BiggerPockets Real Estate Podcast - 297: Mastering the Decision-Making Process with Business (and World Series of Poker) Champion Annie Duke

Episode Date: September 20, 2018

In today’s epic show, we interview World Series of Poker bracelet champion Annie Duke. Annie is a nationally sought-after speaker who combines her mastery of poker with a study of the cognitive sciences in a truly unique and brilliant way. In this show, you’ll have your mind blown by Annie’s insights regarding following conventional wisdom (even if it doesn’t make sense), focusing too much on the results (and not enough on the right choice), and accepting a level of uncertainty to gain a HUGE advantage over your competition. Annie’s theories on “thinking in bets” are designed to help others navigate a world where we can’t be certain of an outcome, but still come out on top over time. This is an absolute can’t-miss episode for those looking for strategies to overcome apprehension, fear, or uncertainty. Be sure to listen to this incredibly brilliant and powerful interview—and get the tools to take your next steps today! In This Episode We Cover: Annie’s backstory and how she got into professional poker Her concept of risk management Thoughts on luck and circumstances we have no control over Elements of luck versus elements of skill Pete Carroll’s endgame decision The concept of “resulting” What constitutes a consensus choice Winning and losing—and caring about your decision-making process The difference between real estate investing and poker The importance of confidence and certainty Why one shouldn’t be afraid of losing and being blamed A champion versus a victim And SO much more! Links from the Show BiggerPockets Forums Rounders BiggerPockets Podcast 074: Buying My First Investment Property- A Newbie Podcast with Jordan, Jacob and Jeromie Jordan Thibodeau’s Author Profile Scott’s Instagram David’s Instagram BiggerPockets Podcast 157: A Simple Morning Ritual to Help You Dominate Every Area of Your Life with Hal Elrod Books Mentioned in this Show Thinking in Bets by Annie Duke The Miracle Morning by Hal Elrod The Geometry of Wealth by Brian Portnoy Decide to Play Great Poker by Annie Duke Superforecasting by Dan Gardner and Philip E. Tetlock Extreme Ownership by Jocko Willink Radical Candor by Kim Scott Thinking, Fast and Slow by Daniel Kahneman The Signal and the Noise by Nate Silver Set for Life by Scott Trench Tweetable Topics: “Every decision, even small executional decisions all the way to the larger goals, carries risks.” (Tweet This!) “There are no small decisions.” (Tweet This!) “The most important person we need to worry about pointing fingers at is ourselves.” (Tweet This!) Connect with Annie Annie Duke’s Personal Website Annie Duke’s Twitter Profile Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast, show number 297. In poker, you're really forced to be keeping track of that in the moment. So that's super unusual. So there's kind of a bright side and a dark side to that. The bright side is it really reminds you that every decision, even small executional decisions on the way to your larger goals carry risk with them, that there are real consequences that come from every single decision that you make. You're listening to Bigger Pockets Radio.

simplifying real estate for investors large and small. If you're here looking to learn about real estate investing without all the hype, you're in the right place. Stay tuned and be sure to join the millions of others who have benefited from biggerpockets.com. Your home for real estate investing online. What's up, everybody? This is David Green here with Scott Trench, your co-hosts for the Bigger Pockets podcast today. And you are in for a treat.

We had one of the most exceptional mind-blowing conversations I've ever had in my life with World Series of poker bracelet champion Annie Duke, who is also the author of Thinking in Betts, one of Scott Trench's favorite books. And I don't even know how to describe how good this show is, but you guys are in for a treat. Yeah, this is a way of thinking. This is her mind, the way she thinks, the way she approaches life is what I believe is the way to go through business in life with the highest possible probability of success over time. This is the kind of thinking that I've tried to apply over the course of the last few years. But when I read her book and found it articulated the way that she wrote it, I was like, exactly. This is exactly what I've been striving for. And these are all the things I need to do to get to this way of thinking and approaching business in life for my benefit.

Now, this is going to be huge for so many people because most of our listeners talk about fear, uncertainty, apprehension, all these things that are keeping them from taking the steps that they know they want to take. and that is Annie's specialty is not in just saying, just get over it. Get over your stupid crap, which is what most motivational speakers are going to tell you. Annie actually focuses on how to reframe these emotions that you're feeling and think about it from a different structure so that you don't look at them and feel fear. Instead, you look at them and you see a strategy behind how to move forward. So this is an episode I can honestly say you're probably going to want to listen to two, three,

maybe four times because you're going to get more and more out of it, the more that you hear it. I'm very excited about that. Do you ever notice how every passive investment somehow turns into a very active lifestyle, active spreadsheets, active phone calls, active stress? Here's a better question. What if you could buy brand new construction homes, 10% below market value, and the best markets across the country, without making real estate your second job? That's exactly what rent to retirement does.

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erase years of returns. If you own a rental property, don't assume you're covered. Have NREG review your insurance with someone who gets investing at NRE.com slash BPPod. That's NR EIG.com slash BP pod. Real quick, before we bring on Annie Duke, I do want to shout out Jordan Tibido. Jordan is one of our bloggers in the Bigger Pockets blog, and he's also a guest on BiggerPockets podcast show number 74. You can check out Jordan's blog post and his contributions over at BiggerPockets.com slash Jordan T, J-O-R-D-D-A-N-T, and that'll redirect you right to his blog page.

Big thanks to Jordan for the introduction. Without further ado, let's bring in Annie Duke. Welcome to the show, Annie. How are you doing today? I'm doing well. How are you guys? I'm doing great. How are you, Dave? I am fantastic. We have an awesome guest today, and I think our listeners are in for a treat because we don't get to hear many people bring the perspective that Annie's going to have. I think when this show is over, people are going to be looking at their businesses and their lives and how they make decisions from a much, much different perspective. Well, I hope so. That's my goal in life. Awesome. Well, Annie, could you maybe, let's start from the beginning. Can we hear a little bit about your career in poker and kind of maybe get us some high. highlights or a story or two that you think is relevant to the decision-making process that we're going to talk about? So I started off my life actually in a pretty traditional way. I went to Columbia undergrad, and I was kind of on my way to being an academic because after Columbia, I went off to UPenn to study cognitive

psychology and the PhD program there. I had a National Science Foundation Fellowship, and that's what I was going to do. And I sort of discovered, oh, guess what? When you leave school, you don't have your fellowship anymore and you're not teaching and ooh I need money so during that year I was actually when I started playing poker and I thought I'm going to start playing poker in the meantime until I can get back out on the academic job market and the meantime as I sort of joke turned into 20 years I spent 20 years in the meantime I played for 18 years actually as a professional poker player in 2012, I fully retired and started really focusing full-time on the work that resulted in the book, Thinking and Betts. So, you know, a couple of things that people say to me is sort of twofold.

One is like, how did you end up going from poker to speaking about decision-making critical thinking skills and writing a book? And the answer is, well, it's not that crazy. A friend of mine got asked to speak to a group of options traders about decision-making and risk, in particular And my friend doesn't like public speaking. He just really, really hates it. So he actually told the person, hey, you should have Annie do it because Annie used to teach when she was in graduate school because you would teach undergraduate classes as a graduate student. And so she actually knows how to teach and you should have her come and do it. So I got asked to do it. I was like, okay, I didn't even know that was a thing that people did. But okay, I'll go do that. And I got up and I spoke in front of those optimistrators in 2002 and totally loved it, was reminded of why I loved being in academics. And it felt like this really beautiful collision of the academic work I was doing with the real world decision-making problem that poker presents. And it was this cool merging of the two that I then got to express to an audience in this totally awesome way where, you know, you're learning from the audience and the audience is learning from you. And it's this really cool

conversation that you're having and total win-win. But can you kind of quickly walk us through your approach to risk and decision making that you brought to this meeting, that first one, and that you've applied over this 10-year career? So I got asked to come and talk about risk management, and that's what they really wanted me to talk about. And the way that I think about risk and poker is you have some sort of estimate of what your edge is. In other words, how much, what percentage advantage do you have?

You know how much money that you have to put at risk, given that percentage advantage, and then that kind of determines how much total money you need in terms of. of each individual investment. So I could have talked about that, but I felt like there were lots of people who can talk about that very eloquently. So I wanted to bring something different to the table that's actually a very big problem in poker,

which is you can sort of understand all this stuff about how you're supposed to manage risk. But the problem in poker is that, let me sort of divide it into two. There's an advantage in the way that poker works. So we're sitting across from each other and then every few seconds, every few seconds, there's chips that are moving around. And then at the end of a couple of minutes, chips either transfer from me to you or from you

to me. So you're getting, like you're marking in this very in the moment way, what your P&L looks like, like right at that moment, right? So, you know, people think about marking like end of day PNL or end of week PNL or something like that. And you're kind of trying to keep track of that in poker, you're really forced to be keeping track of that in the moment. So that's super unusual. So there's kind of a bright side and a dark side to that. The bright side is it really reminds you that every decision, even small executional decisions on the way to your larger goals carry risk with them, that there are real consequences that come from every single decision that you make. So that's kind of the good side is that it keeps you aware of that,

that there are no small decisions in that sense, right? But the bad side is that you get really emotionally yanked around. So you're seeing your path, right? You're seeing very recently, has your chips that gone down? Has your chips that gone up? Were you in a situation where you were a really big mathematical favorite and like things didn't work out for you, which can feel very unfair? So what happens is that you're getting emotionally lit up a lot when you're playing poker

because of this chip exchange that's occurring constantly. And what goes along with being emotionally lit up is that very often that has very negative effects on your decision making. So what I found in poker was that there's lots of people who really understand sort of how to calculate risk and sort of in the absence of actually playing the game, they would understand what the correct play is. They'd understand how much money they should be risking at any given moment in time or in any given game.

And they had good control of the fundamentals. They were good. But when you actually put them in the real world situation, their decision making got so distorted by this past dependence, by, you know, were there chips going up or were their chips going down? Did they feel like something unfair was happening at the table? So generally they would get off kilter because of these luck elements that can intervene. And then it didn't matter.

It doesn't matter how good a decision-making you are. If you're, you know, if you're making emotional decisions, it's not particularly helpful. So I felt like when I was going and talking to options traders, Again, you know, trading options is very similar where you're not taking just long positions where you know you're going to be holding a position for, you know, some long period of time, but instead you're making these trades that are really quick. And so I talk to them absolutely about how do you, what's this emotional issue?

How do your emotions affect what kind of risk attitude you have, how much risk you're willing to take on in any given moment in a way that can have a really negative effect on your results? So that was the first talk that I ever gave. It sounds like what you're talking about also is this concept of resulting that you discuss in the book where people are, hey, I know the fundamentals, I know the right play to make when in a risk-free setting. But once the chips are on the table, I'm emotionally unable to do that. And after the play, after the hand is over, I'm going to judge my decision-making process by whether I won or not versus whether I made the correct play on that hand. Is that right? Yeah.

