#239 Chris Sparks - How to Manage Risk with One of the Top Poker Players in the World
00:00What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp.You're listening to Off The Chain, simply the best podcast in crypto.Let's kick this thing off.Chris Sparks is one of the top online poker players in the worldand is the founder of The Forcing Function,a company which is empowering the next generation of entrepreneurshipby transforming the way we think about work.In this conversation, we discuss game theory, decision-making frameworks,
00:28how to control emotions during times of stress, what it takes to walk away fromimbalanced risk-reward scenarios, how poker lessons relate to business and investing,and why routines are almost as important as plans. I really enjoyed this conversation,and Chris's episode is super timely given all of the economic uncertainty that investors arefacing today. Also, don't forget, I don't just produce the podcast. Every morning,I wake up and I write a letter to over 40,000 investors. If you want to subscribe,you can go to pomp.substack.com. P-O-M-P dot S-U-B-S-T-A-C-K dot com.Pomp.substack.com. Go subscribe today and let's get into the episode with Chris.
01:20Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed byPomp or his guests on this podcast are solely their opinions and do not reflect the opinionsof Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinionexpressed by Pomp as a specific inducement to make a particular investment or follow aparticular strategy, but only as an expression of his opinion. This podcast is for informationalpurposes only. All right, guys, bang, bang. I am here with Chris Sparks, who is one of the toppoker players in the world. And I wanted to have a conversation about risk management. Given thecurrent situation in the public markets, especially, but even with a number of assets,
02:07we are going into very uncharted risky time period in the financial markets and so what better thanto talk to a poker player about how to make decisions with incomplete information so thanksso much for coming to do this thank you so much pomp it's a pleasure to be here i wish it wasunder uh more pleasant circumstances but i'm sure it'll make for an interesting conversationfor sure um let's just jump right into your background uh people i think are fascinatedby poker, especially kind of the highest, most elite levels. How do you go from the day you'reborn to one of the best poker players in the world? I'll give a cliff note and we can, you know,dive into specific examples as, you know, drop some breadcrumbs in there. So I've always been
02:54into games, played card games growing up. I was one of the world's best gin players,which is a one-on-one version of Rummy. I was really proficient at a game called MicrosoftAnts which was an early real-time strategy game. At one point I was ranked number one in the worldin that game in a very small player pool and this kind of seeded the ground for me to combine thetwo of those where gin is essentially a form of heads-up poker where you are analyzing youropponent you are trying to give him an impression that you have a certain hand right you're tellinga story but really you have something else you haven't believed that you need him to discardthese cards but actually you need the other cards and the real-time strategy aspect where you're in
03:43a very dynamic situation the environment is changing very quickly you have to you haveopponents who are the you know noise in the system that you can account for that you have to quicklyadjust you have this metagame element so you're trying to accomplish this goal acquire resourcesbut at the same time you have to take the system into account you have to take outside forces intoaccount your opponents um so i already started you know when the moneymaker bubble hits this wasyou know you have 2001 world poker tour starts broadcasting um whole cards so poker becomes aspectator sport. Then you have Chris Moneymaker winning the World Series of Poker on, I believe,a $200 satellite. He was just an accountant in 2003. All of a sudden, poker is on every station
04:31in ESPN. This is when I started university at Ohio State. I was playing free-roll tournamentsat this time on my parents' dial-up internet single line, where I'd play for 12 hours tryingto win, you know, a $5,000, you know, free roll tournament with, you know, no entry because it'sa free roll, but with, you know, tens of thousands of people. So I had some practice. And then whenI entered into university, poker was what everyone did. If you were a man in college at this time,you were playing poker. That's how we socialize. That's how we hang out. That's how we got socialstatus. And I quickly realized that I had a knack for the game, that my previous experiencesgave me quite an advantage. And so a few of my friends who I thought weren't very good players
05:17introduced me to online play, and it immediately became an extra source of income for me to payoff my tuition. I'll fast forward, you know, senior year, I'm already winning at the mid stakeslevels. I had progressed from I first started playing, you know, large tournaments, you know,buy-ins from $10 to $1,000 to now I was playing cash games, mid stakes online. So buy-ins rangingfrom $400 to $1,000, playing 24 tables simultaneously up to 30, but it turns out 24tables was the sweet spot. And I was ready to enter the workforce. So Midwest guy,I assumed that I was going to go into the corporate world. And my dream from a young agewas to make television commercials. The thread that ties a lot of my work together is I'm really
06:09driven to understand how we make decisions. And this aspect of how do brands tell a story thatalters behavior, right? Every commercial is essentially selling some infinite value.You have unlimited integrity, you have family, you have friendship, you have risk-taking,adventure. All these things are sold and then attached to a brand. And so we consume in orderto affirm our infinite values. And I found that infinitely fascinating. How could I learn themechanisms of production to accomplish that myself? So I was in a reality show my senioryear called Quad Squads that ended up making an introduction to the head of Team Detroit,which does the advertising for Ford. So after having the opportunity to work on a Super Bowl
06:56campaign for Nationwide my junior year, I figured, why not go to the largest televisionadvertiser in the world, which was Ford at the time, and so I'm going to try to sellcars.If you're doing your math, I started college in 2004, and now we're getting to 2008.Seems like sometimes a decade happens in a week, and this was another one of those timeswhere the week before I was supposed to start my full-time job at Ford, the auto industrycollapses, total bailout, Ford goes on a hiring freeze, and I'm in hiring purgatory, essentially,hired but not hired, not on the payroll, but not able to seek other employment.
07:35And this was, on one hand, a very bad luck. I'd kind of put all my eggs in this basket. I'dactually moved up to Detroit, Michigan, where I knew no one ready to take on this position.But obviously, with the benefit of hindsight, this was a massive blessing in disguise. I mean,At first, I escaped the corporate world, but I moved from having, you know, 10 to 20 hours a week to play poker while I was in college because I was pretty, you know, involved, full course load, you know, multiple student organizations.You know, essentially I'm foregoing sleep if I want to play to now I have a completely open schedule with no responsibilities, total freedom.And I say, what does it look like to treat poker as a job?and it becomes 80 hour a week thing. And within a couple of years, um, I'm ranked in the top 20online players in the world. So there's a whole bunch in there. The part to me that's wild is
08:28when I think of online poker, I think about people sitting down and playing at one table,but the best players in the world, you're playing 24 tables at a time. How the hell do you do that?intuition um it's a fuzzy word my definition of intuition is internalized experienceand so when you have put in millions of poker hands like i have so you know by the time i was22 i had played more hands of poker than people who had been playing professionally their entirelives. I have seen it all and my pattern recognition is extremely good. I'm very,very sensitive to nuance, to the difference between signal and noise. There's the classicstudy that we're thinking in terms of information, bits of information where we are taking in
09:24millions of bits of information, but we have a hard cap of our working memory and that we'reonly conscious of a couple dozen of those million bits. And so the power of this internalizedexperience is that I know exactly what information I need in order to make decisions. So while to auntrained eye, this looks like minority report, how do you heck do you keep track of all thisstuff? The truth is the vast majority of it is just noise to be ignored. And I'm only payingto the attention to the few signals that really matter. Got it. And so let's walk through pokerin general, because really I want to have a conversation about your experience as a pokerplayer with those millions of hands of poker. You constantly have to make decisions. You have
10:11to manage risk. And a lot of times you're doing it with a portion of information, right? The thingsthat are known to you, but you also have a number of things that are unknown to you, right? Kind ofdata points that you know are out there, but you don't have. That's very similar to financialinvesting, right? Especially in a time like right now where there's high levels of volatility,people are having to make decisions and kind of manage risk and do it all under the guise of,I have some data points that I know, and then I know there's other data points that are out there,but I don't know whether they're future data points, et cetera. So I think there's a lotof parallels there. Let's start with poker first. How do you think about the decision making in,
10:49you know, on a per hand basis or a per game basis and kind of walk us through that framework thatyou use for that risk management decision making? Sure, I'll verbalize it the best that I can.So first coming in, you always want to have a plan, right? Classic, no plan survives contactwith the enemy. But still, the exercise of planning is incredibly useful, because itprimes you for what new information is going to be important. So when am I going to have to throwthis plan away? How am I going to update it? And so I'm coming into a session when I sit down toplay with a game plan. And so part of that is what types of games am I looking to play? Who am Itargeting at these tables, right? I am sitting down at these tables specifically to play with
11:37certain players who I believe will be profitable to play with. And so what is my plan in order toget into hands with these players? My assumption is that the more hands that I play with theseplayers, my small edge will be compounded. And then within those, trying to anticipate how couldthis go wrong? What are the obstacles? So who else is at the table? Really key is stack sizes. So thegame is very dynamic based upon how deep you are playing, how much money is at stake, as well asyour position. So money tends to flow clockwise at a table. So being in position where you'reacting after someone in a hand versus out of position where you're acting afterwardsmakes a huge difference in terms of your expected value on the hand.
