The Derivative: Playing Like a Poker Pro in Life/Investments/Career

 

Jeff Malec and Chris Sparks talk about everything from game strategy to deciphering A.I. capabilities and catching bots. Chris dives in about his online alias “GoMuckYourself,” grabbing seats at poker tables in Vegas, exploring his latest article “Play to Win: Meta-Skills in High Stakes Poker,” and using behavioral science and systems-thinking to lead a new generation in the game and the investing world with Peak Performance Architecture.

Video and audio recordings below (1h33m). Resources mentioned, timestamped show notes, and full transcript following.

Chapters:

02:36-19:10 = Gambling for a Living

19:11-28:27 = Data is Power

28:28-50:37 = Playing to Win

50:38-59:00 = Sizing Bets & Catching Bots

59:01-01:13:34 = Peak Performance Architecture

01:13:35-01:20:20 = Playing the Investment World

01:20:21-01:32:34 = Favorites

Resources mentioned:

Podcast Transcript

[Note: transcript edited slightly for clarity.]

Intro: Thanks for listening to The Derivative. This podcast is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM Alternatives, their affiliates, or companies featured.

Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations, nor reference past or potential profits, and listeners are reminded that managed features commodity trading and other alternative investments are complex, and carry a risk of substantial losses. As such, they are not suitable for all investors.

Jeff: Welcome to The Derivative, by RCM Alternatives, where we dive into what makes alternative investments go, analyze the strategies of unique hedge fund managers, and chat with interesting guests from across the investment world.

Chris: I think everything is a system, and so thinking about poker as a complex system with emergent behavior in an uncertain dynamic world has certain implications. So I kind of straw man the game theory optimal player, which operates off of static models, when you really need to be thinking about how things evolve over time, as well as the second and third order effects of your decisions. So an example in poker that's pretty simplistic is I make a bluff and my opponent sees that I make a bluff. I show some garbage hand, like eight-five offsuit. And I'm having—me showing that bluff is going to cause my opponent to make an adjustment. And so before I make any move, I'm anticipating how my opponents are going to adjust, and I'm having a counter already in place to their adjustment, so that anything that I do can never be considered in a vacuum. It's part of a sequence of plays, each of which has second- and third-order effects.

Kenny Rogers: You gotta know when to hold 'em, know when to fold 'em, know when to walk away, and know when to run. You never count your money when you're sitting at the table. There'll be time—

Jeff: Hi, everyone. Playing poker profitably is the ultimate exercise of removing emotion, systematically analyzing probabilities and executing a strategy to maximize the expected outcome, which sounds a lot like investing. So I'm excited to have Chris Sparks with us today, who has played over two million hands of poker and has since taken those lessons learned and turned them into a successful strategy of teaching other people how to think like a poker player and apply it to their business, their portfolio, and their overall life. So, thanks for joining us, Chris.

Chris: Really excited to be here, Jeff. Thanks for the great intro.

Jeff: Awesome, yeah. So we were talking a bit before we got on, you're usually in New York, but you've been in Austin during COVID. What's that look like?

Chris: Yeah, I—I think that our location, our environment, is one of the biggest leverage points on our behavior, so as priorities have shifted through all this, as contexts have shifted, looking for an environment which is more supportive of what I'm looking to do these days—I realize the importance of family and community. So North Carolina, and now Austin, allow me to pretty straightforwardly prioritize those values, as well as just I found it more difficult being in the heart of the storm to make long-term decisions. Just, it was very easy to become reactive, tied to the news cycle, because everything felt actionable, particularly back in March and April. So having a little bit more separation from the things that are happening I think has been really beneficial for taking that long-term view.

Jeff: And so you got out right as the lockdowns were happening and everything, or before that?

Chris: I went upstate with my partner (Hudson, New York, if you guys know it) in March. We stayed up there till June, and then went down to North Carolina. My family is in Charlotte, my partner's family is in Raleigh, so that was a good opportunity to be closer to them. And then, yeah. Here in Austin where things are—you know, it's a completely different world. I think so much of our perception is shaped by who's around us, and here sometimes you wouldn't even know that there's a pandemic happening in terms of behavior, which I think is kind of beneficial, just for sanity. And so rather than being the person who is, "Oh, we need to take this more seriously," I'm surrounded by people who are like, "Oh, it's not really a big deal." And it's interesting just like how it causes us to shift sides just by who we're surrounded by.

So, just, yeah. Spending a lot more time outside, eighty degree days. We were on the lake the other day in February. It's wild. So, yeah. It's been nice.

Jeff: I dunno, it seems like you've built that whole narrative, but the real reason is just tax, right?