So what I would say is that these are outcome-oriented. in the sense that sort of what your recent outcomes are, particularly your path, seems to really matter in terms of how you're processing it. Are you processing in a positive light or a negative light? So I would just add just a little nuance to it. In this particular case, what we're talking about is like you could overall be winning a lot. But if you've just lost something recently, you'll be really sad. Right. So it's like, it's like what's the slope look like. Are you on a downward trajectory or an upward trajectory? And that seems to be what really matters for kind of what happens to emotionally. The resulting issue is an umbrella to that, which is in general, one of the biggest

problems that we have in our decision making is that we don't live in the matrix where all of that code is coming down in green and you can kind of see it so you know what the different influences are on the outcome. So we can broadly think about two categories of influences on the way that our lives turn out. The way that things turn out is the sum of the broad category of luck, which are things that we can't control. And the broad category of skill, which is things that we can. So we can think about skill as like, if I made the same decision again, could I say that with some probability that the outcome itself was related to the decision that I made in some predictable way? And then luck are things that we have absolutely

no control over, that you couldn't say that there was any relationship between the outcome and the decision there. So you can think about like in poker, the luck element would be the cards that are yet to come, for example. That's a really big luck element that I can put my money in with aces. You can put your money in with five, just so your viewership knows, that means that I'm going to win the pot at basically 88% of the time. But I can lose because there's five more cards to come and I have no control over those. And so I can't reliably repeat that those five cards will come. So that would be like a really strong luck element. And in our lives, there's all sorts of stuff that happen that we don't have control over. Like here's a really simple one. We have no control over the circumstances of our

birth. So I was born in America at a particular time. Obviously, there's a lot of luck in the way that my life has turned out simply because of that fact. I wasn't born in 1650, for example, right? I was born in a time when women could work. Women could own property. That's pretty huge. I was born in America. That's pretty nice. So there's all sorts of elements of luck in any decision. And then there's this broad element of skill, which is in poker, we can think about it as that's the way that I choose to play the hand. So the way that I choose to play the hand is reliably predictive of how the hand might turn out. And so this is actually so so but the problem is that we can't particularly after the fact look back at a decision and say, oh, I can tell you what was luck and what was skilled. This is we're

trying to sort of parse this apart. So the resulting problem comes in kind of two forms, this broad thing where we're trying to connect together in some way, the quality of the outcome, the way that things have turned out. And we use that to try to derive the quality of the decision. But that's kind of hard to do. So you guys are familiar with Pete Carroll's end of game Super Bowl decision in 2015. So like David, I'm interested. What do you what do you think about that play? So I like most people, I'm not, I was a basketball player. I loved basketball. I studied basketball, much like Scott with Rugby, right? It was like my whole life is my first love. I never really was a football guy. So when I heard everyone saying, what an idiot, all my football buddies were talking about,

what an idiot, I let myself get sucked in and thinking, yeah, he must be an idiot. Everyone thinks he's an idiot. Why didn't he run? He had Marshawn Lynch, right? And then I heard Pete Carroll's explanation. And it was very, very sensible. He said, well, we had enough time for this many plays. If we ran it, didn't get it, we wouldn't have another shot or we'd have one shot. We'd have two chances to throw. And if both them resulted in incompletion, we'd still have time to run it in, right? The only thing that could possibly go wrong was the interception. And that ends up being what happened. Right. So then I was like, oh, I feel stupid. Like that guy knows way more about football than I did. Why would I think he's an idiot when I know that I don't know football at all? And it changed my whole

perspective on following the crowd like a sheep, right? Like they had no skin in the game. It's easy for us to criticize the guy. He's got his whole career on the line. He knows way more than we do and I'm still judging him. So I have no idea if that's the point you were going to make. But that was the perspective that I took when I walked away from that is maybe next time I should do a little more research before I form my opinion. Yeah. So actually, that is totally the point. So here's the problem is that we don't understand what Pete Carroll understands, right? Just from watching the play, we have no access to the decision, right? We don't really know what was luck, what was skill. We don't know what Pete Carroll was thinking. We don't know what the decision tree looks like. So we use this shortcut when

things are opaque to us, we use a shortcut where we say, oh, if I know what the quality of the outcome is, then that tells me what I need to know about the quality of the decision. And that's exactly what happened in the Pete Carroll case. So 26 seconds left, second down, one time out, that was what Pete Carroll was saying about this time management problem. And he's got a choice. He can hand it off to Marsh on Lynch, you know, one of the greatest short yardage running backs of all time. Or he can pass the ball. And we know what he did. He passed the ball, very famously intercepted by Malcolm Butler to end the game because they were down by four. All they needed to do was score a touchdown. So we can agree this was like a disastrous outcome. We know that. So what happened?

Like all your buddies were saying, oh, it was a disastrous decision. In fact, people were saying it was the worst decision in Super Bowl history. I think USA Today said it was the worst decision in all of football history. That's pretty extreme. Definitely one of the worst outcomes in football history. I think that we can agree to that. Although I don't know, what's that one play where the guy's leg totally gets broken on television. I think that's probably a worse outcome. You know what I'm talking about. Yeah, I think the Redskins quarterback was it?

Oh, yes, yes, yes, yes. Thijsman, was it? Yes, yes, yes. That's it, Joe Thysman. That was terrible. That was terrible. But anyway, so here's the interesting thing. And I think that we can sort of go two ways with this to kind of get down into what the

problem is. So let's start with this thought experiment. What do you think that the headlines would have looked like? had the ball been caught for a touchdown. What do you think your friends would have been saying? Carol's a genius. They were expecting him to run with Marcheon Lynch and he saw it coming. So they stacked the box and he went over the top and man,

that guy just knew what was coming and it was one step ahead of. He's the best coach in football. Right, exactly. So we know that at the moment of the decision, there's kind of a few possible outcomes that could occur. You know, obviously there could be like a fumble or a sack. Let's set those aside. But of the things that occur in the end zone,

there's an interception, an incomplete pass, and a touchdown. So we know that those are the three outcomes. And at the moment that Pete Carroll makes the decision, he's just going by sort of what creates the best possible set of outcomes, what increases my chance of scoring the most. And anything that happens after that, we can put into the luck category. So what's interesting here is that we know when the ball is intercepted, that everybody's like, ah, that's such a terrible decision.

But when the ball's caught, you can immediately feel it, right? that was a great decision. But that doesn't have anything to do with whether the decision itself was great. And we're using this heuristic called resulting, saying if I know what the quality of the outcome was, therefore I know what the quality of the decision is. So let's start with this. The chances of an interception there at most 2%. So right there we know like something super unlucky must have happened, right? It was a thing that happens only 2% of the time.

And as you pointed out, what you're buying for that 2% is an extra play. All right. So that's one way that we can kind of get at this problem resulting. Here's the other way we can sort of see why we result. This is kind of interesting. So I'm going to give you a different thought experiment. Let's say that he hands it off to Marshawn Lynch. And Marshaun Lynch just doesn't get past the Patriots line.

So he gets stopped at the goal line. And now they burn that one time out so that they can run another running play. They burn the time out. they handed off to Marshawn Lynch again, and once again on his second attempt to get stopped at the goal line. Now what do you think the headlines look like? Do you think there's a whole lot of criticism of Pete Carroll there? Probably not. It's probably more like couldn't get it done. You know, big stop by the Patriots, great defense. Right. So this is super revealing. So I'll tell you why this is really revealing. Here's the problem with this resulting. Here's the problem with saying, well, when the ball is caught, it's a good decision. When the ball is dropped, it's a bad decision, which is that there's too much

noise. There's too much luck that occurs between the moment of the decision and the moment of the outcome because we're not playing chess. So if I'm playing chess against you and I lose a game, we know because there's very little luck and there really isn't any hidden information. And those are the two sources of uncertainty. The stuff we don't know and the luck element, the stuff we can't control. We know that if I lose a game of chess you, I made worse decisions than you did. So we know that for sure, so we can actually work backwards. But in poker, we can't do that. If I lose a hand of poker to you, we don't really know very much about my decision making compared to yours. But we act like we do. So that's that first thought experiment. And it's because we don't really know how much luck is

involved in the outcome. And so we use this as a shortcut. But notice when we hand it off to Marchand Lynch, all of a sudden we allow for the luck element. We allow for the uncertainty. What's the luck element here? Well, if we say it was just because the Patriots were too good, Pete Carroll doesn't have any control over that. So that goes out of Pete Carroll's skill into the luck category. So weirdly, if they fail to score with Marshawn Lynch, we allow all this uncertainty to become the explanation.

Why? Because we feel like there's consensus around the running play. We feel like we know what the answer is there, that we know it's a good play. And so therefore, if they lose, it must not have anything to do with them. Here's a super simple example of that. If I run a red light and I get through the light safely,

you don't think that's a good decision. So you don't result in that case. You don't take the quality of the outcome. I had a good outcome and assume that that means I made a good decision. Likewise, if I run a green light and I get in an accident, you don't blame me for it. Because there's consensus around the decision. So what happens is that we don't do this kind of strange shortcut.

cut. Now, why is this like so incredibly devastating? Well, because what it means is that it drives people to that saying, you know, fail conventionally. Because if Pete Carroll had chosen to fail conventionally, right, if he had chosen to just handed it off and say, here's the thing that everybody does. Here's the consensus choice. So I'm just going to do that because then I know if it doesn't work out, nobody's going to yell at me and nobody's going to blame me. That's what that drives people to do. They look ahead and they say, well, the world is going to all result on me. If I, have a bad outcome, they're all going to point the finger at me and say I'm an idiot. And is it worth it for the chance that I have the good outcome for them to pat me on the back? Well, I don't know,

because if they're, you know, I mean, people have been yelling about this play for three years now, right? And really still pointing fingers at him. So what happens is when we know that people are doing that, it makes us choose consensus choices. It makes us choose conventional choices. And what does that do? That really slows innovation down. So we can see that in the NFL because they're not going forward on fourth down enough. We already know that. They've been very slow to adopt that. And you can see that in the NHL where they don't take the goalie out quickly enough. And why? Because people don't really understand that that's a good choice. They don't understand the mathematics behind it. So if someone takes a goalie out early and the team loses the game, what do you think is happening to that coach? So we can

think about how that applies to our own lives, right? Like how are we going down the more conventional route and not taking chances because we're worried that people are going to point fingers at ourselves? And the most important person we need to worry about pointing fingers at ourselves is us. So I got a question here that, you know, this does apply to, you know, let's say that you're listening to the show and you're a middle class family with, you know, no investable assets, lay less than $5,000 in cash, some home equity and a 401K, right? What you're saying is basically you can't go with that, you can't apply this line of thinking and play to win because you're stuck in this kind of conventional mindset trap.

You know, like Pete Carroll played to win. But you're saying that most NFL coaches are not playing to win. They're stuck in this conventional mindset, right? Now, I think that this logic directly applies. I make a direct connection between this logic and why middle class America is not investing in a way with their personal wealth to win, right? Because they're not going to take $50 to $100,000 and potentially put themselves at a total loss at odds with convention, even if that's the smart approach. So is that a fair connection to drive from this? And how do we overcome that?

Yeah, so I think that that is totally a fair connection to drive from this. And I think that you see it all over the place. Right. So here's a really good place that you see it. The difference between someone who is in a startup versus somebody who is in a business that's in operational mode, right? That's a more mature business. So in the startup, there's no consensus choice. That's sort of the definition of being an entrepreneur. So we know that all choices are not consensus choices. All choices are unconventional. What does that free people up to do? It frees people up to fail, right?