12:25And so I might sit down at a game and I might not sit down at that same game if my positionis going to be different.And so I'm trying to anticipate these things in advance where I really like the Bayesianframework here or another framework that's very useful is the OODA loop.So observe, orient, decide, act, and particularly the orient part of the loop where I am paying attention to which variables are most important for my decisions at the table and being very sensitive to when those variables are changing or essentially trying to predict the future.So part of that is even though someone is – I can't see them, right?I'm not sitting across from them like you and I are.There is a person on the other side of the screen.
13:09and this online interface of a poker game is just an intermediary or a translator for their stateof mind and that that's very noisy i have to think about chat i have to think about click speed ithink about bet size that they bet 666 versus 665 all of these things can matter in the rightcircumstance but it's all compared to a baseline so you look at classic studies say like paulEkman's work as far as lie detection. And they always talk about a baseline where no behaviormatters except for compared to a baseline. So how does this player play on average? And so a largepart of the player pool, let's say I'm sitting down at a game of six players, including myself,it's going to be generally four other professional players and then one recreational player.
13:59The four professional players I tend to play with every single day. You have a player pool of maybea hundred people in the world and you play with them every day so you get to know their game veryvery well and because they're professionals they tend to be very consistent but consistency canalso be a downside and that they become predictable. So I have a baseline of theseplayers at the table and I'm sensitive to conditions that might cause them to deviatefrom that baseline. Most of my attention is directed towards the recreational player whereI'm quickly trying to thin slice them into an archetype. How is this player going to play onaverage? The four classic archetypes, if you have a two by two grid, it's tight, loose,
14:41passive aggressive. So my strategy against an opponent who's loose aggressive, playing toomany hands and playing them very aggressively is going to be very different from someone who'splaying too many hands and playing them passively. And so once I have them into a bucket, I canpredict their decision-making pretty accurately, and I don't need to be as nuanced. So, yeah, Imean, that's kind of a sample as far as sitting down with the game plan. At the same time thatI'm trying to track the state of mind of everyone else's table, at the table, I'm trying to trackmy own state of mind because this is dynamic throughout. You know, if I'm giving myself agrade A through F on, you know, what's my decision-making ability, trying to correlate
15:21that at any given time so that if I start to slip, I have a stop loss. I cut off the damage at thesource. So sometimes I sit down planning to play for a long time and I play for 15 minutes and Icut it off. I stop. Other times I'm like, oh, I'm just going to sit down and check it out and endup sitting down for 16 hours straight. It's very difficult to predict in advance and it's part ofthe success is just showing up and being ready for what comes. And it tends to fall into powerlaw of distribution where if you take out, say, my 10 biggest days of the year, I'm barelyprofitable. But if I hadn't, you know, if I couldn't have predicted those 10 days in advance.So a lot of what you are describing sounds like financial markets, right?
16:03One of the things that struck me in the description you just gave, though, is there'ssome very specific things that you can do that are in your control before you even play the game,Right. And I'll break them into two buckets. So one is the whole idea of having a plan and going through that process can be valuable.And then the second is kind of how you position yourself. Right.So whether this is who you're targeting, what seat you sit at, et cetera, how much of that is just repetition.Right. Meaning that you've done it so many times that it's second nature versus you're actually sitting down and like writing out a plan and saying,I want to sit in the third seat and all of that, you know, how kind of sophisticated andintentional versus just you've done it so many times that now it's just intuition.
16:52I think that any paradigm can be subverted once it's been internalized.So in the beginning, I was extremely diligent about writing out this plan in advance,having a ritual that I'd follow before sitting down, kind of a checklist that just to ensurethat I've fully prepared. Now as I've internalized that, I am less strict about the process and it'smore of a mental exercise. What's on the checklist? So checklist, various things as far as my mentalstate. So have I done my habits today? Particularly, have I journaled to empty my brain? Have Imeditated to center myself? Have I stretched? I might be sitting down in this chair for 16 hoursAm I prepared for that? Do I have enough water? Have I eaten? Just basic, am I ready for a big
17:46day if this becomes a big day? Taking assessments of my mental state, I'll ping my network as faras how are the games looking? What to expect? Is there anyone I should be keeping an eye out for?Playing on one site versus another, trying to get an idea for the landscape.and then you know I was having music picked out in advance so having a playlist that I'll rollthrough that kind of keeps me in flow these sort of just basic checklists like am I ready to playand it's kind of going through this ritual almost increases my discipline just by going through itbecause I'm primed hey this is important and then you know I'm scanning the tables and whileyou know I'm trying to get on them because you know sometimes I have to wait in order to get
18:31on the game. Some games they have a waiting list, so people need to leave. Other times it's thefirst one to click, kind of a high frequency trading situation. There's some lag time whereI'm not immediately playing 24 games. I ramp up to it. And it feels to me like a lot of what youjust described is very focused on your emotional and mental state, right? So understanding thatit's not so much the exact decisions you make as much as it is putting yourself in the positionto make good decisions right um once you get into the game so you've figured out what tables youwant to sit at you're in the right seat you start to play you've identified who the professionalplayers are who's not etc how do you think through the actual evaluation of the cards you have the
19:19cards that are on the table the cards that other people may have but you don't know what they haveand kind of that framework of you have some of the information but you don't have all of it and a lotof it's out of your control at that point. Cool. Well, I'm going to try to bring it alittle bit out of the abstract at the risk of losing a few of you guys who have less experiencein poker, but pay attention to the principles rather than the specific terms. So I'll walkyou through a hypothetical hand and the things that I'm thinking about. So let's say that Idecide to enter a hand, that the hand exceeds my minimum threshold for entering the pot,which is going to go up exponentially with my position so from the earliest positions
19:59playing very a very tight range of hands and as i get to the later positions and especially thebutton and the small blind if there has not been any action my my hand range opens up quite a bitso sometimes in some cases five times as many hands that position is that importantand if someone else has entered into the pot before me obviously trying to think about whattheir range is. Playing online for a regular player, some cases I'll have enough handsto know the exact range that they have. And so I'm limiting the potential universe of all ofthe hands they could have. We call this the potential range down to a smaller set of thatrange that they can only have one of these hands because they have done this. And then as the hand
20:45progresses. So we see a flop. To simplify, I'll use a specific example. So let's say thatsomeone opens from early position and so they have a tight range of hands and I'm in the bigblind. And so I have a little bit of money in there and I'm closing out the action. Nothingelse can happen after me. So I'm actually calling a wider range of hands. And the range that I'mcalling is pretty well known to, let's say we're playing against a good player. So a little bitmore predictable. And there comes out a flop. And so I'm thinking about how does this flopinteract with their range versus my range? If it interacts with my range on average betterthan their range, I'm going to be aggressive regardless of my actual holdings. My holdings
21:26don't really matter all that much. It only matters to the fact that my bluffs don't need to work asoften. I have additional equity in the hand. I'm entitled to more of the pot. It's kind of a failsafe if things go wrong. But I'm not playing my hand as much as the hands that I could be having.And so if it comes out with a flop that's, you know, better for my opponent's range, something with high cards, you know, the worst would be something like ace, king, queen.You know, I'm generally going to be playing, you know, very tight passive, folding a lot because I can get myself in a lot of trouble.The most expensive hands are second best hands and playing passively because, as we say, my range is capped.I cannot have the best hands and he has all the best hands.now if the the flop is something that's much better for my range of hands say something like