Chris: You know, I think that's a big driver for a lot of people coming from the coasts. SF has had a huge exodus here, lots of tech coming in. You know, I think, yeah. It's an interesting thought that we do construct this narrative in hindsight. Who knows what the ultimate drivers were?

Jeff: And then I've gotta ask you what those paintings are, because they look on my Zoom here they look like they're like blurred out, but they're—I think that's how they're supposed to look?

Chris: Yeah, I would love to take credit. My partner, Marianna, is an artist and has some amazing work. I am currently in an Airbnb, so on my left this—yeah. I don't have any personal attachment to them. This woman is from Patagonia, which I actually have visited a couple times. I like a lot of mountain metaphors in my work. So that one's a cool one to have by as like, "Hey, we're all taking different paths to the top of the mountain," that sort of thing. That other one—

Jeff: Have you seen those—

Chris:—Yeah, sorry.

Jeff: Have you seen that stock chart art person?

Chris: No.

Jeff: I'll put links and I'll send it to you, it's really cool, she has like—like Tesla was one, and kind of like a space scene, but the mountain range is the stock chart, and then they have all this, so she makes art out of the stocks, which is cool.

Chris: Oh, beautiful.

Jeff: And then Patagonia, I love it. My sister got married in Uruguay, it was like ten years ago, so we spent some Bariloche and the—what was it? The Llao Llao hotel? That big old hotel?

Chris: Oh, Llao Llao. Yeah, it's gorgeous.

Jeff: Yeah. Love that thing.

Chris: Yeah. I love that area because the culture is so opposite from New York. So, Argentina, Uruguay, very European-influenced. You have some French, you have some Italian, so it's very you know, mañana, ultra-slow down, you know, three-hour dinners, three-hour coffees at 10:00 PM, and for me it was just very refreshing to experience something that's so opposite from the norm.

Jeff: For sure. That's on my bucket list one day, to go down and actually in the summer, and ski in Patagonia. That'll be good. So also in your bio you've got the Ohio State University. So, big Buckeye fan?

Chris: That's right, I am. Yeah, my social calendar revolved around the Buckeyes for a decent amount of time.

Jeff: When were you there? For any of the national championships, or what?

Chris: Yeah, I—my timing was pretty good. We won, I believe, two championships while I was in school. So this was, let's see—

Jeff: Urban Meyer? Or before that?

Chris: Urban Meyer was there, yeah. So this was 2004–2008. We beat Michigan all four years, I do remember. Basketball teams were quite good as well. These were the Greg Oden years. So yeah, it was a good time to be a sports fan.

Jeff: Poor Greg Oden, right? What was he, number two draft pick and played like thirty games total or something? Maybe sixty?

Chris: Number one, yeah, before—he got picked before Durant, and you know, there's a—it's easy to say in hindsight, right, if you have a very large body it puts a lot of strain on joints, but man he was just so dominant in college, it was hard to predict that he wouldn't have that sort of impact of like an Anthony Davis that we're seeing. And it's just having that big man that can take up space down low, especially—you know, I don't follow NBA as much as I did, but everyone shifting to the kind of four guys on the perimeter, one guy down low, having that one guy down low be really dominant has a really big impact.

Jeff: And what do you think of Justin Fields? Is he gonna make it, NFL? Looks pretty good.

Chris: Hard to say. I mean, the game has changed. You know, running quarterbacks aren't really having the success that they once were. I think defenses have adjusted, and he seems like he does best when he's on the move. That'd be the question, is like, hey, can he adjust to being a pocket passer?

Jeff: Yeah. Tough. Too—not so much. So, let's get in. How did you first start playing poker, and when did it become a career versus just a hobby? What did that all look like?

Chris: It's funny telling the story, because just like any narrative it's short and sweet, it feels clear. Where I usually start is I do have a bit of a gaming background, so most notably I played a lot of gin rummy growing up. That's the one-on-one form of rummy, where all the cards are held in your hand.

Jeff: Like Goldfinger?

Chris: Yeah. Yeah. So from a very early age, games of incomplete information, where I am trying based on an opponent’s actions to figure out what cards they need, or in a sense what are they trying to get me to do and doing the opposite. That was kind of drilled into me from a young age. I started playing poker completely unseriously around the age of fourteen, playing just free-roll tournaments where you didn't put any money up, but you had the opportunity, if you outlast tens of thousands of people for twelve hours, maybe you can win a thousand dollar prize. This was sort of a promotion to get new money onto the site.