It frees people up to say, look, we're just going to throw some spaghetti at the wall and we're going to try out a bunch of stuff. And because everything's kind of like, we don't really know. And so we're not really going to be pointing a lot of fingers of bad outcomes because we don't really know what the best decision is. We're just experimenting here. And so you get this environment of amazing innovation that occurs within a startup because there is no consensus choice that people are being driven into because they're worried about

the way that they're going to be evaluated. But once you get into a company that's in a more mature state that's in operational mode, what happens? You have layers of management and you have the way that things are done, right? You have the process that that particular manager likes and what do most leader say were results oriented. That might be one of the worst things that you can say to people who work for you, right? We're results oriented. What does that mean? Is that they know for a fact that, well, think about it. When people are doing a weekly meaning where they're trying to deconstruct the week's results, how much time are they spending deconstructing and questioning when they win, right? Are they going, whoa, we had this amazing win. Let's deconstruct that and try to figure out all the mistakes that we

made and how we could have done better or maybe that we should have done worse. And whoa, let's really look and tear apart that outcome? No, every week at the end of the week, you're looking at all the bad results and you're trying to deconstruct them to try to figure out if you could have done a better job, if you could have somehow avoided them. What message does that send to your employees? What message does that send to the people who are making decisions and trying to manage the risk along the way? Well, I'm going to have to sit here at the end of the week and listen to my bad results. So what am I going to do? I'm going to make sure that I can cover my mask. I'm going to make sure that I've got consensus. If I need to along on my team, I'm going to create false consensus, which means I'm just

going to get everybody to agree for the sake of agreeing. I'm not going to be trying to find the best way. I'm not going to be trying to challenge the status quo in any way in order to get to a place where I can do some really cool innovative things that are out of the box because I'm going to get yelled at for it. So when you sit here and you say, why is it that like a startup can beat a really big company when the big company has all the resources will just look to resulting as a problem. Like people are saying we're results oriented. That's what you're being judged on. And by the way, no matter how much leadership says,

no, no, no, no, we're process oriented. If at the end of the week, you're only looking at the bad results and deconstructing those, it doesn't matter what words come out of your mouth. People can read the actions loud and clear. I cannot tell you how much of a game changer has been for me when I realized I was doing this in my own head.

I know in the movie Rounders, a famous poker movie, they talk about how every poker player remembers their bad beats. they know the hand that they should have won and they did everything right. In fact, this just happened to me with Brandon Turner in Austin not too long ago. I pulled him in. I got him to put all his chips in and he caught a card on the river and he took everything I had to went to the winner's table, right? You remember those.

You don't remember when you caught the card, right? When you got lucky and you messed up and everything worked out in your favor, you don't remember for whatever reason like, man, I should do this more often. I might get lucky even if I make a mistake. And I can't tell you how many investors I meet that when I say something like, And they find a great deal. Like this is a no-brainer home run, can't lose deal. And they're afraid to do it.

And I say, why don't you just take a HELOC on your property and take out a 5% loan interest only that you can pay back whenever you want? And the minute they hear the word HELOC, they think 2010 when everyone lost their home and they go into that conventional thinking, helocks are bad. They shut down. They don't hear any of the logic of what I'm saying. And they say, I can't do this. What if I lose my home? My family will be homeless. I'll be raising my little girl in a car.

And they miss out because they're not thinking about what's my risk if I don't make. this move, right? Like how much money am I leaving in the pot if I don't bluff with this few chips here? This could be a really easy one for me. And I know one of the big struggles for most bigger pockets listeners is that they have this fear of getting started or this fear of making mistakes. And you hear people talk about, oh, man, I didn't see this coming. It turns out that there was a termite problem that nobody caught. I don't want to ever do this again because something bad could happen. But I often don't think about 80% of the time my house is appraised for more than what I planned on and my rehab budget comes in less than what I planned on and I made more money than

what I thought I would make. And that deal let me to relationships that brought another two deals my way. We get out of that line of thinking of acknowledging how some of this risk that we're taking is actually opening up more doors to build our wealth. And sometimes the riskiest move is not making a move at all. So can you tell us a little bit, Annie, like what in your experience of studying this you found helps people to overcome that natural tendency to focus on negative and not think about how their inaction is costing them way more than making a mistake one. Yeah. So here's the thing that I would say is that, so first of all, to the point of what you just said, we have a really big bias to looking at bad results in an upward direction that are

commissioned. So what does that mean? It's things we chose to do, investments that we made that didn't work out and then we ask ourselves a very particular question, could we have done better? Could we have not lost on this? So that's the set of things that we're examining. But there's a whole world if we say, no, we want to examine the whole world of things that we should be examining. We should examine the deals that we didn't do and ask what that cost us, right? So that that we want to look at is keep track of the things that were under consideration or the things that we might have missed and that we didn't commit to. And think about those in just as an important way as the things that we do do. gets to what you just said. We want to also be direction neutral. So what that means is that if I say,

if I look at a loss, I want to ask myself both questions, could I have lost less? But I also want to say, should I have lost more? So sometimes, for example, we invest too small in a deal that we lost, but when we look back on it, actually it turns out that it was a much better deal than we thought. And even though we lost on it, we should have actually lost more because our position in it should have been bigger as an example, right? So this would be in a poker case, for example, I can lose a pot where I lost money, but actually given the situation, I should have had much more money invested in that pot. So I should have actually lost a lot more. And that's really hard to sort of get our heads around. So that's the direction. We want to look in both directions. And then we also want to look equally

at unexpected wins as unexpected losses. So when I just heard you say, oh, it actually appraised for a lot more than I thought. And I came in way under budget than what I thought I was going to come in. You should be just as concerned about that bad forecast as when it comes in over budget and appraises for less because in both cases you haven't actually forecasted well. Right. So it may be that there were things that had to do with luck and actually there was stuff that you could not have known.

So given the information that you had, your forecast was good. But sometimes you really truly missed something that was knowable that would have told you that it would appraise for more. So when you have those good things happen, like it appraised for way more than I thought, don't just pat yourself on the back. You should be asking yourself the question, why did I miss that? When it comes in way under budget, why was my budget projection off? Maybe it was because I just had a lot of stuff that was built into contingency, which I always do. And I got lucky on this case. A whole bunch of stuff went my way. But maybe I really did actually mis-forecast that. Like maybe there was a problem with my forecast there. So we want to look equally

at things that are unexpected on the losing side and unexpected on the winning side. And then we want to ask in both directions on the winning side, right? Could I have done better, but also should I have done worse? Maybe I actually got really lucky on this situation and I shouldn't have been invested in the first place. And boy, few. Thank God things went my way. So let's just start there.

And if we can create that structure around the way that we think, that's going to be very helpful and sort of fending off this problem. So we want to think about things that we do as well as things that we don't. unexpected losses as well as unexpected wins and upward and downward direction. So that's first, create that structure. That's going to be really helpful. But second, the fact is that our minds just work this way. You know, people talk about software, let's call this mindware.

And this is the mindware that got installed at birth. So there's only so much we can do because we can't like to sort of steal from Gary Marcus here, who's an amazing guy who does a lot of work in AI and cognitive science. You can't take our brains offline, have someone go and install new stuff on it, and then stick it back in our head. Like, that doesn't work for us. So you kind of have to work with what you have. So this is where I say, you're only going to get so far on your own. Someone was asking me about, well, you know so much about bias. How many of your decisions do you think are biased? And I said all of them. And I really mean that because that, you know, can't, do I catch it quicker? Am I maybe a little less biased than somebody else in certain cases? I'm sure. But every decision. and I make is biased because that's the way that I'm built. So once I sort of recognize that and I say, look, there's only so much I'm going to be able

to do on my own. The key is to go find some people to watch your back. Just go find a couple of, it could be two. It could be a bigger group than that, but you want at least three people in the group. There's something special about three and say, okay, here's what we're going to do. We're going to watch each other's backs and we're going to check each other's bias. And we're really, so let's take it in the poker example that you talked about. like poker players are always talking about bad beats.

So I was very lucky to land in a group with people like Eric Seidel, for example, and my brother, where that was just not tolerated. If I walked up to them and said, oh, I can't believe I lost this hand, I got so unlucky, and I'm sure you have the equivalent in your industry, you know, I can't believe that happened. I couldn't, how could I've seen that coming that was so unlucky, you know, oh, that stupid appraiser, right? If I went up and tried to have that conversation with people, they would have shut me down. They would have said, well, what's the point of this? Like if you really just got unlucky and you have this sad story to tell me because this horrible thing happened that was out of your control, there's literally nothing to learn from it.

And Eric Seidel actually said something really important to me. He said, I have bad stuff happen too that I'm dealing with every day. I'm losing hands that feel really unfair to me. Why do I need your emotional baggage on top of mine? So what he said to me was, look, I want to engage with you about poker, but I don't want to engage on the stuff that just has to do with bad luck. I want you to come and tell me hands that you have questions about. if you have a question about a hand, whether you won or lost the hand, so this is this sort of being neutral to direction. If you have a question about a hand that you lost, fire away. So now notice what's happened in that agreement. It's like we're going to watch each other's back because I'm going to be able to see when you're being biased and you're not thinking clearly about the results that you have in a better way that I'm going to be able to see that for myself. And likewise, you're going to be able to see my bias better than I can see it. So I can watch your bias. You can watch my bias. And we can

make a commitment that were the group that thinks about accuracy, that thinks about finding the truth instead of just making ourselves feel better in the moment, which is a lot of what this problem is. So we can think about, for example, when we have a bad outcome and we just say, oh, I got unlucky, or when we have a really good outcome, like it appraises for way more than we thought and we just pat ourselves on the back, that's not grabbing that for a learning experience. That's just trying to make ourselves feel better in the moment. When we make a conveys a choice, worrying about how we're going to be judged for it later, it's making sure that we're sort of making ourselves feel better in case we have a bad outcome. But that doesn't mean we're

making the best choice. What we're focused on is I just want to always sort of feel like I'm right, like I didn't do anything wrong, right? As opposed to I want to come up with the best choice possible. So let's make an agreement. This is what we're going to reinforce for ourselves. And now when I go up to you and I say, hey, David, I think I made a really big mistake here. I don't know how I could have been so off on the appraisal. Can you help me with it? And you now pat me on the back for that behavior. Think about how much better my decision making is going to be. Think about how much more clearly I'm going to be thinking about the results that I have. When I come and talk to you and I say, hey, I'm thinking about making this investment, but I'm really scared of this particular type of loan because of what happened in 2010. And I kind of really want to

understand how much of this is me worrying about what the result's going to be versus whether there's too much risk in the position that I want to take. And that's what we start talking about. Think about how much better my decision making is going to be. So I'm just a huge fan of saying don't do it alone. You can try and you'll be a little bit better if you try to do it alone, but you're going to be so much better in a group where you're all going to reinforce this. And now you're going to be the tribe that thinks this way. And here's what's going to be amazing for you because this is what happened in poker. You've got your tribe that thinks this way, that really watches each other's back, that really calls each other out on bias, that really

tries to think about outcomes in a really clear-headed way. And now you're going to walk down the halls of the next meeting that you're at, the next convention that you're at. You're going to hear other groups talking in this other way that most people talk in, and you're going to hear the difference. And you're going to really say, wow, we're really working hard at this. We're doing something different than other people are doing. And that's going to feel really good. It's the difference between winning and losing and caring about winning and losing and caring about your decision-making process. I'm going to go in and I'm going to, I could win the World Series of poker and you might even be upset about it because you didn't play, you made a bunch of poor

decisions along the way. Or you could lose and you might be like, you know what? If I keep playing like that, I'm going to keep winning, even though the outcome wasn't really good today. And this decision-making process when I was reading your book, I was like, this is, This is the correct way to go about life. This is the correct way to go about business. It doesn't matter. If you focus on the core decision-making processes with a long-term focus on improving those underlying factors in your decision-making,

you're going to produce exponentially greater results year in and year-out, regardless of the day-to-day wins and losses, that you just feel better. I feel better about my life in general as I've applied this process over the last couple of years, really. And then really kind of better since I've read your book. look and formalized it, I guess. Look, here's the deal.