22:12you know four five six with two spades well he has very few fours fives and sixes in his rangebecause of the position that he opened and i have a lot more and so he's going to have to play muchmore passively and i'm going to be able to play much more aggressively and then that that continuesas you go to the turn where you have one more card and then to the which changes the the placementsometimes a great deal so a card on four five six four something like a jack is a blank doesn'tchange much but a seven or especially a seven of spades makes this board maximally wet it changesthings a great deal and so that's where you make very very large adjustments based upon newinformation and then you have the river where all the information is known except for the opponent's
22:56cards and essentially is like, is this opponent bluffing enough in order to call? Or how much doI need to bluff? We call this a minimum bluff frequency in order to remain balanced. And soI look at where my hand ranks in the range of all hands. So if I have one of the worst hands I couldpossibly have, I'm always bluffing. If I have one of the middle hands where sometimes I beat him,I don't need to bluff. If I have the top range of my hands, one of my best hands, I'm always betting.and so you can see how this yeah these compounding probabilities where as new information isintroduced to the game you know seeing what positions where they raised the action and thenthe cards how they with this new information they react i can continually limit down the range of
23:43possible hands they have you know combinatorially weighted to the to i say oh well given that he hasthese hands. I need to be bluffing this percentage of the time, that type of thing.Got it. And so at what point do you go from probabilities to certainty? Or do you neveractually get to certainty unless it's the cards that you hold and you know with 100% certaintyyou have the best hand? Certainty is a very dangerous thing. There's no case in that you'recertain. And even if you are certain what the best move is, there is the additional variableof bet sizing, where there's situations where you can be very elastic to bet sizing or versusbeing very inelastic. So certainty would be is I am folding no matter what they bet. And elastic
24:31is, well, if they bet a lot, I might have to fold. If they bet really small, I might have to callbecause you're getting a better price. For example, if someone bets half the pot, I only needto be right 33% of the time in order to make a profitable call. This is something that's very,very difficult for non-expert players to internalize is you can be making these decisionswhere we're so we're so weighted like you know it is or it isn't like you know well i called and hehad it it was a bad call there are calls that i make where i know i'm going to be wrong 90 of thetime but i still have to call it and it's very difficult to know the difference between you knowi'm wrong you know he has a 10 of the time and 20 of the time and to be to get that feedback that
25:12you were wrong, but still believe in what your system's like, hey, that was the rightcall because I was getting a very good price, that's a very, very important skill.And that kind of goes into the intuition of the numbers where I don't know the exactpercentages for a lot of these situations, but over time, I've built a very good fingertipfeel for them.And so this idea of price is really interesting, right?I've never really heard somebody describe it, especially poker that way, where you'remaking decisions and the probability and price create a equation that ultimately drives the
25:47decision that you make. And immediately my mind jumps to like financial assets, right? Obviously,you might buy a good asset at a great price, or you might buy a, you know, a less than good assetat a really, really great price. And either one of those could be a good or bad decision,depending on when you do it, the future price movements, etc. So there's a lot of analysisas that goes into it. In the game, how do you control yourself mentally and emotionally whenyou are given the feedback of bad decision? I kind of put that in air quotes, meaning thatyou lost a hand or somebody bluffed you or whatever happened, but it's still fit withinthe framework that you had, that you made a sound decision. Like what is that kind of control
26:35mechanism that you use in order to make sure that you don't kind of lose faith in your decisionmaking and frameworks that you use? That's a fantastic analogy. Yeah, there's no good or badinvestments without price included. So something could be very cheap and be a bad investment andsomething could be very expensive and be a good investment. It's all about underlying value.and there's a lot of people who go through life saying, is this a buy or sell and don't actuallylook at the price. And so in a poker sense, it's very, very important to be process oriented ratherthan results oriented because results in poker and in the markets are extremely noisy and we can makegood decisions and have bad results and vice versa. And so as you said, we still want to be
27:27taking new information into account. And so this is where that concept that I introduced earlierof range comes into play is that I have an expectation that this player, based on theactions they have taken, has one of these hands. There's a composition of this range. It's xpercentage value hands, x percentage bluffs. And the only information that is useful for meis information that disproves this range and that it falls outside of this range. They show up witha hand as a bluff that I didn't think they could have, or they bet a hand for value that I didn'tthink they could bet for value. And that means, well, my assumptions were wrong here. And that'swhen I adjust. I think the key to improvement in anything in this world is tightness of your
28:17feedback loops, that you make a decision and ideally you get immediate feedback. How doesthis change, the assumptions that you use to make this decision? And so that's how I'm reorientingmyself is I was bluffed, but they had a hand that I thought they could bluff me with. That doesn'ttell me anything. But, oh, I didn't expect that. And I want to have this part of my brain light upand say, that's fantastic. I have just learned. This is very useful. So even if I'm wrong,not making the same mistake twice. I've already paid tuition. Now I need to make the rightadjustment. Got it. And so in poker, I'm just thinking out loud here. So you've got, let'scall it six people sitting at a table. Each person can provide a certain number of variables to your
29:05decision making. You described some of them around the chat, the speed of clicking, the bet size,the position at the table, all these different things. And so let's say there's 10 variablesthat each player times the six players at the table.That's a-Add a couple orders of magnitude.Okay, explain.So you mentioned the visible examples,but there's many examples that are very invisible.
29:32Okay, like what?Hyper situational things.So I would introduce the concept of centrality here,which has an analogy to Buffett's circle of competence,that players have certain situations that they're most comfortable in, where they've solved it,they know they have a good strategy that works. And this becomes a crutch for them, and thatthey continually try to stay within this circle of competence. And so if you can shift the fieldof play, think about maybe a basketball game where teams prefer to slow it down versus run on the
30:09break, and you take them out of their comfort zone, you put them into situations that arecentral for you, but not central for them, meaning that you have more experience andinsight into the situation than they do.You studied it more.And when people get uncomfortable, they make bad decisions.And that's a lot of poker playing is forcing people into making bad decisions.And so that's where a lot of the variables come into play.It's essentially combinations of these variables and how do players play in very specific situations.
30:44Got it.How do you think this overlays with the financial markets, right?Like there's very obvious kind of comparisons, right?If you think of just there's a potential prize and I have to make a number of decisions that go into what price am I paying?what's my downside risk, what's my upside potential profit. There's other players in themarket, et cetera. But how do you, coming from such a high level in the poker world, think aboutthe crossover to the finance world? I mean, we could do a whole episode on that.I'll give a couple highlights that maybe we can dive into for today. So one that I always love
31:29to talk about is people always forget that there's someone on the other side of the trade.And so when you're playing poker, the most important thing is who else is at the table.So you can be a little league player, but if you're at a t-ball league, you're the MVP.And a lot of being one of the best poker players, which my definition is who's winning the most,because why else are you playing? Everyone's, you know, who's the most skilled? Well,Well, you know, all that matters is your bank account at the end of the day.That's why you're playing poker.And the best poker players in the sense are the ones who are playing in the best games
32:06because it's relativistic skill.And so, I mean, that gets into a whole other rabbit hole around, you know, online where,you know, you're taking the games that are there and trying to get into them versus livewhere, you know, it's much more soft skills and cultivating relationships and gettinginto games where, you know, you might not be good, but the players are worse.Putting that aside for a second, thinking about who is on the other side of the tradeand understanding them deeply, what are their motivations?So at the poker table, a lot of people think they're playing to make money, but they're
32:39usually playing for some other purpose.They're playing for diversion.They want to gamble.They want to test their skills.And if you can figure out what their internal driver is, their id, you can predict theirdecision making in some interesting situations.The same thing in trades, knowing what people's risk threshold is, what their targets are, what information might they have that you don't, what is driving their decision-making, are they motivated?Everyone's motivated, but what are they motivated by?
