sports betters, each requiring distinct skill sets.
- 👥 Poker players are described as amateur psychologists, skilled at reading people and bluffing, while blackjack players are system players with a focus on strategy.
- 📊 Sports betters are divided into computerized and intuitive, with the latter relying on their ability to process information mentally and make probability estimates.
- 📈 The 'risk intelligence' of expert gamblers is demonstrated through their unconscious ability to model complex linear equations to predict outcomes.
- 📝 An online test is available to measure one's risk intelligence quotient (RQ), which assesses the ability to judge one's own certainty or uncertainty.
- 🧠 The test for risk intelligence does not measure knowledge but self-knowledge and the capacity to gauge one's own level of confidence accurately.
- 🎲 Three methods for making decisions using probabilities are suggested: setting thresholds, bet sizing, and considering expected value.
- 💡 The importance of having the right amount of confidence in each situation is highlighted, as overconfidence and underconfidence can be detrimental.
- 🎰 Expert gamblers are portrayed as having a long-term perspective on decision-making, considering the average outcome over an infinite number of bets.
Q & A
What is the concept of 'risk intelligence' as mentioned in the script?
-Risk intelligence refers to a special kind of intelligence for thinking about risk and uncertainty, which the speaker believes can be observed and learned from successful gamblers.
Why does the speaker believe studying expert gamblers can help us make better decisions?
-The speaker believes that expert gamblers possess a unique way of thinking about risk and uncertainty that can be applied to decision-making in various aspects of life.
What is the difference between expert gamblers, problem gamblers, and leisure gamblers according to the script?
-Expert gamblers are those who can earn a profit from gambling due to their skill and expertise. Problem gamblers are those who bet more than they can afford to lose, while leisure gamblers bet and lose relatively small amounts for the thrill of the game.
What are the three distinct tribes of expert gamblers mentioned in the script?
-The three tribes are poker players, who are the rock stars of the gambling world; the more private and austere blackjack players; and the sports betters who gamble on a variety of sports.
How do poker players and blackjack players differ in their approach to gambling according to the script?
-Poker players are described as skilled amateur psychologists, good at reading people and bluffing, while blackjack players are more focused on systems and do not require as much psychological awareness.
What does the script suggest about the skill set required for sports betters?
-Sports betters can be divided into computerized sports betters who need strong programming skills, and old-fashioned intuitive sports betters who rely on their mental calculations and intuition.
What was the main finding of the study conducted by Steven cesie and Jeffrey Leica at Brandy Wine Raceway?
-They found that the expert gamblers were able to unconsciously model their predictions of a horse's chance of winning as a complex linear equation with seven variables related to the horse's past performance.
What is the purpose of the online test created by the speaker, and how does it work?
-The online test measures a person's risk intelligence quotient (RQ) by asking them to rate the likelihood of 50 statements as true or false, expressing their certainty or uncertainty as a percentage.
How does the speaker define 'overconfidence' and 'underconfidence' in the context of the risk intelligence test?
-Overconfidence is when a person is too certain about their knowledge or predictions, while underconfidence is when they are not confident enough. The test aims to find a balance, where confidence matches the actual knowledge or situation.
What are the three ways the speaker suggests using probabilities when making decisions?
-The three ways are setting a threshold for decision-making, bet sizing which involves betting proportional to confidence, and using the concept of expected value to make decisions over a longer time horizon.
What is the key difference between expert gamblers and leisure or problem gamblers in terms of their approach to betting?
-Expert gamblers focus on the long-term expected value and make decisions based on a rational pursuit of profit, whereas leisure and problem gamblers are more driven by the thrill of the game or betting beyond their means.
Outlines
🎰 Understanding Expert Gamblers' Mindset
This paragraph introduces the concept of 'risk intelligence' and delves into the psychology of expert gamblers. The speaker has interviewed successful gamblers to uncover a unique intelligence for assessing risk and uncertainty. While psychologists often focus on problem gamblers, the speaker argues that expert gamblers possess a skill set that allows them to make profitable decisions in games like poker, blackjack, and sports betting. These experts are distinguished from both problem and leisure gamblers, with the latter two losing money over time due to betting beyond their means or for the thrill of the game. In contrast, expert gamblers are motivated by a rational pursuit of profit and intellectual satisfaction. The world of expert gamblers is divided into three tribes: poker players, blackjack players, and sports betters, each requiring different skills such as psychological insight, systematic strategy, and programming or intuitive analysis.
🏇 Insights from Expert Horse Race Gamblers
The second paragraph discusses a study conducted by psychologists Steven cesie and Jeffrey Leica at Brandy Wine Raceway, where they interviewed 30 male racetrack patrons. These men were not professional gamblers but were deeply passionate about horse racing. The study revealed two distinct groups among the patrons: 14 who were adept at predicting final odds and 16 who were average. Over four years, cesie and Leica developed a model to understand how these expert gamblers forecasted a horse's chances of winning, identifying it as a complex linear equation involving seven variables related to the horse's past performance. Remarkably, these gamblers did this unconsciously, without formal knowledge of statistical modeling, demonstrating an innate 'risk intelligence' that allowed them to estimate probabilities accurately.
📊 Measuring Risk Intelligence with an Online Test
This paragraph introduces an online test designed to measure an individual's 'risk intelligence quotient' (RQ), which is analogous to the intelligence quotient (IQ) but specifically assesses one's ability to handle uncertainty. The test consists of 50 statements that participants must evaluate in terms of their likelihood of being true, expressed as a percentage. The test does not measure knowledge but rather self-awareness and the ability to judge one's own certainty or uncertainty. It is noted that overconfidence and underconfidence are both penalized, with the ideal being a balanced confidence level based on the information at hand. The test is said to be challenging even for highly intelligent individuals, as it rewards accurate self-assessment rather than the accumulation of knowledge.