It's like I don't have a problem with outcomes signaling for you, like being, you know, the impetus for you going in and looking process. I, you know, certainly when we have things that are, you know, unexpected things happen, it's usually a good trigger to go look at process. And you do always want to be picking apart process. So having something that triggers you to go look at it is good because it means that the process doesn't become stale. It doesn't just be like, this is the way I've always done it.

And so great. I have a problem with it being so focused. on losses, right? Because then that does get us to care about winning and losing only as opposed to about whether the decisions themselves are winning and losing. And I can tell you, like, because of this really early intervention that I had in my life through Eric Seidel and the speech that he gave me that was very loud and clear, you know, like I just don't want to hear it if it's about luck. Like tell me about things that you have actual control over. It really changed the way that I thought. So I can give sort of two, I think, good examples from poker on this.

The first is that I used to have people say to me all the time, like, don't you get just so upset when there's bad players and they play some stupid hand and they beat you? And how can you even deal with that? Like, doesn't that just piss you off? And I was like, no, I'm really grateful that those people are willing to sit down at a poker table and play with me. So that's your point, Scott, right? Which is like, that's great. If they keep playing those hands again, I might have lost this one hand, but that's really irrelevant. Because if they continue to make those errors against me, obviously that's going to play out over time because we know I'm not going to win.

every single one, you know, we're playing the probabilities here. I'm going to lose on some things and win on some, but I'm going to win more than I lose, and that's what's going to matter. So thank God that person exists, right? So that's the first thing. The second thing is actually, this first came to me when somebody wants to ask me, like, can you tell me the worst beat that you ever took? And I thought about it, and I realized, like, I don't really have a lot of memory for those things. The most memorable hand that I have is a hand that I won, but that I just butchered. I mean, I played this hand so poorly, and it was a big learning moment for me. So this was right when poker got on television. And prior to poker being on TV, there was a

particular way that people tended to play. And there was a particular way that people sort of valued their hand. So one person might value a pair differently than another person might value the exact same pair. So it's a little bit person dependent, how strong you think that hand is or not. So when poker got on television, that all changed. Like the conventional ways that people thought about the value of their hands really shifted. But I had had my fourth baby during that year. And so I was behind the curve on this one. So I didn't quite realize how much the average person's perception of what the value of their hand was.

So I played a hand thinking that when I played the hand this particular way, that the person would surely fold what I was very sure was a pair. So I made a very big bluff on with one card left to come where the chances that my hand would actually win were 8%. So I clearly wasn't betting all this money because I thought, wow, my hand is so great. I was going to lose the hand 92% of the time. Like that wasn't the point. The point was I was very sure they had a pair. And I was sure that if I made this play, that the guy would fold. So I made this play. And he called me faster than anything that you've seen. In fact, so fast that I thought, oh, I totally have him on the wrong hand. He clearly doesn't just have a pair. He obviously must have three of a kind.

And wow, that was really stupid of me. What a bad read. Well, don't worry, I hit the 8%. I needed exactly a jack. I got a jack. I actually made the very best hand. I ended up winning the pot. And when he showed me his cards, it was the exact hand that I thought he had. But I was totally and utterly wrong about the way that he would react to his cards in a way that was completely mortifying to me as I'm scooping in the biggest pot of this tournament that I've won thus far. And I was just like, how could I have been so completely wrong? And that's what really concerned me. And for me, that's the most memorable hand I ever played, this moment of just, holy cow, did I ever get that situation wrong? That's really mortifying. Let me think about this. And it actually made me go talk to some people

who'd been playing a little bit more under those circumstances. This was my first tournament back and really say, like, what's going on? Because I really wasn't expecting that. It clearly made a really big mistake. And they all started laughing at me because, of course, they'd been playing for, you know, a year or really under those circumstances. And they were like, yeah, no, that was really bad. And that I can't credit myself with.

Like, that's completely the group that I was involved with, retraining the way that I thought, retraining the way that I thought about things. No, that's a world-class championship mentality to life and business, right? I mean, David, do you have examples from your business where you kind of apply the same thinking? Do you have wins that you look back on as things that just made poor decisions in? Oh, yeah, tons of it. And it's not just with investing with my real estate agent business, with other things I've done in life, where the result ended up good and I got a lot of credit.

But I knew inside, oh, if they only knew, I know I messed that up. I know that could have went horrible for me. I got lucky there. And I think that the more humility you have or you're honest with yourself about these things, the more likely you are to come to the light sooner. And like Annie clearly has no, she doesn't BS herself at all. Like Annie has enough humility and she can say, I know I screwed that up where someone else would be like, they would automatically kick in and start trying to tell themselves as a defense mechanism.

Yeah, I knew that that was going to happen. Or well, if I did it enough times, that would work. But you're saying, I assumed he would know his hand wasn't that. good, but he thought it was because he hadn't watched enough poker or poker wasn't played this way for a long time. And you, you called it wrong. The thing that I think is why I just love real estate is even if you do everything wrong. Like I hear people say, oh my gosh, my property manager lied to me. They said that I wouldn't have to fix all this stuff and I did. And they told me the rent would be $1,100. And now it's only $900. And I thought I was going to make $300 a month. And now I'm barely making $100. This is horrible. I hate real estate. I never want to do it again.

if you just zoom out and you think about 30 years later when that house you paid 200 for is worth 800 and the tenant has paid it off for you, and your rent went up every year after that. So in two or three years, you're getting the $300 you thought you were getting. That house is going to make you an insane amount of wealth, and you will never look back and say, I never should have done it.

But in the moment, your feelings are telling you this was a horrible mistake, and so many people quit. And if you just bought one house a year like that over the next 30 years, you would be a multimillionaire off money that your tenants paid you by taking that different perspective. And I think that's what people are missing out on

is when they're focusing on the result they got in the moment and thinking about what didn't happen the way that they thought it would. And not taking into consideration factors like inflation and the fact rents go up all the time and interest rates are insanely low. And like the population of the U.S. is not likely to stop growing. Like all this money from other countries is flooding into ARC. And there's all these things we're not thinking about because we're focusing on the stupid property manager that lied to you. And now you don't trust people so you don't want to buy anymore. And they're shooting themselves in the foot. And I know Scott talks a lot in his book

Set for Life about conventional wisdom says, you know, if you just didn't buy a cup of coffee every day, you could save $40 a month. And with that, over 20 years, you could turn that into whatever that would be, right? Rather than saying, well, if you got rid of that $2,000 mortgage payment and you house hacked and you dropped it to $500, and you invested the $1,500, it'd be this huge, huge difference. And that's why I want people listening to this to buy Annie's book and to consider very strongly what Annie's saying, because the rest of the world isn't doing this. Like, they're all just following that conventional wisdom, following their fears, not thinking about what could go right. And if you are that person that takes action, and we haven't even mentioned

the fact that because Annie's willing to go in there and lose money and risk money playing poker and risk the emotional beatdown you get when you lose, she's learning every single time and getting better and better, which is now increasing her odds of future success because she's taking action. And that'll work in any other area of life as well. The people who take action that learn that are willing to accept risk and not look at risk like something to avoid like a disease, but look at it like it's something to manage are always the one that end up with all the spoils. I just want to try me in the takeaway that I'm getting on top of that is that, you know, it's about choosing the highest probability path to success and continuing to increase your

odds at that, whether that's a real estate investment, whether that's a stock investment or whatever, right? The problem that a lot of folks have financially is they're playing not to lose with their money and they're keeping it in, you know, a bank account or in a very conservative portfolio allocation and their probability in 30 years of having less wealth than if they had invested it according to a very disciplined decision-making process, like the one that we're discussing here and in 80's book, is you're going to be less wealthy over 30 years with a higher and higher statistical probability the longer your time horizon expands. And so it's how do you apply this decision-making, get better at that throughout this entire, throughout the process.

And then also, the good news about investing in business in general is that that it's not a zero-sum game like poker's. So you can actually increase your odds and produce wins in multiple directions. Right. Your average outcome is going to be a net positive one. Sort of what you were saying about like, oh, the property manager was wrong and the rent is lower and so and so forth. That goes back to what we were talking about in the beginning with your path dependence. That we're not very good at coming up and taking a 10,000 foot view of how is this going to look over time.

We get really caught up in sort of what the trajectory and the trajectory and the moment. moment is. So, you know, you can think about it. Like, if you look at Berkshire Hathaway over 40 years, it looks pretty darn good, right? It's like this nice upward trajectory. But if you look at it at like 1130 on a Tuesday in like 2009, it's looking pretty bad. So when you're caught up in that, I'm only making 100 when I was making 300. It's like, but you're making $100. The problem is that your path is negative and you get really caught up in the emotion of that. But what does it look in the long run? What does it look like overall? And that's where a group really help you do that to pull you out of kind of that hole that you're in and get a 10,000-foot

view. So that was the first thing I kind of wanted to grab onto. The second thing is, I think that the distinction is in that particular hand that I described where that person called me in a spot where I really wasn't expecting it, is that you have a choice there to say, wow, I can't believe I missed that. That was really bad. Let me change my behavior going forward versus what I hear most people saying, which is that guy's dumb, he should have folded there because I made a great play and how did he not know before? So think about the difference in those two approaches. You can't be mad if someone's supposed to buy a house and they don't or someone's supposed to do this or the market's supposed to do that and it doesn't do it. That's on you to figure out why that's happening. Right. So I think that

that's the second thing that I wanted to grab onto. And then the third really big thing that I wanted to grab onto was this point that you said about humility. So can people ask me all the time, well, don't you have to be like super duper confident to be a poker player? And I said, well, it depends on what you mean by confidence because I think that people really conflate. They merge together the meaning of confidence and certainty. And what they think is that in order to come across as confident, you have to be certain. You have to say, I know that it's going to turn out this way. And I'm awesome. And I'm so good at this game that I play. I'm so good at these investments that I make and I'm so sure and I'm going to win every single, you know, and all those things that we

sort of put forth as being confident. But confidence and certainty are actually two separate things. And you can be very, very confident and still be uncertain. And the uncertainty piece is the humility piece. So here's the humility piece is it's really, really hard what we do when we invest, when we're trying to manage risk. There are a lot of layers to it. There's a lot of stuff that we don't have control over. There is stuff that we do have control over, but even when we make the best decisions, we're only hurtling ourselves to a set of possible outcomes, not a certain outcome. There's always that 2% chance of an interception, even when we make the best possible choices. So we know that this is a really hard game. And generally, we don't know this will work out 70% of the time. It's something

more like it's going to work out between 50 and 80% of the time, right? And that's more of the world that we're working in, but the more that we can sort of narrow down that uncertainty, the better off we are. But we know that it's a really hard game. And it's not solvable in any way, because the probabilities are always going to be unknown. And so therefore, we must be humble in the face of the problem that we're facing because the problem is really hard. But that's different than saying, I think if I have a really good process, and I really approach this game in a way that's really rational. If I really wrap my arms around the uncertainty and say, I acknowledge this, that I can't be certain.