33:04All of these factors where you need to understand the other player, the person on your side of the trade, you understand their position, their mental state better than they understand their own.Can you change it in the financial markets?In poker, you definitely can, right? Because you're literally sitting at a table staring at them or you're playing with them online. In the financial markets, if I'm buying and selling stocks or doing other things, can I have an impact or do you think that's more market dynamics and less kind of 1v1, if you will?I mean, that's probably above my pay grade as a retail investor. I'm imagining there's people who are listening to this who are doing things relationship-based over the phone where they know their counterparty personally in some cases. And I assume that there's a lot more of those dynamics at play, but I wouldn't be able to speak to them.Yeah, I think it's fair. OK. And then in the financial markets, one of the things I think is really timely right now is this idea of emotional control. Right. And kind of risk management. You talked earlier about kind of cutting your losses. Right. So you sit down to play poker and you don't know if you're going to play for 16 hours or 15 minutes. And at some point you make the decision. Today's not my day. And you get up and you walk away.having the ability to do that and kind of the maturity and the emotionalstability to do that, I think is obviously a really important skill because it essentiallyprevents losses, right? And as you said, kind of your 10 best days make up the majority of
34:39the returns for the year. How does that play out in the financial markets, especially on days liketoday where we're watching literally the stock market opened and it's down 7% and within thefirst 10 minutes, they halt trading. So it's obvious that there's incredible emotion and fearand greed and kind of all of these things that kind of coming together in this cocktail ofall the things that make humans humans, but also all the things that make humans really badsometimes at investing. You've spent your entire career trying to avoid or sidestep that stuff.How do you think about it?I mean, this one is so timely and is so in line with what I'm thinking right now.
35:22A post I'm releasing this week is all about this.It's called The Perils of Over-Optimization.The Perils?The Perils of Over-Optimization, as in optimization being a trap.And let's say peacetimes, we're always trying to perfect things.our systems, our routines, our tools. And, you know, when we're in war times, you know,sorry for the bad analogy, all those things go out the window. I mean, who cares what our taskmanager is? Like, who cares, you know, if our emails are well formatted? Oh, I don't need to
35:59do my full routine today. Like everything goes out the window. And that's a problem becauseyou need to practice like every day is game day. And you don't know when you wake up what the dayis going to be like. And if you're completely unprepared for it, you're in a position to makevery poor decisions. And so you have to wake up ready for anything. And, you know, hopefullyyou're pleasantly surprised and say, well, okay, I can go back to, you know, doing the things thatI would normally do. Or you're ready for, hey, this is what we were waiting for. Now is the timeto take decisive action, but that happens through preparation. And the antidote to this overoptimization is showing up and being consistent. And those are the best systems and the best tools
36:44and structures your day is that you show up every day that if today is game day, you are ready toplay. Elaborate on that a little bit, right? Because I think that it's very obvious when youtalk about it from a poker standpoint of like, I'm making the choice to sit down and I'm going toplay. And if it's my day, I'm going to play for 16 hours. If not, then it'll be a short periodof time. And a lot of the things that you described, I think, were very concrete in thesense of you're clearing your mind, you're getting kind of that emotional balance, right? And thenyou start to play. And it's all centered around making sound decisions or that framework or focuson process. In the investing world, it's a little bit different. Now, if you're a day trader,
37:26right then i think that um it has a very similar uh kind of mechanism to uh poker right becauseyou're making a lot of smaller decisions uh going through that framework over and over and overagain throughout a single day but if you're not trading in the sense of kind of multiple tradesper day if you're making more longer term decisions how do you think about applying thatframework or that plan to that when it's not let's make a decision every day sometimes actually it'swe are going to resist making decisions. And instead, what we're going to do is we're goingto not participate, right? We're going to basically wait months and months and months or years and notdo anything, but still come to work every day, kind of ready for game day, if you will.
38:09Absolutely. So I think there's two dimensions of this. The first is having principles or rules inplace that you look at past experience and with the benefit of hindsight and how you made decisions,continually keeping track of that, having what rules, what structures could we have had in placeat the time in order to have made better decisions and putting those things in place and trustingthem when the situation comes up. And so I'm very principle driven is that I want to eliminate asmany trivial decisions as I can to essentially outsource these two principles so that analgorithm could follow it, i.e. Bridgewater. And if I have seen that this strategy performs wellover time, that if I do this every day, I do well. If I do this first, I do well. If I check these
38:57things before making a decision, I do well. I put that principle in place and I follow it in goodtimes and in bad. And so that raises the floor, limits the downside, but also causes us not tomiss things. I think on the other side, being maybe a little bit more tactical, if I can talkabout a couple things I've done with some of my portfolio manager clients. It comes to structuringthe day in that the most important things are moving forward. You're being intentional withwhat you do, potentially how you start the day before you let the flood, the stream of marketinformation flood you. And so something that I always talk about, if the market is opening upat nine, like your day doesn't start at nine, your day starts at six. Six to seven, you have
39:41a morning routine that allows you to perform at peak and then you have you know seven to eightyou take care of anything that you need to do so you can have your mind on the day it's like sowhen you're at the office you could be at the office for the open and then i think from eightto nine is you've pre-selected one hour i call this the power hour what is your most importantthing in other terms like what are you going to do is this you have a company that you want to do adeep dive on? Is it you're writing a memo that's going to promote your position to help you getsome deal flow? It's like there's something that is holding you back from growing your portfolio,growing your investment base. My perspective is if you prepared yourself, you've planned out what
40:23you want to do from that hour. And for that one hour, that is all you do. You single task.The rest of the day is a complete bonus. Market bell hits. You can be completely reactive as muchas you want. Generally going from proactive to reactive is a one-way street. The second youcheck your phone, the second you check your email, the second you check the tickers, you're not goingback to doing deep dive research. And that's why it's critical that you get it out of the wayso that you're starting the day from a good place that you're already moving forward.And then you can be opportunistic with no regrets. You have full attention. You're very in tune withthe dynamics of what's happening because you've cleared your mind. You've made progress. I think
41:02that that simple structure, thinking about how you start to the day in order to set yourself up well,it extends to investing, it extends to founders of companies. And it's just a matter of knowingwhat are the important activities that are moving your business forward? And what are your bottlenecks?What is most holding you back? What can you do to attack that? I'm a huge believer in this. I mean,every morning I wake up and the first thing that I do is I write, right? And it's a way for me tobasically organize my thoughts, et cetera. And probably one of the rare ones that I send it topeople, but there's plenty of people who write in a journal or do whatever.This is what I call a forcing function, that if you've externalized your goals,
41:40there are others involved. Even if you think they might be reading it, that causes us to show up.It's a classic study. If you have a loose idea, hey, I'd like to go to the gym tomorrow,on average, your chances are 10%. And you can continually raise that percentage as you addmore forcing functions into place. Or if you get to the point where, hey, I'm meeting this specificperson at this specific time at the gym, and we're going to do this workout, you go from10% to 95% because you're going to show up.It's crazy how science works, right?A lot of people know this stuff, but they just don't take the time to actually put it
42:17in place to increase the probability of them doing it.Everyone's trying to reinvent the wheel, looking for new diets, all these last mile,nootropic solutions.like the right ways of doing things haven't really changed much in four decades. They'rejust not evenly distributed. Yeah. The planning part, I think most people say that makes a tonof sense, right? Put together your plan, clear your head, be ready for whatever comes to youthat day. What comes to you that day though, can drastically throw people off. And so it's kind ofthe Mike Tyson, everyone's got a plan until they get punched in the face. Today is a great day to
42:52have a conversation about getting punched in the face. Last night, oil dropped 30%. There wasmultiple circuit breakers that have gotten hit both in the futures market and the stock market.We have seen the interest rate or the treasury yield drop to 0.5%. I think all of the treasuriesnow are below 1% for the first time in history. This is like we're in a heavyweight battle.There's been a lot of firsts in histories recently.Yeah. And it's just the reason I go to the heavyweight battles is because it's not like people got punched once in the face. They've got punched over and over and over again. Right. It's kind of like the Marshawn Lynch. He's like, my job is to run them over and over and over and over again.That's what's happening in the financial markets right now.All of those people with plans all of a sudden aren't so confident in those plans.
43:42If you were talking to them or advising them, et cetera, like what do you put them through?How do you have that conversation and keep them kind of as on task and on target as possiblegiven that they're getting those punches in the face kind of continuously over the lastcouple of days?So maybe I can propose a framework, maybe a visual interface, where we're talking aboutmanaging one's emotional state in the face of quickly changing circumstances.And so I would have you manage, let's say you visualize a continuum in front of you.So an arrow going from your left hand to your right hand.
