First, there is a wonderful place for a poker and psychology treatise akin to Harrington on Hold’ Em or Super System. Many poker coaches / books give strategies with a discussion of the underlying why. Poker players are more likely to hear about John Nash because of equilibrium in solvers but Kahneman et al are equally important.
I absolutely agree prospect theory is a great framework for your article but I think you could easily analyze play around a bubble in context of Mischel’s marshmallow study as well. That was Seidel’s comment to you in a nutshell —- do you want a min cash now or the larger (but not guaranteed) victory later.
I know there are questions about delaying gratification can be linked to how are brains work. I also wonder how much is associated with access to resources as children and in now. A min cash is much important when it is your full bankroll…
2. I question how much those of us who think in probability and ev are in someways are lying to ourselves. You correctly point out we should pick the higher EV spot. But statistics in life are rarely correct or repeatable. Life choices don’t come with statistics and equally no guarantee of repeating. Perhaps Kahneman is underestimating the what you might call present value in finance. Money today is by definition worth more than the same amount tomorrow.
3. I think another fundamental part of all of this is wagering, risk, gambling etc has a fundamental unfavorable connotation in certain parts of society. I think others would say all of like is risk, chance, and probability. But we often teach these concepts through “gambling” like poker leading people to improperly believe they should abstain. In short, probability needs a better PR team.
This is a great post. It perfectly shows how playing poker is good practice for making a lot of other decisions in life.
These have little to do with prospect theory, but there are some other factors in why the play you made was the right one. I wasn't there, but from your description it sounded like your opponent almost folded. The odds of hitting the flush on the river were not super great so limping in would have meant you were likely to lose the whole pot. Betting gave you an additional chance to win in potentially having your opponent fold.
Also, I think making plays like you did increased the odds of doing as well in the tournament as you did. Succumbing to lose aversion would have prevented you from getting near the bubble.
Thanks, Maria. As a non-poker player, so very interesting to get a description of your poker play, expressed in logical calculations. Added value in that you are not afraid to describe a loss. That adds a lot of credibility to what you say.
I find it helps to reframe choices like that in other, mathematically equivalent ways that have a Yes/No answer, to help my monkey brain work through the prospects. For example, the first offer can simply be reformulated to: I am being offered a bet on a 25% outcome with a payout of $1000 for a $240 stake - should I take it? Now it's clearly slightly +EV, but it equally clearly is the sort of bet you need a pretty large bankroll to take on regularly.
The second one is a $250 stake for a $1000 payout at 25% odds. Zero EV of course, with the same variance/busting out concerns as the first bet. So I'd always choose C, and I'd only choose B if I had a very large bankroll behind me.
Thank you for this great post.
Three polite thoughts for your consideration:
First, there is a wonderful place for a poker and psychology treatise akin to Harrington on Hold’ Em or Super System. Many poker coaches / books give strategies with a discussion of the underlying why. Poker players are more likely to hear about John Nash because of equilibrium in solvers but Kahneman et al are equally important.
I absolutely agree prospect theory is a great framework for your article but I think you could easily analyze play around a bubble in context of Mischel’s marshmallow study as well. That was Seidel’s comment to you in a nutshell —- do you want a min cash now or the larger (but not guaranteed) victory later.
I know there are questions about delaying gratification can be linked to how are brains work. I also wonder how much is associated with access to resources as children and in now. A min cash is much important when it is your full bankroll…
2. I question how much those of us who think in probability and ev are in someways are lying to ourselves. You correctly point out we should pick the higher EV spot. But statistics in life are rarely correct or repeatable. Life choices don’t come with statistics and equally no guarantee of repeating. Perhaps Kahneman is underestimating the what you might call present value in finance. Money today is by definition worth more than the same amount tomorrow.
3. I think another fundamental part of all of this is wagering, risk, gambling etc has a fundamental unfavorable connotation in certain parts of society. I think others would say all of like is risk, chance, and probability. But we often teach these concepts through “gambling” like poker leading people to improperly believe they should abstain. In short, probability needs a better PR team.
This is a great post. It perfectly shows how playing poker is good practice for making a lot of other decisions in life.
These have little to do with prospect theory, but there are some other factors in why the play you made was the right one. I wasn't there, but from your description it sounded like your opponent almost folded. The odds of hitting the flush on the river were not super great so limping in would have meant you were likely to lose the whole pot. Betting gave you an additional chance to win in potentially having your opponent fold.
Also, I think making plays like you did increased the odds of doing as well in the tournament as you did. Succumbing to lose aversion would have prevented you from getting near the bubble.
Choose violence, always ;)
Thanks, Maria. As a non-poker player, so very interesting to get a description of your poker play, expressed in logical calculations. Added value in that you are not afraid to describe a loss. That adds a lot of credibility to what you say.
I find it helps to reframe choices like that in other, mathematically equivalent ways that have a Yes/No answer, to help my monkey brain work through the prospects. For example, the first offer can simply be reformulated to: I am being offered a bet on a 25% outcome with a payout of $1000 for a $240 stake - should I take it? Now it's clearly slightly +EV, but it equally clearly is the sort of bet you need a pretty large bankroll to take on regularly.
The second one is a $250 stake for a $1000 payout at 25% odds. Zero EV of course, with the same variance/busting out concerns as the first bet. So I'd always choose C, and I'd only choose B if I had a very large bankroll behind me.
Kahneman was an intellectual giant and he is dearly missed. I've written multiple articles based on his work...but none about poker.
Part 1 of my unpublished academic journal article based on Kahneman's theory of noise and the undesirable variability in expert decision making.
https://k12ssdb.substack.com/p/impact-of-noise-on-assessing-school