But the better that I am between 50 and, you know, saying it's 50 to 80% versus 55% to 75% and I'm willing to really view that with clear eyes, that I'm going to be a better decision maker than the people I'm deciding against. That's where we make that separation. I am completely humble in the face of the uncertainty, but I also understand that I can probably handle the uncertainty

better than most other people. And I'm confident about that. So I think that that's a really important message for people to understand, is don't go around with your swagger thing. I got this. I've got this solved. I know exactly what I'm doing.

I'm so great at this. Because I think otherwise you can end up being someone who was flipping houses in 2007, thinking that you're the world's biggest genius where maybe you are. Maybe you have a really good process, but maybe it's also just the market is so easy that, of course, you're making money at it. And because you're just spending so much time patting yourself on the back saying, I've got this. I've got this solved. I'm so confident that you're not actually doing.

digging in to look at, well, what could the future be? What are the things that are dependent on my process here and my success? And why am I winning? How much of this is due to specific decisions that I'm making versus how much of this is due to the upward trend of the market itself so that I can start thinking, well, what if the market starts going down? How am I protected against that? And you miss all that ability to plan ahead when you confuse confidence with certainty, when you lose the humility piece. And I also read, you know, when I was reading this, I also kind of read, not just the overconfidence piece, but also the fear piece, the fear of losing everything. Suppose I have $10,000 to my name, that's my whole net worth.

If I go into a poker tournament or a table and the buy-ins $10,000, everything's on the line. I'm going to play the game very differently than if the buy-in were $5, right, where I can apply this line of thinking. And so I think that there's also maybe an entry price, depending on the stakes of the game you're playing, of how can you put yourself mentally in a position? So people can take their whole net worth all 10 grand and play poker to win with this process. Some people can't. I think how can you, the listener, put yourself in a position to play investing or any other financial game so that you can apply this system and respect the outcome, regardless of what it is, and really judge yourself based on your decision-making process and not the outcome. Yeah. So I think one of the best ways to do that is to first of all, first of all, you have to think about what your own.

values are. Right. So some people are, you know, looking to live a comfortable life and some people are looking to hit a home run and understand which person you are and totally be comfortable with that. Because if I'm a, I just want to have a comfortable life person, then I need to be comfortable in my own values and not allow somebody who's a home run person for me to feel judged by them, that this is supposed to be what my values are. And likewise, if I'm a home run person, I shouldn't be looking at the comfortable person and thinking, you know, maybe that's, maybe that's what I should be doing. Because think about for yourself, what are your goals and what are your values, number one. Two, think about what your own risk tolerance is. Like your risk tolerance when you're 65 is going to be

really different than your risk tolerance when you're 25. And then also different 25 year olds who have different risk tolerances. So like understand for yourself, like how much is the amount of risk that you feel like as a person you can tolerate and try to think about that really clearly. So get those two things figured out, number one. And then this is where I think this process is really helpful is once you've sort of mapped out the future and you say, here are the possible outcomes that can occur, here are the good ones, here are the bad ones. First of all, you can metabolize the emotions in advance. You can say like, okay, so I recognize when I make this decision that I could lose the

hand, that it could actually turn out poorly. And I'm thinking about that in advance. So at the point that that happens, I can somewhat shrug my shoulders and say, okay, on to the next decision. I understood that this could be. And I think that that's really important. Secondly, it allows you to stop being so reactive as things happen because because you've thought about them in advance, you can be more nimble.

You can say, and if this happens, here's my plan. If this bad outcome occurs, here's what I'm going to do next. If this good outcome occurs, here's what I'm going to do next. And you've sort of thought about the different ways that it might happen. And then what you're going to do is the next step after that. So you're not just always reacting to the world as it happens to you. You become a real agent in your own decisions and your. and your own trajectory. So that's number two. And then I think here's the really important thing is

once you've identified what your goals are, let's say that you have like a five year plan. Like in five years, this is where I want to be. Then say, okay, imagine that you're holding up a newspaper and it's five years from now and it's like Scott has achieved his goal. Now work backwards from that because this gives you the time. This makes you look at it in the long run. It makes you look at it in more the 40-year moment instead of 1130 on a Tuesday. Okay, it's five years from now. Oh, this is great. I made my goal.

How did I get there? What are the things that happened that got me there? That's a really good thing to do. But here's actually the more important thing to do. It's five years from now I did not get to my goal. It did not happen. What do I think happened to get me there? And it's hard for people to live in that negative space.

It's hard for people to think about having failed. But if you don't think about it in advance and really map out what those negative outcomes might occur, what kinds of things might intervene. Some of them luck and some of them decisions that you make that cause you to actually not achieve your five-year goal. Well, guess what? You're more likely to actually end up in failure as opposed to success. Because what comes along with doing that advance work is that number one, you recognize, well, there are some things that are just going to be luck that I can't do anything. about. So if those occur, I'm not going to do a lot of time self-flagellating and I'm going to be able to move on because I'm going to actually have a plan in place. But the second thing that's actually

more important is that then you can look at that kind of here's how I got to failure and you can say, okay, so how can I decrease the probability of these things happening that might cause me to fail? And how can I increase the probability of, you know, the chances of success? Because if you don't get a full view as full of view of the future as you can and a full of view of the things that might intervene along the way, then you can't actually change your decision-making to accommodate those occurrences. So imagine, for example, I mean, again, thinking about that seismic event that occurs when the crash happens, if someone had said, okay, it's five years from now and somehow, you know, all of my houses are, you know, underwater. Like, how did I

get here. And now you're going to start seeing some of the vulnerabilities and what your positions might be in a way that you can actually put plans in place to protect yourself from them. Would you be able to do it perfectly? Well, no, you know, I mean, this was a pretty out, you know, a pretty unexpected thing that happened. But you're going to be able to foresee some of those things a little bit better. You're going to start to figure out what are my plans. How can I change what my portfolio looks like to protect against that volatility in some way that's going to be really helpful to make the volatility work for me. And I think if you don't do that if you're not willing to say, okay, let me imagine all the failures. I don't know how you get there.

Well, it's a different way to look at the world, right? But it's the way that successful people look at it. And that's why there's value in changing what comes natural for you to doing it a better way. Hal Elrod wrote the book, The Miracle Morning, and he's been on this show before. He was just speaking to a group I belong to. And he was talking about how pain we feel, emotional pain, comes from our resistance to accepting like what is. Your girlfriend broke up with you. you're feeling all this pain about it. It's because you don't want to accept she's gone. I need to move on.

You clinging to that is what results in pain. And pain's experience we don't like. What we tend to do is think, well, I don't ever want to get a girlfriend again because this pain was horrible. Rather than think, I need to let go of this. I need to accept this as reality and the pain will go. So he talks about when you're late to work and you're stuck in traffic, we get in this mode of, we're just frustrated, right?

But you can't help your position by being frustrated, right? You'd be better off to just let it go and think about how am I going to be extra productive today to make up for it or something along those lines, right? And I see as a real estate agent, I have some escrowes that go super smooth and some that are like pulling teeth with my clients. It's horrible. And I've found it's always the people that are un, they do not accept that the world is an uncertain place. I don't know if our offer will get accepted. I don't know what the inspection reports will look like. I don't know if the appraisal comes in though. They're looking to me to find a way to make this transaction go through where they know exactly what's going to happen because

they're not accepting that there's uncertainty, right? And they end up miserable. And they end up making me miserable half the time, right? Because I have to deal with them calling me at 10.30 at night and wanting to vent about how they feel, rather than just accepting, hey, if your offer doesn't get accepted, I wasted my time. You didn't waste yours. Let's just write another one on another house, right? And if you don't want that, let's write a little bit higher.

I don't want to do that. It's that I don't want to let go of the way I want the world to work. And if you can be that person that takes that leap of faith and just understands the world is an uncertain place. You don't know if you're going to get cancer. You don't know if you're going to meet the love of your life tomorrow. You don't know if the love of your life is going to stay in love with you, right? All you can do is the best that you can do in that situation and try to win more than you lose. And I find that wins open up doors for more wins.

And, like, Annie, you went on to be a very, very successful poker player, one of the best in the world. And now that you're not playing poker, you're winning in these other areas. You're writing amazing books and you're a brilliant speaker and you're doing keynote speeches. Like, it was definitely in your best interest to be humble enough to accept uncertainty and look where it brought you. And the people who don't are the ones who stay in that nine to five job complaining all the time about how life sucks, complaining about their boss, complaining about the commute, but they won't let it go because they don't know what's on the other side of that door. And they need that certainty. It's so incredibly beautifully said. And, you know, I'd go back to that comment that you just made about, about, you know, the person whose girlfriend breaks up with them. And then it's like, I'm not going to try anymore. That when we're so emotionally wrapped up and worried about, you know, the person who's girlfriend breaks up with them and then it's like, I'm not going to try it's up. That when we're so emotionally wrapped up and worried about. out what it's going to feel like when things don't turn out well. The only natural response to that is to make choices of one of two types. Either I'm going to minimize the chances that I lose or minimize the size of the loss that I can take. What does that mean that you're going to be investing

really small? Because the only way we can protect against the big downside is to also make it so that there isn't really any kind of big upside either. It's just the lower volatility to try to stay around even so you're not taking the swings because the swings feels so horrible. So that's why somebody will say, I just never asking anybody out on a date again. Because if I don't ever ask anybody on a date again, I can't have the pain of losing that. I can't lose. And the other way to handle it is to make sure that there's consensus that if it doesn't work out, it wasn't your fault.

Right? And that's also not good because that means you're going to be taking conventional roots or you're going to be hanging out with people who, like to affirm for you that bad things aren't your fault. I can't believe that I lost this deal. Yeah, that really sucks. That wasn't your fault. Oh yeah, that guy was just an idiot for calling you there. Wow, that was his fault, not yours, right? Or going to Facebook and saying, why are all guys the same? And then everybody wants to comment. Yeah, you poor thing, they're all jerks, right? Right. What you need is someone to say, well, why did you do this? Right. Why were the last 10 people that you dated jerks?

Let's think about how you might be choosing jerks because we can agree there are non-jerks out there. But people don't do that. They say, oh, yeah, that's really horrible. I can't believe the world happened to you in that particular way. And that's a culture issue, right? Like if you're hanging out with people, so you can do it either because you're choosing consensus choices. So you're never going for it on fourth down. You're not pulling the, you know, the goalie.

You know, you're telling people, yes, you have to have 20% down on your house exactly. or whatever the conventional wisdom is. And you're not kind of trying to figure out what are the creative ways that we can change the structure of the decision that we're making because you're afraid of losing. That's one way. Or just have people tell you it's not your fault all the time.

That would be the other way to do it. You know, in the traffic thing, I ask people to do this thought experiment, which I think is really telling for what you were talking about, David, which is, okay, so imagine you don't have ways, right? So you don't have like a nice app that tells you the best route to go. and you're going to the movies with your spouse.

And one of you says, let's just go the way that we've always gone and we have to get there at seven. So we know that we need to leave at like 615 in order to get there at seven and let's go. And you go the way that you always go to the theater. And like there's really bad traffic for whatever reason. Like, you know,

there's a disabled car on the side of the road or something that, you know, obviously was unexpected. And you miss the movie because, you know, you're in a standstill on the route that you normally go. And I don't think anybody in the car is yelling at each other. I don't think anybody is like, man, I can't believe you're such an idiot. I can't believe we went this way to the movie.