44:27And one that we could do would be you have your parasympathetic nervous system and youhave your sympathetic nervous system.So sympathetic, essentially fight or flight, heart rate pounding out of your chest.You could outrun a bear at this moment.You are fully engaged.That is the full far right of the spectrum.And then you have parasympathetic nervous system, far left.You've been meditating in a cave for the last 10 years and you've just emerged.
44:54You have reached nirvana.You are oneness.and thinking about where are you on this continuum at this very moment.That is the first step is awareness.If you can bring awareness, think about in terms of a measurement,you're making something that is subjective a little bit more objective,you can make better decisions.And the meta skill here, the next level of this is where on this spectrum
45:20is it best for you to be right now?Sometimes it makes sense to be full fight or flight.Sometimes it makes sense for you to be full guru.Usually it's somewhere in the middle, but there's a great deal of nuance in there.Another one that I would propose, and maybe we could talk about making this into another two by two, would be you have fully confident on one side.You 100% know the right move.You're a maximalist.You're all in.
45:44You're leveraged if necessary.No news that could come out would ever change your mind.You have 100% priors.You are certain in black edge terms.you have the far left, which is hypercritical. Every new piece of information that comes outflips your mind. You are on the razor's edge, a straw breaking the camel's back. You areextremely critical of your own thinking processes. What have I been missing this whole time? How haveI gotten myself into this? You're maximally critical. And at the same time, it's like
46:15recognizing where are you on this spectrum. Some of you listening today might be fully critical.You're thinking about, man, I should have acted sooner.Why didn't I see this coming?What do I do now?Everything is getting out of control.Maybe today is the day where you can recognize I need to shift more into confidence.Like this hasn't happened before, but similar things have happened before.Generally, best decisions are made by looking at base rates, by taking the outside view.
46:45Like what previous experience do you have to shed some light on this situation?Who can you talk to?what how when you've made decisions in the past when they've gone well what have you done whenthey've gone well how have they gone poorly and can you do a pre-mortem in that to preventyourself from making a bad decision today think about if i made a terrible decision today youknow if i overreacted if i made the wrong move how did i fail and not doing that yeah and and iI think this idea of measuring failure is really important because one of the things that I see this play out all the time in investing is really around if I sell today, right?And the way that I always think about it is baby boomers are a great example.
47:33So I had this tweet storm over the weekend where I basically said, baby boomers basically started saving when they should have been investing over the last decade and have just started to invest when they should have been saving.So the whole idea is baby boomers had two core assumptions.One was that the financial system was bulletproof in the United States, and two was that their greatest asset was their home.The financial crisis obviously shook that to the core.And so all of a sudden, what happens is between 2007 and 2009, you see baby boomers get incrediblyunconfident in their decision making, and they get unconfident in the financial system,and they start to break down. And so what they did was rather than start investing at what becamethe longest bull market in history, they actually became very kind of close chested, right? And they
48:19started to save money rather than invest it. So as they're saving the money, stock market explodes,right? They're not exposed to that upside. Well, over time, they realize, hey, maybe I shouldn'tbe saving. I should be investing. This thing has been running like crazy. 2015, 16, 17, and 18,19, they start saying, maybe I should be investing a little bit more. And so what do they do? Theystart to get a little bit of exposure, then more, then more, then more. And they start to realize,oh shit i'm behind my financial goals and they break down that decision making process and thenbecome so overexposed because they are more aggressive in their risk appetite to get yieldand to get returns that now as the market turns over basically right at the moment when they are
49:03you know no governor on this 100 exposure to markets etc or or you know incredibly highexposure to markets bam it turns over and it's going to crush them a second time and to me likeAlthough that plays out over a 12-year period, give or take, you know, 13-year period, that is the essence of really bad decision-making.And it shows a perfect example of how human emotion can take what are generally intelligent people and completely flip it on their head and they do things out of comfort rather than out of sound decision-making.And it seems like that's what you've spent most of your life trying to combat and make sure that you yourself don't make those decisions.wow that that was a total value bomb i hope you guys are paying attention there i know i wasuh in in a quick word yes i that's what i think about uh i think everything really comes down tomaking good decisions and everything essentially is a bet you know there's some risk to crossing
50:02the street but i make that bet every day because i need to get to the other side and it's veryimportant to closely examine the way that you make decisions and to have these principles in placeto understand your own situation well enough and to step outside of it well enough. And so thatif circumstances change, you can act appropriately, not overreact, not underreact, that you haveconviction because you've done the hard work ahead of time that, you know, this just becomes a litmustest essentially. But that you know how you're going to make bad decisions and you prevent thatin advance. How do you think about measuring downside risk and understanding when to kind ofcut your losses and walk away or kind of shut down for the day versus continuing to experience
50:49losses or pain? What's the framework that you use there? Well, I think this one's probablybest illustrated by an example. So we were talking about how a key advantage in poker is,we were talking about comfort a little bit is getting another player out of their comfort zoneand so i was playing in a game the other night um the game's live online they live streamed it i'ma little bit embarrassed by it by to be honest i think some of my decision making could have beenbetter um but it's been it was a very valuable experience you know to watch yourself makingdecisions uh it's a very quick way to improve i hadn't done that before and the dynamic of thisgame changed very drastically. And so I had showed up for what was supposed to be a 5-10
51:37no limit game. And so typically, a no limit game, you buy in for $1,000. And in these games,they play a little bit bigger. So I was expecting to buy in for $3,000 or $4,000. And just to covermy downside so that I could play well, I brought $13,000. So this is, well, if things go reallybadly. I could lose 13,000, but my downside is capped. Like I can only lose what I brought.I show up and I realize that there's some new faces in the room that I hadn't seen before.And a acquaintance and now, you know, trusted friend after he gives me this tip is like,hey, you see that guy? There's like five players at the table I recognize with one guy I didn'trecognize. Kind of slobby, kind of, you know, he had a giant thing of vodka in his hand. I'm like,
52:22wow this guy's the target and uh he says hey like that's the best player in the city like watch outlike keep an eye on him i'm like oh wow that's that's really interesting and this guy goes onthere's 10 you know 10 players at the table and in a 10 10 handed game you'd probably want to beplaying depending on how good your cards are between 10 and 20 percent of hands just likethere's a lot of players at the table and it's just not profitable to play many hands this guyis playing 50% of hands. So half of all hands he is playing. And it's just impossible to playprofitably in this point. And he continues to consume alcohol and make some pretty questionabledecisions, like clearly some thought behind it, but taking on way too much risk. And because he's
53:08losing and wants to try to get back to this even, this is a theme that occurs a lot in investmentis we think about, you know, we're down.How can I get back to where I was before?He keeps trying to raise the stakes.And so it was a 5-10 gamebecause a 5-10-20-40-80-160-3-20 gamewhere now we are playing for 30 times the stakesthat I had shown up for.
53:34And some hands, you know,these are some amongst the biggest gamesthat I've ever played.And I clearly am undercapitalized for this game.I didn't bring enough.And so I'm trying to think of my own strategy is,well should i put all my money on the game and to because there's clearly a really big opportunityhere but if i get unlucky and i bust then you know i have to go home and you know i've you know
53:54blown my load i have like i have all my chips on the table and so you're trying to play thatdynamic strategy when these are dynamics that are so different and what was very apparent to methese are very very skilled live players who are used to playing in very dynamic environments andvery large games. And it has shifted from a situation from was completely in my comfortzone and very underneath my control where I know the exact strategy to is like, I don't really knowwhat the exact strategy is in this game. And these guys have made it more central. Like theyunderstand these dynamics better. They're clearly playing really bad, badly fundamentally, butthey're just going to be in situations that they know well, and I don't know at all. And so it
54:35reached it reached a point where he said well even though on paper i know i have a large edge in thisgame today i don't think i have a large edge and so at a certain point after about six hours i saidhey guys it's been it's been fun you know the stream had ended at that point i said i'm gonnago home and uh you know sleep it off um and you know normally in a lot of these situations i wouldhave been up until 6 a.m playing with these guys because this is you know this is like a once amonth, you know, once a year, potentially type game, you know, these, these guys could, you know,win and lose six figures in a night. Um, but I said, Hey, given these, this, these dynamics,I don't think they're favorable to me and I'm going to make the smart decision and step away.