🎯 Applying Risk Intelligence to Decision Making
The final paragraph explores the practical application of risk intelligence in decision-making. It addresses the common challenge of making decisions based on uncertain information, such as probabilities, which is not typically taught. The speaker suggests three methods to incorporate probabilities into decision-making: setting a personal threshold for action, adjusting bet sizes according to confidence levels, and considering the expected value of an outcome over an infinite number of repetitions. The concept of expected value is highlighted as particularly important for expert gamblers, who consider the long-term average outcomes rather than single instances. The paragraph concludes with the idea that expert gamblers exhibit a 'coolness' in their decision-making, knowing when to bet and when to refrain, which is a key distinction from less experienced gamblers. It also acknowledges the inherent uncertainty and randomness in gambling, quoting Nick pulovski to emphasize that even with excellent risk intelligence, there are no guarantees in life.
Mindmap
Keywords
💡Risk Intelligence
💡Expert Gamblers
💡Problem Gamblers
💡Leisure Gamblers
💡Poker Players
💡Blackjack Players
💡Sports Bettors
💡Risk Intelligence Quotient (RQ)
💡Overconfidence
💡Expected Value
💡Uncertainty
Highlights
The concept of 'risk intelligence' is introduced as a special kind of intelligence for thinking about risk and uncertainty.
Psychologists often focus on problem gamblers, neglecting the expertise of successful gamblers.
Gambling is not solely about luck; games like poker, blackjack, and sports betting allow for skill and expertise.
Expert gamblers are distinguished by their ability to earn a profit from gambling, unlike problem or leisure gamblers.
Expert gamblers are not motivated by the thrill of winning but by a cold rational pursuit of profit and intellectual satisfaction.
The world of expert gamblers is divided into three tribes: poker players, blackjack players, and sports betters, each requiring distinct skills.
Poker players are amateur psychologists, skilled at reading people and bluffing.
Blackjack players are systems players with a focus and determination, less reliant on psychological awareness.
Sports betters are divided into computerized and intuitive betters, with the latter being of particular interest.
A study by psychologists Steven cesie and Jeffrey Leica on horse racing patrons revealed two distinct groups of betters.
Expert gamblers subconsciously use a complex linear equation to predict horse race outcomes, despite no formal knowledge of statistics.
The ability to estimate probabilities from gathered information is termed 'risk intelligence'.
An online test is available to measure one's risk intelligence quotient (RQ), reflecting self-knowledge and judgment of certainty or uncertainty.
The test of risk intelligence does not measure knowledge but the ability to judge one's own certainty or uncertainty.
Overconfidence and underconfidence are both punished in the risk intelligence test, emphasizing the importance of accurate self-assessment.
Three methods for using probabilities in decision-making are described: setting thresholds, bet sizing, and using expected value.
Expected value allows expert gamblers to view decisions over a longer time horizon, fostering a coolness in their decision-making.
Expert gamblers distinguish themselves by knowing when not to bet, unlike leisure or problem gamblers.
The importance of accepting the irreducibility of chance and making peace with it is emphasized for better decision-making.
Transcripts
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 oat
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 are
games of pure chance so there's no room
for expertise
there but poker Blackjack and all kinds
of sports betting 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 gamblers both lose money over
the long term the main difference is
that the Le the problem gamblers bet
more than they can afford to lose while
the Leisure gamblers bet and lose
relatively small amounts but it's not
really the money these people are
playing 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 EX
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 rock stars 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 you have the sports betters
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 betters can be
further subdivided into two distinct
subgroups on the one hand there are the
computerized Sports betters and
obviously they what they need most of
all is the ability to program and on the
other hand you have the what I call the
old-fashioned intuitive Sports betters
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 cesie and Jeffrey Leica and cesie
and Leica back in the 1980s fresh out of
grad school they visited Brandy Wine
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 cesi
and Leica 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 cesi and Leica figured
out that the best way to model what the
expert gamblers were doing when they
were thinking about predicting the
horse's chance of winning the
race was to model it as a complex linear
equation consisting of seven variables
Each of which related to the hores
performance in previous races like its
average speed its uh average uh
finishing position and so on but of
course these expert gamblers they didn't
know anything about linear aggression
they'd 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
they had 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 horse's
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 mul 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
www. projection point.com 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
sentence 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
100%
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% chance a 70% chance
80 or 90 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% again
depending depending on how sure you
are so when you've done the test the
website figures out a number between
zero and 100 which is your risk
intelligence score your RQ your risk
intelligence quotient and 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 is 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
underconfidence 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 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 date 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 in 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 and expect 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
that that I've interviewed when they
look at a roulette table or a blackjack
game an ex the expert Camas 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 con in by
thinking about this decision in this way
in the 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 uh in the long run as
Keen 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 their 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 rooll
on this Thro of the die or this horse
race now I can come back tomorrow and
it's when knowing no when not to bet
that is really one of the crucial things
that sets the experts apart 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 a
guarantee buy a
toaster so I want to end this lecture by
saying by urging you to make your peace
with
chance just accept that you can't
control her or cool her accept that she
doesn't care about you and she never
will but don't
despair as Damon ran 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
[Applause]
you
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