But let's say that you're going to the movie and it's a seven o'clock start and you say, look, I've got a really, I think I have a better way to go. I was looking at this new route and I've got a shortcut. Now you take the shortcut and the same unexpected thing happens. There's like a disabled car on the side of the road and there's horrible traffic and you miss the movie. Do you think you're a happy couple? No, like the person who chose the shortcuts getting yelled out by the other person for their stupid shortcut.

How could you have chosen this stupid shortcut? But in either case, there's something that happened on the root that was completely out of your control. But notice that in the one case, you're pretty accepting. And you're like, no, don't worry. It's okay. We'll just go do something else or we'll check a later show because it's totally like this is the root that you've always got. But boy, if you try that new route, you know you're going to get yelled at. So who wants to try a new route then?

right who wants to ask the next person out you don't ask the next person out because you're so afraid of that feeling of losing and being blamed it's such a horrible thing to have to carry around with you so you know you got to get good people around you who instead of helping you to feel better by saying oh yeah that wasn't your fault instead the way they help you feel better is saying man you really identified some stuff that you could change that is really hard to do what that's great I'm going to engage with you now because that's really exciting to me. And what's better than having a really amazing conversation with somebody who you respect, whose approval that you want, who is intellectually, like, super exciting to talk to

about something really deep, which is like deconstructing your decision so you know you're going to be better in the future. That makes me feel a lot better than just saying thanks for telling me it wasn't my fault. I mean like again it's the difference between a champion a someone who takes charge someone who's in control and a victim right and it's a choice that you made you made a choice all those years ago when you joined this group and began playing poker to to play the game a different way and it resulted in a very different outcome over time that compounded in your advantage people love to call real estate passive income which is interesting because most of the investors I know are very busy Busy finding deals, busy managing teams, busy worrying they pick the wrong market. Rent to retirement flips that model. They help investors buy turnkey new construction homes, often 10% below market value in top rental markets across the country.

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and set custom roles in approval policies. There's even a dedicated bill inbox for each property to keep everything organized. Ready to simplify your workflow, book your free demo at bill.com slash bigger pockets and get a $100 Amazon gift card. That's bill.com slash bigger pockets. Welcome to the segment of the show where we are going to dive deep into a specific aspect of real estate or business with the guest today, Annie Duke. Annie is a master when it comes to thinking in bets and that's where we want to dive deep today. Anyways, one of the things I want to bring up before we wrap up here is the theme of your book, which is we've talked about a lot of top tactics, a lot of high-level decision-making processes.

But the simple, major takeaway that I got from the book was that the easiest, way to apply all of this and have the tactics kind of flow naturally is to simply think in terms of bets. Can you explain that concept very briefly and why that's that one thing is maybe the driver of all the rest of this? So here's the thing. I talked about the fact that in any way that things turn out, there's uncertainty. There's uncertainty that comes from information that we don't know. And there is uncertainty that comes from luck, right? So those are the two forces of uncertainty that make it so that whenever we make a decision, there's a larger number of possible outcomes than the one that will actually occur. And a lot of the problem that we have in our life is

when we don't allow the uncertainty to bubble up to the surface, when we don't acknowledge it, when we don't embrace it, when we go around acting like we're playing chess, as if our decisions are so tightly connected to the way that things turn out, right? So what we want to do whenever we're trying to decide what the best course of action is, is to make sure that we're as deeply and honestly as we can confronting the uncertainty, because if we don't do that, we're going to make bad decisions. We're going to tend to be very overconfident in our decision about how we think that the future will unfold. And we want to have as broad a view of the landscape that lies ahead with as clear-eyed of view of the uncertainty that might be in it as we're trying to decide what to do.

So how do we get there? Well, let's see. Let's start with acknowledging that every single decision that we make is a bet. So people think about betting as like, you know, I go to the blackjack table with my chips or I go to the poker table with my chips or whatever and I like put money on some gamble, you know, that then turns out into some sort of payoff. But once we realize, well, what does that really mean? What it means is that I'm taking some sort of resource that I have in this particular case, it would be money.

I'm investing it in an uncertain future. and what I'm hoping is that I'm getting a positive return on that future and the decisions that I'm making are driven by the beliefs that I have. Right. So we can think about our beliefs and form our decisions and our decisions are really bets because the future is uncertain. So, and it's whatever resource you have, it doesn't have to be money that you're investing. It could be time, for example, that we invest our time in things all the time. And we're hoping to get some sort of positive return on the time that we invest in something. So we can think about all sorts of different ways that we invest. So once we have that framework,

what we can understand is here's where the uncertainty comes in, that the bets that we make, the decisions we make are only as good as the beliefs that we have. And those are formed by incomplete information. That's the incomplete information piece. And then once we make the decision, there's luck that can intervene in terms of the way that the future occurs. So in order to make a good decision, we have to acknowledge those two things, that the beliefs that we have are not 100% correct, they're going to be somewhere in between zero percent and 100 percent correct, right? Because they're always going to be informed by incomplete information and our own bias and our own perspective on the world. And so we need to recognize that we can't really know

anything for 100 percent short. And then we also need to recognize this luck element. So this is where the thinking and bets piece comes in. Well, once we know that decisions are bats, if we start to more explicitly think about them as bats, we start to embrace the uncertainty more. And that actually causes us to be very information hungry. So let me try this out on you. So here's a thing that I've heard a lot over the course of this summer, a ton. People telling me the Democrats are going to win the House in November, right? And I'm sure you guys have heard this a lot. You hear this from pundits on television, and we hear that all the time. Okay, and people declare that as a known fact, right? The Democrats are going to win the House in November. But what if I were to

say to one of those people. What if I said to you, do you want to bet on that? What do you think that would do? How would that change their response back to me? I go from, oh, of course they're going to win to, hmm, let me get back to you after I do a little bit more Googling and research on. So let me think about this because, oh my gosh, November is really actually quite far away. It's 90 days away or so, you know, so it's quite far away. And so there's a lot of stuff that I have no control over that's going to occur that could actually affect the outcome of that vote. And I don't know what those things are that might occur that I have no idea about in the next 90 days. And then also, there's a whole bunch of information I don't have. Like maybe I should go look

at how the districting looks, right? Like if the country's overall leaning Democrat right now in terms of the House race, what's each individual House raises look like? Because obviously, we know that the districts are drawn in a particular way or whatever. Like, I'm just going to start, I'm going to be researching polls. So notice what this does. It bubbles up your uncertainty. You go, wait, no, I didn't mean that I was 100% sure when I said that. I meant, like, I think it's going to happen, like most of the time. So all of a sudden, that idea of what is your level of confidence? Like, how short are you as opposed to are you short? And think about the difference in those two things. Are you short is asking for a definitive, whereas how

sure are you is asking for what level of certainty you have. And that, when I say do you want to bet on it, it causes you to go through all these, like, how sure am I? Why might I be wrong? Look, if all anybody ever did was stop asking people, why am I right? And instead asked everybody around them, why am I wrong? You would be a lot better off if that's how you lived your life. Just take why am I right out of your, out of your repertoire and just always ask people, why am I wrong. And you're going to get a lot further because you already know why you're right. You know why you believe what you believe, you know what those beliefs are that inform those decisions. You want to start thinking about your beliefs is in progress. And when you think about want to bet, and that's the way

that you frame it, it forces you to think about your beliefs in progress. And then exactly what you just said, Scott, which is now I want to go do some more Googling. What does it do? When we think about those two forms of uncertainty, there's the luck element. Well, it brings that to like, oh, 90 days is a long way away. But then there's also the incomplete information element. And that's what Google does for you. It makes you think, oh, maybe there's stuff that I don't know. Maybe there's information that I should be go looking at that it's going to help me to calibrate and refine these beliefs that I have. So let me pull out my phone and start Googling to try to figure out if there's something that I'm missing. Causes you to be super information hungry.

It causes you to think about things from the other side, from people who might hold a different view. Why does this person want to bet me? Why did they think maybe that the Democrats are going to win? Now it forces you to think about their perspective and start arguing the other side. And those things are all so amazing for you. So if you can get yourself into that mindset, my decisions are bets and I'm going to think about them in an explicit way like that, it's going to cause the uncertainty to start bubbling up for you in a way that's going to make your beliefs so much better informed. You're going to have such a better perspective on the world.

You're going to be better able to acknowledge the luck element. And you're going to have a more accurate and clear. ideal of what the future might hold. I wish everyone in the world thought the way that you think. Like this is just, the clarity of that, the simplicity of just applying want to bet to various truths that you think that you hold, beliefs that you have. I mean, yes, it just introduces it says, hmm, I'm only actually maybe 75% on this particular thing. I mean, you're just going to get so much, so much, again, higher quality decision making. And just going to be a more, reasonable person in general. You know, I think half of my friends on Facebook, they're posting

things, you know, and I want to be like, I would bet you a hundred, would you like to bet a hundred dollars that this is true or not? I bet you that half of the fake news, the crap that's going up disappears overnight if people are getting challenged to that kind of thing. Do you know what would happen actually if you said about things that people posted, you know, like articles that people shared if you said, do you want to bet that's true? I think most of the time you get the answer of, well hold on a second i have to read more than the headline that yeah let me read the actual article for a second here no i i think everybody listening to this podcast should go out and apply this in their life when they see when they see then do it to yourself first because you know you don't want

to tick off all your friends or whatever but apply this in your life and then maybe you know if you see someone posting something that's really questionable that's that you know ask them would you like to bet on would you like to bet on this piece of information that you're sharing that's probably not true and i think it'll start to an interesting conversation conversations. You know, I actually have a friend who's tried this out with their kids a couple of times on, you know, low state decisions. So obviously, you don't, you know, they're kids. You don't want to go challenging them for their allowance money all the time. But a very simple decision that he told me about where his child really didn't want to go to a movie that the family wanted to go to and was like,

no, I don't want to go. I'm going to hate it. And he said, well, do you want to bet on that? And as soon as he said that they were like well no i mean i didn't mean i was going to hate it for sure well i don't know maybe i'll like it i don't need and because he said do you want to bet on that his child actually went to the movie and guess what loved it and what a great lesson for that child right here's something that i was so sure of i was declaring with absolute certainty like lying in the sand i'm not going to go to the stupid movie that you want to go to it's going to be so dumb and once he said want to bet it allowed them to sort of acknowledge, well, I don't really know because I haven't seen the movie yet. So I can't know for sure that I'm going to hate it. And then when they went, it actually turned out to be a great

movie and think about the arc of what that does for their decision making going forward. Like, I love that story. So you can train this thinking in very small way, but they'll have really big impacts, these small ways that you actually incorporated into your life. Well, in psychology, we learned about this, it's referred to as confirmation bias. You tend to look for people who support what you already believe and when information comes across your path that refutes what you believe, it makes you uncomfortable, you experience cognitive dissonance and you push it aside. Like, oh, I don't like that, right? And we see this in politics like all the time. Our current president is pretty controversial. People usually love them or hate them. And if you're on one side of that