55:15And so I think maybe giving that example illustrates, you know, some of the thingsthat I would think about. And part of it, I guess, is really, uh, understanding that even though youmight be the better player at that table, right. And maybe that's accurate or close to accurate.So being the best player doesn't always mean that you're going to go home winning.And so it's understanding not only the skill set of you and all the other players at the table, but also the environment and your comfort level and kind of multiple variables.They're just not lining up.And so you decided to walk away.Exactly.
55:47And that's that's really why keeping identity small is very important.And, you know, I've had issue and everyone has issues of thinking, you know, I'm the best.And, you know, my results show that on average, I am probably amongst the best, if not the best players.And actually, I would assume that some of these players have won quite a bit more than me, but just in games that I don't know about.And it required a humbleness of saying that, hey, in my environment, you know, particularly online, you know, six mass cash games or a typical 5-10 game where I have a lot of experience, I would play against any of these guys any day of the week for as long as they would sit down with me.But today, given these dynamics, I am not the best player at the table.In fact, I might not be amongst the best players at this table.And so recognizing that and adjusting my perception to say, hey, that's OK. That's fine. And I win because I play the games where I'm amongst the best.
56:45So I tweeted this quote earlier today, and I actually didn't have anything to do with you coming in here, but now it makes a lot of sense, which is basically one of the big rules of risk management is to make sure that you never blow yourself up.You don't ever get to a situation where you can't live to fight another day.And essentially that's what you're talking about here was even though there is potential high payoff, the I'm going to go home without any money is not a good kind of risk-reward tradeoff.And so walking away ends up being the right decision to make.Right.Tell me about this.So you've got a workbook.It is called Experiment Without Limits, Personal Experiments for Peak Performance and Productivity.
57:28you've got this life outside of poker, but you take a lot of the things that you dowith poker and you spend time with portfolio managers at financial firms, founders,executives, et cetera. Tell us a little bit about that work and then kind of how this workbook cametogether. Well, sure. So, I mean, in the poker world, I coached hundreds of poker players whowere already amongst the world and I took them from, you know, top 2% to top 0.01%. And Irealized that many of the skills that were instrumental to becoming one of the world'sbest poker players were highly transferable to other fields as well. So fast growing companiesto executives who are, you know, high up in a large corporation to especially I love working
58:17with portfolio managers and other active investors. So, you know, real estate, crypto,that type of thing. And I found that having these frameworks for decision making,and essentially what I call peak performance and that you are showing your best self is showing upevery day so that you are in the best position in order to make good decisions and just generallysucceed. That I was able to take a lot of the things that I had developed in my journey fromgoing from being a pretty good poker player to one of the best, teaching this to other poker playersand now taking some of those frameworks and teaching them to others who they can apply intheir day-to-day job and day-to-day decision making. And so Experiment Without Limits was
59:01my attempt to distill down everything that I've learned in the past decade. So millions of handsof poker playing, four years of working with high-performing executives into what are thefew things that work reliably in order to perform. And so there's building block chapters as far ashow do you set goals? How do you build systems? How do you develop habits and routines? And thenI get hyper tactical around how do you optimize your time? How do you optimize your focus? Howdo you optimize your energy levels? How do you accelerate your learning? How do you eliminateprocrastination? How do you optimize your mental game? These are their principles in there thatare distilled down. And then I break them into what I call experiments where you can follow this
59:44step by step and implement this into your life and see the results for yourself. And yeah, I give itaway for free. It's available for download on my website at theforcingfunction.com slash workbook.I think we'll probably put a link in the show notes. And yeah, if what I've been talking abouttoday is of interest, you know, highly recommend you check it out. Can you tell us a story aboutsomebody that you've put through the program and kind of like has wild results? Becauseit's one of these weird things where I think when people hear like, oh, you shouldn't procrastinate,Right. Or, oh, you should like focus and you should prepare like it sounds stupid.But then when people actually go through something like this, they're like, holy shit, my life can change.
01:00:24Right. The results of what I am doing can change.Maybe can you tell us a story of kind of what you've seen and impact it can have?Sure. So right now I think about taking people who are already performing in a very high level.Let's say they're in the top five percent.And how do I get them into the top one percent?This is not a zero to 60 type thing.These are already people who are having amazing results and want to improve even more.And I'll give maybe an example is on the outside, it looks like this person has everything put
01:01:00together, right?I don't want to get too specific about clients just to protect their anonymity, but theyhave everything put together.No one would ever guess that they think of themselves as a procrastinator, that theydon't really stick to their routines, that they wake up and just kind of do whateverthey feel like or don't really have a good plan, that they're constantly getting distracted byTwitter or on their phone. And at the end of the day, they just don't feel like they're veryeffective. From the outside, it looks like everything is going well and they're getting
01:01:27the things they need to do done, but they're not moving the right things forward. They're not doingthe right work. Their time is not really a reflection of their priorities. And some ofthose priorities are being neglected completely, whether it's their health, whether it's theirfamily, whether it's their relationships, and in some points, their business. And so I think aboutwhat are the habits and systems that this person needs to put in place in order to make sure thatthey're moving forward in all these right ways. And once we start collecting data together,what's working, what's not working, we can identify ways to double down and accelerate that progress.Yeah. How much of it is doubling down on kind of what they're good at and ignoring the things
01:02:05they're bad at versus trying to cut out the things they're bad at?Cut your losses early, double down on your winners.Really? And so it's if you know that, hey, I procrastinate a lot, but when I'm hyper focused, I'm incredibly effective at what I do. Do you basically then say, look, forget about the procrastination component. Let's figure out how do we get you in that hyper productive state and just double and triple down on that?A hundred percent. So focus means being focused. And so pick one thing and focus on it. And I will compress this down to a book title, which is The Goal. And this talks about the theory of constraints or the notion of bottlenecks, that everything is a linear process. And along this process, there is one point that is most holding up going from input to output.And so you said maybe for this person it's procrastination, maybe it's they're not planning, maybe it's that they don't have good eating habits, maybe they're not getting the right level of sleep, maybe they have too many distractions, their work environment is not supportive, right?I try to be a detective and suss this out of them because what people think is the problem is never the problem and try to uncover what is the bottleneck, what is most holding back progress.And the really, really counterintuitive idea of the goal is that any effort spent on something that's not the bottleneck is wasted because it is not proving overall output.And so the key is first identify the bottleneck, then keep trying things until the situation improves by attacking that bottleneck.
01:03:35If nothing is changing, you know you don't actually have the bottleneck.Yeah, it's fascinating when you really break down what I think are common, commonly understood or accepted issues. Right. So, you know, hey, I don't follow my routine. I don't focus on all these things. But when you scientifically break it down as to why, how do we correct that and start having that conversation?it's pretty simple to figure out it's just the fact that there's somebody holding you accountableand asking you the questions and and forcing you right kind of that forcing function of changingor improving simple does not mean easy right if knowing how to do it meant we were all doing iti mean why are we even having this conversation you know we're already we're already doingeverything we wanted to do clearly there is a gap there that there are things that we knowwe quote unquote should be doing, but we aren't consistent with doing. And that's part of my
01:04:30functionality, right? I call myself the forcing function because I force you to do these thingsin order so you can start having the results to internalize this is something that I should bedoing to the point that it crystallizes into your identity, that it no longer becomes a habit thatyou need to keep in the air. It's just something that you do. But the first part of that processis you need to be taking actionin order to have those early gains, right?Classic newbie gains, when you go into the gym,you haven't been in the gym in a year
01:04:58and you start working out and, oh my God, I'm jacked.Well, you're gonna hit a plateau eventually,but those newbie gains are what keep you coming backthrough the pain.And that is all growth is stretching.It's having that pain and creating new musclesand you break through that plateau.Yeah, the gym is a great example
01:05:15where I always wonder how much of the,like let's say a fitness trainer is the actual exercises they're asking somebody to do versusjust the trainer being there. So you show up, right? I think, I think a, I think the trainerhaving you show up is worth the price of admission. I work with a trainer myself and if that's all itwas, that would be worth it. But what I think the really interesting value is you outsource yourdecision-making to them. You don't need to have your routine. You show up and you would do whatyou told. And it's much easier to follow through if you don't have to think about, oh, how long doI have in between sets? Should I be doing chest or back today? Oh, should I make it through the
01:05:59full hour, right? It's like you're outsourcing this decision-making to someone. And by releasingthat load, you increase your performance. You actually make a lot more out of that time thatyou have. Do you think at all about kind of, what is it, like the exhaustion from decision-makingthroughout the day? How do you think about that in terms of, you just talked about outsourcingdecision making to somebody else for working out, but what are your thoughts on just like in generalpeople make too many decisions or they don't make enough decisions during the day and can youactually kind of get tired? Yeah. I mean the research on some of this stuff that's come outin psychology is kind of a cluster duck. Yeah. I mean the actual word obviously. This one in
01:06:44particular, it's, it could go either way. And so it's shown that some people have shown thatwillpower is a muscle. And so you get stronger, the more that you exercise it. Other people haveshown pretty convincingly decision fatigue. So that's the word I was looking for. That's theintelligent way to describe the question. So you've seen, you know, classic Steve Jobswearing the turtleneck. I kind of pulled it off a little bit today. You know, Obama wearing thesame suit every day. It's like you try to eliminate trivial decisions because you have a limitedsupply and you want to save that capacity for decisions that really matter. And I subscribeto that a little bit. And I also subscribe to the over the long run. I want to do things that are
01:07:23hard to make those hard things easier. It's inconclusive. And the latest findings, whichwho knows how long the Lindy on in this is, is if you believe that you have unlimited willpower,you have unlimited willpower. If you believe that willpower is limited, you have limitedwillpower. So in some cases where the science is unclear, you choose a belief that's mosthelpful for you taking action. I love it. What are your thoughtson Bitcoin and crypto? Oh, this is where I get intospeculative territory, pun intended. You know, I think most people listening to this will knowmore than I. I will only say personally, I've had large positions in the past and I intend to have
01:08:05large positions in the future, and I have no position currently.No position. Oh, interesting. Why no position?We live in very interesting times. Things that are generally uncorrelated over long timescalescan become hyper-correlated on shorter timescales. I am of the perspective, again, limited,many of you know more than I, that crypto at the moment is performing as a risk-on asset,and we're in a risk off environment. I'm very bullish on Bitcoin's long term process orpotential prospects. Exactly. And I intend to be a large holder in the future. But at this moment,I am not. It's interesting that you think of it kind of the short term time frames and actually
01:08:56take the position on and off. I think a lot of people are either I believe or I don't believeIt's kind of a very binary type thing, and it's almost more religious than it is risk analysis, right?And so it's refreshing to hear somebody who basically says, no, actually, I can be a long-term believer and a short-term, maybe not a non-believer, but just a bear or a neutral party in the short term, even though it is in contradiction to my long-term belief.The biggest costs are always hidden.And so two I would mention here first is sunk cost, and the biggest sunk cost is identity.Like you said, if any belief becomes religious, to go against that belief is to give up your religion.And we have a lot of case studies on how hard that is.So someone is invested, and so they stay invested.
01:09:48So someone is uninvested, and so they stay uninvested because they have a sunk cost of identity.The other one is opportunity cost is I have a limited amount of capital to invest.And so anything that I am invested in, this could be time, money, energy, relationships, et cetera, are resources that are coming away from everything else.You and I having this conversation right now is coming at the expense of everything else that you could be doing.Everyone else could be doing different things instead of listening, but they're here with us, and that's amazing.But this opportunity cost is so pervasive because you have to think about I am not forced to be in any position at any given time.And being in this position comes at the expense of all the other positions that I could be in.And so in life, it's waking up in every day and not saying, am I holding?
01:10:36It's that I assume that I have sold everything before and does it make sense to buy back in, right?It's like I am never committed to any position.I continually buy back in, right?I reinvest in relationships.I want to keep showing up.The meme that Joe has pulled up here is when you buy the dip, but it keeps dipping, which I think is kind of your point, right?Exactly.You have to update with new information, and that could lead you in both sides today.
01:11:05So I think keeping in mind both of those, the sunk cost and the opportunity cost, it's important to be rational, to keep identity out of it.And if times are changing, change with them.And how much of this is an analysis of price versus price intersected with future prospect, right?Meaning that is it more of a macro decision for you, risk on, risk off?Or is it risk on, risk off is one perspective, but then you overlay that with, well, is Bitcoin at $10,000 or $2,000 right now?And kind of these other variables that go into it.Sure.For me, it's definitely an overlay.
01:11:44Obviously, current volatility plays into that where being able to have limit orders in is very beneficial.It's also thinking about, you know, what am I comfortable with and at what point am I making good decisions, right?Taking the personal into account.I think it's important to come in that I have a target.I have these principles that I'm going to use to make decisions and evaluating on an ongoing basis, like, are these conditions still correct?Yeah, I think it's a very rational and frankly, pretty even keeled way to think about it, which doesn't surprise me that I'm biased, but I think it's a good way about going on in life.What's the best book that you've ever read?Oh, man, I mean, it really book recommendations are tough because they're so personal and it really depends upon, you know, what the person is, you know, where they are in their life right now.
01:12:35What's the message that they need?Some of the best books that I've ever read aren't objectively the best, but they are the message that I needed to hear.I think people think about reading as a way to accumulate knowledge when really it's a way of priming thought.So, you know, what do you want to be thinking about right now?I mentioned the goal earlier.I think for anyone who is looking to improve their processes, which I believe should be anyone, that's a very good place to start.I read House of Morgan very earlier this year.I think Chernow is a fantastic writer, anything he's put out.
01:13:08And if you want to understand the history of the financial system, generally seeing where we've been, all of this has happened before in some sense, you can have a better understanding of what's happening in the present because we're a little bit too close to it in a sense.Having a little bit more time perspective can be useful for evaluating the present.um as far as best book that i have read all time um you know the book that i reread every yearprobably qualifies uh it's called it's a one of those old school self-help classic that's beenin and out of print for 50 years it's called the magic of thinking big the magic of thinking bigthe magic of thinking big and you know it kind of has some of that dale carnegie feel where it's alittle bit folksy, a little bit dated, but the message is so, so important. And for me, whereI'm trying to think about bets and particularly bet sizing, it's a very good frame for thinking
01:14:07about, I want to place fewer bets, but I want to place much larger bets. How can I think bigger?This has kind of been outblown in terms of the 10X mindset, but it comes into play a lot withbottlenecks. Rather than trying to do a bunch of things, I want to put a lot of effort intothing that's going to have the maximal outsized impact. Yeah, I love that. I'm a huge believer inthe mindset of going larger, thinking bigger, et cetera, and how people generally just avoid itbecause it's scary, right? The idea that by going larger, you can actually benefit, but you mighteven be able to keep the same downside risk is usually lost. What about aliens? Believer,non-believer agnostic um oh come on agnostic
01:14:54yeah yeah um one more i'll i'll add to the list that's very very topical and timely it's beenbeen quite a you know trippy experience we're talking about uh you know understanding thehistorical in order to have a better perspective on the present um the book is called the hot zoneby Richard Preston. And this is about the Ebola outbreak in the 80s. Interesting. Some interestingparallels there that you can see in terms of headlines and otherwise. And so reading thatin parallel today has been very, very interesting experience. Really recommend that one. If you'relooking for what do I pick up today while you're hopefully not sitting on a plane, maybe sittingon a beach. Back to aliens. So we're getting into books now. One of the biggest red pill moments for
01:15:45me last year was reading the Three-Body Problem trilogy. It's been coming up a lot in the hackercommunities and I ignored it, ignored it. It's like the writing is not amazing. It's like stickwith it, stick with it. And the ideas are so good and the perspective is so big. And it goes throughmany dimensions and billions of years and always out to the further reaches of the galaxy.But it's not a space opera. It's a metaphor for communism versus capitalism. And the layers goso, so deep. And part of it is the perspective that, you know, aliens are other forms of lifeforms that just took a slightly different branch on the evolutionary tree. And due to differentoutside constraints, turned out very differently, you know, that we breathe oxygen, that we have
01:16:36skin are made of meat, all these things that we completely take for granted are just a functionof the constraints of the primordial soup that we are formed in.And so for me, it's very clear that there are other beings who we might even construeas gods.You think about typical, you know, flat land, a fourth dimensional creature coming throughthe third dimensional is kind of analogous to if you had a sphere going through a pagewhere it just looks like a expanding and a decreasing circle where something like thatwould be so beyond our comprehension, we wouldn't even know how to explain it, that
01:17:10there are clearly many physical dimensions out there and that the universe is a very,very big place, you think Fermi type calculations, it's very possible and even probable thatthere is some form of life form out there that we construe as alien that exists.And I think as augmentation, genetic, and otherwise becomes a thing, that will becomea very interesting conversation in the coming decades as far as what is this definition ofhuman and we might have aliens amongst us who started human that might be one of the bestanswers i've heard good i should write it down it is uh it's a great way to look at question thedefinition of alien question the definition of us right and also um how those two things relate
01:18:01over time. I mean, that just opens up the whole rabbit hole of language and fuzzy definitionswhere we're trying to communicate right now and I'm using words and hopefully we're pointing tothe same thing. But that many times language is a limiter of thought. And by trying to put a labelon something, we put blinders on. What one question do you have for me to finish up?i would love to know what new information would come into place where you no longer believedthat bitcoin was the future uh there's a lot of things that could happen um so one of the thingsthe reason why i love the religious uh angle of the conversation is i think a lot of peopleperceive me to be religious about it um but i'm actually i think uh very non-religious about it
01:18:58things that could change uh are actually like pretty obvious like if there was a bug introducedfrom a technical standpoint that would drastically change the way i thought about itif the code did not execute what it was supposed to kind of related to a bug right in terms of likethe having just didn't happen or for some reason. That would make me question a lot of things.If there was external forces that acted on it in some way, so let's say, for example,there was a coordinated global effort by nation states to ban ownership or something, right? Ithink that would make me question it. If there was something that was created in which the marketstarted to determine was more valuable than it, at some point, I would change my mind, etc.