spectrum and information comes across that would challenge it, you block that person off Facebook or you unfriend them or you don't want to see it because it makes you feel uncomfortable. But the real winners in life are willing to like bring that in, cause it to challenge what they're thinking. Maybe it strengthens your own beliefs because you now have confidence that, no, I believe that it was right. Now I have proof that I know I was right. Or maybe it changes your belief, but you come out a stronger person. That's what you had to do in poker, Annie, to get good at it. Because you had people, like you said, a huge thing was the people I surrounded myself would not let me do that, right? That's just a huge proponent for that whole you are the five people, the average of

the five people you surround yourself with. You're acknowledging I wasn't even that humble, but I were I ran around with a crew that forced me to be that humble or they were going to beat me down. So I could either accept it willingly or I could have them tell me how wrong I was over and over so I wanted to cry and then I would get there. Right. Like that environment you put yourself in fostered a spirit of humility, which fostered a spirit of challenging what you thought was right. And you didn't let yourself off the hook by saying he got lucky or yeah, well, that won't happen next time or something. You let you had to look introspectively. And I just, if people did that in real estate, the average American would not need social, security. They would not need to be dependent on the government for their retirement. They wouldn't be miserable working at a job complaining all the time. We wouldn't have to read on Instagram,

all these people complaining about the world. If they looked at themselves and say, I made this decision that ended up in something I don't like, I need to look at why I made that decision and understand it. I think that the world be in a better place. And as you're talking, I'm like, man, what would my life be like if I just hung out with Annie all the time? Right. Well, let me, I just want to, I just want to say one thing, though, just to sort of like correct the record a little bit. I just want to tell you guys, like, I'm horrible at this. I really am. Like, it's so hard when you have bad things happen, not to just be like, that wasn't my fault. And it's our natural instincts. Like, the reason why I needed other people around me is because on our own,

we're all really bad at it. But one of the things I think is really important sort of in the self-compassion space is to recognize that even if I know what perfect decision making looks like, that I'm going to fall incredibly short of that. But that's okay because I'm not in competition with perfect. I'm in competition with the past version of myself. Who was I yesterday or the day before that or the day before that? And let's say that Annie, when I started playing poker, was seeing five out of every 100 times that you could learn. I was actually catching five of the learning opportunities out of every hundred that came my way because I was so biased and because I want to be like, that guy's an idiot and it was his fault and all of that stuff like we all do. But then as I started to work through it and

work with this group, now maybe I was actually catching 10 of those learning opportunities. Maybe for a few reasons. One is they trained me in a new way to think. When I was playing poker, I was looking for cool questions that I could then go talk to them about because that intellectual engagement was so important to me. So I was actually viewing the game differently while I was watching it. So I was looking for questions, which helped me to catch more things. And maybe also, there are a bunch of times where I was like, oh, that guy was just an idiot and that wasn't my fault. But when I went and tried to talk to the group about that, they helped me catch it much quicker.

So an opportunity that might have passed and never gone noticed actually gets noticed with the help of the group. And now maybe I improve. Instead of catching five, I catch 10 out of every hundred. Well, I'm crushing the old version of me. Look at the progress that I've made in terms of the quality of my decisions. So you could look at that two ways. I guess I can compare myself to perfect and say, wow.

I'm only catching 10% out of the 100 that I could catch. I'm such a failure. Or I can say, no, I actually have doubled the number of learning opportunities that come my way from the old version of me. And that's what I should really care about is, am I doing better? Am I catching more of my mistakes? Am I training my thinking to be more focused on accuracy as opposed to just wanting to not be wrong?

Right. Am I thinking more through the lens of asking people, why am I wrong, acknowledging the uncertainty, trying to be humble in the face of a game in a way that really helps me? And if the answer is yes, it's okay that I'm so far from perfect. Because of course none of us can ever be perfect. We're all really biased. It's the minds that we were born with. And we can only have the experiences that we've had.

The world interacts with me in a really different way than the world interacts with you guys. you know, it interacts with you in a different way that it, you know, David, then it interacts with Scott, then it interacts with everybody else. So we all live in our own heads. We all have our own perspectives. We all think that the world works a particular way because that's the way that we happen to have interacted with it. And if we don't draw in different perspectives and get better at that, and we can only do that by saying, why am I wrong? What do you know that I don't know? What's the information that I'm not uncovering? What's the perspective that I'm not seeing? We're not going to improve. But it's about improving. It's not about being perfect because perfect is completely, like, it's an unattainable goal. And you're going to view yourself as a failure if that's what you compare yourself to. It's so clear. I'm really bad at it. That's the takeaway. It's like I'm very bad at this stuff.

I'm just better than I used to be. That's what all of this is. Like all business, all getting, all of mastery seems to just be like getting less bad. Accumulating this experience over the course of years with a rigorous process behind your decision making and learning. and then the results slowly, slowly begin to stack and compound until you find yourself World Series of Poker Champion or a multimillionaire real estate investor or a successful entrepreneur or whatever it is that you're going for. By application of this process, you increase your odds of achieving this. And I think that here's one of the takeaways as you're talking

about like this is what we're trying to do in business, right? It's just be a little bit better or be less bad. I think that when you think that the goal is perfection, then I think two things can happen. When is that you see that you're so far from perfect that you just give up? Or you start thinking that you are perfect. And if we don't have this view that all we're trying to do is be less bad, what is that, that mindset of thinking about it is I want to be less bad forces you to view your beliefs as in progress. And what comes with viewing your beliefs in progress? You aren't rigid and you're thinking. You don't become dogmatic. You don't become an ideologue. Because you're forcing yourself to view your beliefs in progress, you become

open-minded to all sorts of new ideas and new innovations and new ways to think about it and the ways that other people might think. And even if they disagree with you on 90%, you're looking for that 10% that they can teach you. What's the 10% that they can teach you? And it makes you be so open to that because the whole point is to try to get your beliefs to a slightly better place for them to be less bad. And once we say like, oh, I'm perfect, I've got this down. I know what I'm doing. Boom, what happens? You close. And that's it. And you're not going to notice, for example, look, you might be totally right in your strategy for the strategy that you were applying in 2009. But when the world changes around you, your strategy better change as well. You better be

flexible to noticing when markets are changing. And if you think you've just got it down, and you're perfect, you're not going to be open-minded to that. I dare anyone to put that into practice and not double their success at least in their life, just taking that mindset into whatever they're doing. That's so good. All right. Well, we need to move on to the next segment of the show called the Fire Round. It's time for the Fire Round. This is a segment where we take questions right out of the Bigger Pockets forums and we ask our guests. Now, I know you're not necessarily the real estate investor, any of you.

but I think you're just probably one of the smartest human beings I've ever met. So I have full confidence you can be able to handle some of these. The first question is, how do I overcome the fear of getting started investing? Think about what it means if you don't invest. And I think that that's actually the real key is that you have to understand that not investing is a decision, just as investing is a decision. And then the second piece is as you're trying to decide between different investments, start to embrace the uncertainty and recognize that one of the things that we're trying to

trying, I think that we have an unrealistic view of is that when we invest, we want to guarantee that it will work out well. Otherwise, it's really scary. But once we recognize that there's nothing that we can guarantee, we can't ever get something to 100 percent and just embrace the fact that you're trying to get to the best decision that you possibly can, then once you've gotten to a reasonable place where you feel like, okay, it's like, I think this is 60 percent that it's going to work out better than all the other options that I have available to me, you can ask yourself a very simple question once you get to that point where you're leaning toward a particular decision, which is in the time frame that I have to make this decision, is there some piece of information that I could reasonably uncover

in that time that would really change the probabilities that I have? I'm 60% to do it, 40% not to do it. Is there a piece of information I could find in the time that I have to decide, which would all of a sudden make the not doing it go up to higher than, you know, the doing it. And if the answer is, yes, there is a piece of information that I can find in that time, go find it. And if the answer is no, I can't find that in that time or there's nothing that I could really know that would change my mind here. Go ahead and make it and be okay with the fact that you're only 60 percent because that's pretty good in life. Like we can't be certain about anything. So just get used to it and stop holding yourself up to the standard of needing to know for sure. Okay. So the second question

here is related to this first one. That was the fear of be getting into investing, right? Now, without having them listen to this podcast, how do I convince my spouse to get into real estate investing or to go along with the suggestion that I just made? Hey, we got a 60% probability to do this. How do I, how do I can influence my spouse? That's not too risky. I think with the spouse, I think what would be really important is to sit down and say, what are our goals? Where do we want to get to in terms of what our financial situation is in the future? Really sit down and identify what those goals are and then start working backwards. Well, how do we think we got here? So one of the things that I'm pretty sure about, I mean,

it depends on what your goals are, right? Is that having the money sit in like a CD or a bank account is probably not going to get most people to the financial situation that is ideal for them, you know, within reason, right? So for some people, that's probably. true. For some people, like, look, I'm happy if I just make my like 1% or whatever my 2%. But for most people, I think when you sit down and you really lay out what are the goals, I would actually do the backcath and the premortem. Like, how do we get here? How do we not get here? And then let's look at how much risk we're willing to take on in order to move ourselves to that trajectory. Because I think that when you've really imagined all the different futures, I think it really helps you get there. And I would say that that would be, that would be what I would really do is sit down and make them a partner in this kind of thinking with you and say, look, most, and I would actually make it so that you're sort of part of a special tribe. And I would say most couples don't sit down and do this. Most people aren't sitting down and saying, where do we want to be in three years? Where do we want to be in five years? Where do we want to be in 10 years? Most people are sort of mushing around and making decisions in the moment

without actually thinking about what the long-term impact of these decisions are, which is actually true, by the way. The research shows this very strongly that people aren't thinking like, what is my 30 or 40 or 50 or 50 or 60 year old self look like under these circumstances? What do I want for them? So we're going to be the special couple. Like we're going to do something really hard and really important. And we're actually going to look at where do we want to be in three years, five years, 10 years, 20 years.

Let's look at what that is and let's work backwards from there about how we got there. And then let's also really examine the disaster. Like let's say it really doesn't work out. Okay. What's our plan? Where is it? Is it really that devastating? How big a chance are we willing to take that we lose this money? And really work all of that out in advance and make that part of your process as a couple. And I think that that really helps people sort of become partners with you in it as opposed to you trying to convince them. It's more this is what you do as a team. I think that's a great answer. I think that like it's again, application of your philosophy across a broad spectrum of life and business. game, I guess, with poker. Yeah, I hope so.

What are you going to say, David? I was just going to say, I like that more than I'm right and you're wrong and let me just be into your head until you agree with my side. You're bringing them along and you're opening up their mind to, well, most people don't do this. Why don't we separate ourselves from the pack and make it an intentional focused game plan to get us where we want to be? And it opens up someone else's mind and they stop thinking about risk and they start

thinking about strategy, which is fun, right? We like to think about that type of stuff as opposed to scary. start thinking about like what is your downside risk tolerance right like okay what really what is our downside risk tolerance like I mean if you think about it like you just got out of college you're 22 you know you saved up you know five thousand dollars and you want to invest it um is it really a disaster if you lose it I mean the answer is probably no like you can go and save up another 5,000 right and you can think about like what's the reward that I need in order to take this downside risk like how often am I willing to lose this nest egg that I've built up at 22 or 23 years old,

I'm going to be willing to do that. And that's going to be a really different answer than if you're 75 and you're taking on that kind of risk. And to really sit down and think about, well, let's think about the worst case scenario. What does that really look like? Let's think about the best case scenario. What does that really look like? But I agree. If you start saying, I'm right, you're wrong. I'm the decision maker here and I'm making the decision. You are just opening yourself up for resulting. Because if that doesn't work out, it's just going to be a ton of, told you so and I knew it and you shouldn't have done this because you haven't brought them into the partnership with you on the planning. And that's the best way to create long-term health in terms of

not having to repeat this problem. Otherwise, you're going to have to repeat it every single time. And it's just going to cause discord anyway. That is fantastic. And a great segue into our next segment, which is going to be the famous four. Okay. Annie, can you tell me what is your favorite real estate book? My favorite real estate book? No, because I haven't. I knew you're going to say that. Brantically thinks about any book that has the word real estate in the title that I could throw out there.