01:19:45So I don't think that it's so much the – like what is the one thing that would change because there's actually a whole bunch of things that could happen that could get me to change.To me, it's actually what is the probability of any of that happening and I don't think that there's the same probability of it all happening.Like it's actually kind of a descending probability to some degree.And what I normally describe is if you go to a spectrum of things, like the most technical things on the left and the most non-technical things on the right, I'm much more worried about the technical things than I am about the non-technical things.But the technical things aren't like the things you hear people on Twitter yelling and screaming about of like, oh, it's the block times or the speed or like all that kind of stuff.It's not performance related.it's all about the actual structure and the ability to prevent errors right so when somebodyasked me like what do i think is the number one most likely thing to occur that will ruin bitcoin
01:20:43it's what i call it the self-inflicted wound it's some kind of code gets committed that ends upactually having a bug in it and that code ends up ruining the whole thing and so thelike the the reason why i believe that is what is the thing that can act on bitcoin that is mostlikely to have an effect uh it's humans changing it in any form at all uh i'm much more worriedabout that than i am like you know what a central bank does or whatever else and so i think that'sin the grand scheme the thing is like a pretty small concern because the process is pretty welldetermined that you know we got 11 years of kind of seeing how it plays out and and they're prettyslow methodical intentional etc um but i don't think a lot of people worry about that stuff
01:21:32right when i talk to people they're usually worried about like all the other stuff likeoh what is going to happen if you know x or y or z happens this is being overlooked yeah and andtypical and to me it's like uh i one time gave the example to somebody the things i worry aboutbitcoin are the things that are closest to bitcoin right it's almost like um if you think of a a fortin medieval times right very very rarely was it some invading force just came and killed everybodyright it was usually things like uh we accidentally poisoned ourselves or uh there was somebodyinside who like you know uh was mad at the king so he killed the king right or um they allowedsomebody to get into the fort because their brother was from another town or human error
01:22:18yeah like all that kind of stuff and so i think the same thing here um hopefully we've got allthe fail self safes in place you know i obviously have very high uh conviction given the data wehave today but look it can change right and so uh i don't know we'll see what happens but umit's one of those things also where like at some point you're just like look this is what i believeright if it changes i'll let everyone know but like reminding everybody every day that this iswhat i believe people are just like if you stop telling them like we do not believe that anymoreyou're like no i'll let you know if i change my mind um but but not uh not yet that's reallyfascinating and it touches on this interesting idea of being able to change your mind and not
01:23:00getting entrenched in your current position that if circumstances change and knowing what thosecircumstances are that you're ready to change, classically called strong beliefs, weakly held,where there are some people who do change their mind, but because they have this identity that'sbeen built around this position, they become full hedgehog. How do you switch from a foxand not make those who are following you for this very specific opinion that validates alltheir own beliefs upset? It's a challenging thing in this world that's hyper-connectedmy social media, et cetera. And I think it'll be a continually interesting one. And those arechanges of beliefs that I am particularly sensitive to and weigh very highly as if
01:23:40someone has been pounding the table for a decade with a certain position and all of a sudden theyreverse, that's a really big signal to me. Yeah. It's, um, you see this in politics allthe time, right? Which is basically like, well, they don't actually hold positions.Well, here's, here's the two examples. So I'll go both sides of the aisle. Cause we haveexamples right now of each um mike bloomberg was a republican his entire life and ran as a democratuh donald trump was a democrat his entire life and ran as a republican and political partiesdon't actually exist exactly and so you almost get into this thing of like the quote-unquoteidentity almost is my identity only matters it because it's a self-serving identity more so than
01:24:21it is actually what i believe and i think that being able to separate when is identity liketruly identity like i actually believe this stuff i i'm identifying with it etcversus i want you to believe on this person because i identify this waycognitive dissonance is a hell of a drug right if it's changed my beliefs or changed my behaviorchanging my behavior all right where can uh where can people go get the workbook uh find you etcman this is so much fun i feel like we uh should do this again sometime so if if what i said todayresonated. You know, if I've gotten you so far, and perhaps I can get you to come along a littlebit deeper, I highly encourage you to check out the workbook. So my company is The Forcing
01:25:04Function, and that can be downloaded for free at theforcingfunction.com slash workbook. Some ofthe books and articles that I mentioned today, we'll throw some links into the show notes aswell. I think this concept of bottlenecks is really important because there's likely somethingthat's holding you back, that's invisible to you. And so in that realm, I've created a free quizthat you can take that's called the performance assessment. And so that's the forcing functiondot com slash assessment. And the goal of taking that quiz is to eliminate what is most holdingyou back. I can be hit up on all the major social media. Take your pick. My handle is always atsparks remarks go get the workbook very simple i've had the chance to look through it and uh
01:25:51when you hear workbook by the way uh some of you are gonna be like oh what is it like two threepages like a worksheet this is like a legit book with like all kinds of information uh quotesworkspace um a lot of different like i'll call them tasks almost um and things that you can gothrough there's like a daily planning uh template etc so it's it's a hundred pages and every wordin those pages has been carefully chosen uh to keep it as short as possible we're going to showpeople that there's literally uh all kinds of graphs and charts etc so go uh go and uh and getthis um but uh thank you so much for coming man this is awesome you uh you got a way of thinkingabout the world that i think more people could benefit from so i appreciate you coming in and
01:26:32sharing that. And hopefully people stay safe out there because the markets are not going to betheir friend for the next few days, I don't think. Absolute pleasure. Thank you for having me.Hey, everyone. Pop here. If you like this episode of Off The Chain and want to help us take cryptoto the top of the Apple, Spotify, and other podcast charts, please do us a favor and rate,review, and subscribe. To review, simply go to the Off The Chain homepage, scroll down until you seethe five blank stars. Taking 15 seconds to fill those stars in and leave a quick review goes along way in helping us take the entire crypto ecosystem to the top of the charts. I appreciateyou listening and see you next time on Off The Chain.
There aren't comments yet for this episode. Click any sentence in the transcript to leave one.