Yeah, yeah. So, but I think that for anybody who's doing investing, I think that one of the best books out there right now is the geometry of wealth, which is by Brian Portnoy. And it's really thinking about how do you plan, what are your values, how do you think about what the decisions are in terms of your own wealth bills? So that would be the book that I would really recommend in the sort of building wealth space. Okay.

And the next question is, what is your favorite business book? But I'll give you an option here. You can either do a business book since we talked about geometry of wealth or poker book. Well, my favorite poker book is decide to play great poker, but I wrote that. So that's not fair. Harrington's book. But one of the things I think is really important when you're thinking about business books is to sort of get outside the box. and start thinking about in general,

how do I build my own culture for myself around business? So like super forecasting by Phil Tetlock, which thinks about how do we become good predictors in uncertain systems, right? I think that's a really important book. You have things like extreme ownership, right? Which is like how do we really own the things that happen and own our own decisions? Radical candor, you know,

which I think is really about like this honest exchange within your group and how do we be honest with each other about what we're seeing in each other instead of this sort of like, yeah, man, that really sucked, even though I don't believe it, right? Like, how do we get to that place? And then obviously you've got like thinking fast and flow, for example, which is just generally about like decision making and sort of where decision making decision making go wrong, you know, and that kind of thing. You know, you can even get into something a little bit deeper like the signal and the noise, which is Nate Silver, which is really about making decisions under uncertainty. So I think it's really important when people are thinking about business decisions and business books to sort of get out of the box and stop thinking about specifically like how what am I reading about what other people have done in real estate. But in general, how am I thinking about my own decision making process? How do I own my own decision making process? How do I interact with other people in order to become a better decision maker?

Because at the basis of every business decision is the word decision. And so I love thinking more broadly about decision making and then figuring out how that to apply. to yourself. And I think that helps you be more innovative, your own thinking and it well. A lot of what our conversation earlier was talking about made me think of extreme ownership. That mindset you're developing is everything is my fault. How can I look at what just happened and improve myself? And what I find is that when we adopt that mindset, we get better all the time. Whereas when you blame things on other people, you lose the opportunity to get any better yourself. Yeah. The next question here, Annie,

is can you tell us about some of your hobbies? Yeah, sure. So I'm an avid tennis player. I love playing games. So I'm a big words with friends player, which I totally love. I am really into, you know, like certain shows to binge watch, like, which I, you know, I just love things like the night watchmen. It was so good, you know, I was a big, like, Breaking Bad fan. So, like, I'm always looking for really good entertainment to read. And then, you know, I have four kids. So I would say a lot of my hobbies just go into categories of just hanging out with them. I'm very lucky because I really, really, really like my kids and I really, really like who they are and hanging out with them. So it all goes into like tennis, yoga, you know, solid core, spinning, lots of hobbies like that.

So the last question here of the famous four is what sets apart successful investors or people in general from those who give up, fail, or never get started? Yeah, I think it all comes down to how much you're willing to embrace some. certainty and really be okay with the fact that sometimes things don't work out. And that doesn't mean you're wrong. It doesn't mean you were a bad decision maker. By the way, sometimes it does. And that's okay. That there is no way that we can control the outcomes of our lives. We cannot do it. The future is by definition uncertain. So accept that. Stop with the illusion that you can control your outcome. Stop with the illusion that you think you're supposed to be certain about it. And I think that this is a place where people don't realize that other people around them can actually create

a really toxic environment in ways that they don't notice. When you're around people who are like, yeah, I'm sure I knew it was going to work out that way, like, you know, expressing that they're so certain about things that you think that that's actually a thing that you can actually do. Of course, then when you get in your own head and you realize what all your doubts are and that you don't really know, it's going to be hard to ever pull the trigger. Not only that, you're not going to be particularly open-minded. You're not going to be listening to, you're not going to be willing to listen to people who disagree with you. You're going to be close-minded to those opinions. You're not going to approach the world wondering why you're wrong as opposed to wondering why

you're right. And that's going to have a terrible effect on your decision-making in the long run. You have to take an open-minded approach to the world. And an open-minded approach requires that you know that you yourself aren't certain about the things that you believe, that you operate is if you are in terms of your decisions, but you certainly aren't certain and you're trying to learn and that you can't ever be certain about the way that the future turns out

because there's always a 2% chance of an interception. What are you going to do about it? You don't have any control over that. And I think that that's really what sets people apart, honestly. And I hear people say all the time, like, no, it's like I'm such a confident decision maker and that's what sets me apart. And again, I think that they're conflating confidence with certainty.

Right. And I think it's, no, I'm a. really uncertain decision maker. I think that that's what sets me apart. I think that I've always looked at confidence as the way you carry yourself in the face of uncertainty. The more confidence I have, the more I'm willing to walk into situations that I don't know what to expect, which you kind of develop as a police officer, right? Because I never, ever know what I'm going to get when I get on scene. The call starts off with someone says they have abdominal pain. I think it's a medical call. And I get there and the guys running around with a knife stabbing people in the abdomen and you're like, oh, this is not a medical

call, right? And the cops who freeze and don't know what to do are not okay of living in that world of uncertainty. So to me, confidence, like the measure of it is how well that person operates in a world of uncertainty because they trust themselves and their decision making and their ability to analyze their environment in a situation. So I love that, that they're not opposites. Like, you're either confident or you're certain. Like, you can never have certainty. So confidence is being willing to operate in a world of uncertainty and trust yourself. I love that. I'm going to, I'm going to, I'm going to steal that with permission if I can. You just put that so much better than I ever have.

And now I'm like totally jealous of that phrasing. So with permission, I'd like to adopt it. Is confidence in your decision-making process? That's what you have confidence in. Yes, exactly. Exactly. I totally have confidence in my decision-making process. And I also know that I'm really bad at it and that I can't control the future.

But I think that that's what gets you there. Because if you acknowledge that you're not good at something, what do you do? You start practicing. And you start trying to get better and figuring out what you can do to improve the process. Awesome. Well, last question here before we get out of here, where can people find out more about you? Thank you for asking that question. So first of all, obviously you can get my book. And that's available at bookstores online and in real life, thinking in bets how to make smarter decisions when you don't have all the facts. I'm very active on Twitter. You can follow me at Annie Duke. And then also hopefully people will check out my website, Annie Duke.com.

You can contact me there. I actually really love hearing from listeners and readers. I actually respond to every inquiry if I can. I don't think I miss any. I try not to. But I get some great just, even if it's just, hey, there's a really cool article. Like, you know, I love getting stuff like that. Really cool questions, things that people are thinking about because of the content that I'm kind of putting out there. So, and then also, obviously, if you want to hire me, you can also go there and find that as well. And then the last thing is that I actually put out a weekly newsletter. It's been on a hiatus just at the end of the summer here because I'm on vacation. But, But I put out a weekly newsletter.

If you go to Annieduke.com, you can find archives of the newsletter there so that you can read it before you buy it, so to speak. And then hopefully you'll subscribe to that. And what I do, which you'll see if you look at the archives, is I try to take things that are happening in current events in the business world and science and politics and apply the type of thinking that we've been talking about today to sort of things that are happening that are currently sort of out in the world in that day. And Annie, did you mention if you're on Instagram? You know what? I'm on a couple of places. The place where I'm personally really active is on Twitter. So if you want to interact with me authentically, the authentic place to find me is on Twitter.

Annie Duke, that is awesome. If you want to follow Scott or I, he's on Instagram as Scott underscore Trench. And I am David Green 24. Please hit us up and let you know what you thought about this episode, what insights you had. I mean, there's probably more than we could ever talk about. this was like one of the best conversations I've ever had for the human being in my life. That was awesome. And I know Scott's over there like totally fanboying over you.

I read your book because Scott wouldn't stop talking about it. Oh, thank you. It made it to be like secondhand. Like this book is so good that this other guy won't stop talking about it. Brandon told me about it. He hadn't even read it yet. So you did a great job. Oh, thank you.

Thank you. Yeah. Thank you very much for coming on. This was awesome. It's one of our longer shows. So, well, thank you very much, Annie,

for being on the show. I had a blast. I hope that we can stay. touch and I hope that our listeners all get a hold of you and start talking to you, but how I have the right mindset to overcome some of the fear, apprehension, and uncertainty that comes with any business endeavor. With that being said, Scott, do you have anything else to add? No, thank you very much.

All right, awesome. Thank you, guys. Thanks, Annie. Have a great one. All right, awesome. All right, that was Annie Duke, author of Thinking and Betts, World Series of Poker Champion and Just Brilliant Mind and Logical Thinker Extraordinary. What did you think of the show, David?

Oh, that was an awesome treat. I mean, I almost feel like I should have paid Annie for the time that I just got to spend listening to her talk because that was so good. Yeah, like I mentioned at the beginning of the show, this logic that's so clear in her interview here is broken down in a really digestible way in her book, which again is one of my favorites and honestly the one that I recommend most today since I read it maybe four or five months ago. So I was delighted to have an opportunity to talk to her in person today and just hear her thought process in person. And I think we're all better off for having done so. Yeah, absolutely. If you feel like this episode was good in helping you, if you just feel like a weight off your chest and you kind of see there's light at the end of the tunnel and I know what to do, please share this with somebody else you know because you're not the only person that struggles with uncertainty, not knowing what steps you should take or if you're full for taking them. A lot of people need to hear this information. So think about who in your life would really be benefited by hearing this kind of a conversation. Share the show with them. Reach out to Scott and I. Let us know what you thought about it, how this changed your life if you liked it. I know we didn't. didn't talk a ton about real estate, but man, this is almost more important than hearing

another investor talk about what they did, hearing someone explain how you can get over what your own personal, unique hurdles are, is so invaluable. I mean, this is oftentimes like what life coaches or business coaches do in their conversations with their clients. Yeah, absolutely. And this, the philosophy is applicable to every discipline in life that I can, I can think of. If you have a logical mind and are willing to work on it, then this philosophy will make you unstoppable over time. The odds just continue to stack in your favor, you rigorously apply it. Absolutely. So I hope you guys enjoy the episode. Please subscribe to the Bigger Pockets podcast on iTunes, Stitcher, Android, wherever you happen to be listening. So you get

notified when new shows come out. I hope everybody had a great time. Reach out and let us know what you thought. And with that being said, unless you have anything else, Scott, you're ready to sign off? Let's do it. This is David Green with Scott Set for Life Trench, signing off. You're listening to Bigger Pockets Radio, simplifying real estate for investors large and small. If you're here looking to learn about real estate investing, without all the height, you're in the right place. Be sure to join the millions of others who have benefited from biggerpockets.com. Your home for real estate investing online. Do you ever notice how every passive investment somehow turns into a very active lifestyle,

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