It started to pick up for me when I entered university at Ohio State, as we mentioned, where Chris Moneymaker had just won the World Series in 2003, so poker was on ESPN twenty-four hours a day, and just if you were doing anything socially, especially with guys, it was playing poker. So playing some of the underground campus dorm games there. Some of my friends started playing online in the early online poker days. This was like Party Poker, which led into PokerStars and FullTilt. So I started playing tournaments in my spare time, having some success my junior year. I had a couple five-figure scores. Decided that, you know, I've mastered tournament poker and now it's time to move over to cash games, and hopped into cash games where I accelerated my learning curve by playing twenty-four games simultaneously. Paid some tuition for a couple of months while I figured out the ropes—

Jeff: Do you have like a trader screen setup? Bunch of monitors?

Chris: Yep. Multiple thirty-inch monitors, one monitor for games, another monitor for analytics. You know, it started to get to the point in my senior year where I was paying off my tuition. In addition to my campus job; I was selling advertising for the school paper. And all the time I thought that I was going to go into the corporate world. I had this job lined up with Ford in brand advertising, working with Team Detroit on their television commercials, which was my dream from a young age. Probably since from the age of thirteen, that's what I wanted to do, is make Super Bowl commercials. And you know, 2008 for everyone—Probably more people listening to this have had some deep visceral feelings when I say that year, but—

Jeff: Mine's joy, but yeah.

Chris: Joy? Yeah. It was an unfortuitous time to come out of college—

Jeff: Yeah.

Chris: And Ford put on a hiring freeze, so I was sort of in this purgatory where I was waiting for this hiring freeze to end, sitting in Detroit in the winter, didn't know anyone, didn't have anything to do, so what was kind of a part-time hobby in college became a full-time, you know, eighty-hour a week—

Jeff: And wait, you're from Detroit, originally?

Chris: I'm sorry?

Jeff: You're from Detroit, originally?

Chris: No, I grew up in Cleveland.

Jeff: Oh, all right. So—

Chris: Yeah, I lived in Ohio 'til that point. Ford's based in Dearborn, so near Detroit. So I assumed that I was going to be starting work any moment, and this was just like the dream time where I could do whatever I want before I have to enter into the real world. And after a few months of, you know, eighty-hour a week, I got to the point that I was making what my annual salary would have been on a monthly basis. So it's like, "Hey, maybe that whole corporate world isn't for me."

I started consulting with other players, and I built an investing arm, where I would put up the capital for up-and-coming players, so they could play in larger games and we could share the upside. And really through this process of teaching, watching others, picking up the best of what others are doing. About eighteen months later I moved out to LA, got a kind of coworking house with four other players where we just talked about poker all day, really sharpened each other's game. After eighteen months of that, I was ranked in the top twenty in the world.

So you know, I start at fourteen, at this point I'm twenty-three, so it's like nine years of playing, some full-time, some not-so-full-time. But it was really that three years where it was a, you know, full-time thing, both teaching, investing, and playing that things really took off for me.

Jeff: And were you—did it start to feel like a job where you were like, "Oh, this is a bore"? Was it always exciting?

Chris: That's a good question. I think it's funny. So right now I'm a part-time poker player. I play fifteen to twenty hours a week, and the players that I play against are a whole generation younger than me. So they're like I was, twenty-one to twenty-three, when most poker players tend to peak, and they complain. They're like, "Oh, poker's such a grind. It's so hard." It's like, "Well, just start a business and all of a sudden you'll be really motivated to play."

Jeff: Hah. Yeah, exactly.

Chris: Where, I just didn't know how good I had it, because it's just ultimate freedom, ultimate control. The feedback loops are so tight. I think that's a major difference from a lot of forms of training, is you're just immediately testing your assumptions. And it's almost like a video game, particularly playing multiple games online. And it took doing other things in the real world to realize, "Wow, this—I had it pretty good."

Jeff: And so you're top twenty in the world. At that time, who were some of the other names in that list above you and around you?

Chris: So, you wouldn't know any of them.

Jeff: Okay.

Chris: This is—so I have to be specific in these rankings. This was top twenty cash game players online all-time.

Jeff: Okay.

Chris: So the other nineteen are screen names which would sound very silly if I read some of those out. Most of the players who people know, they know because TV has put them forth as a professional.

Jeff: Yeah.

Chris: Which generally means that they happen to be playing and have a character and a personality that people could rally around, hero or villain, around this like 2003-2006 time period where poker was everywhere. And so a lot of these guys actually made more from endorsements than they ever did playing poker, or they were independently wealthy and just liked the fame. The most profitable players in poker in the world are players that no one's ever heard of, in general. So it's either they play online, they're a little more secretive about their identity, or they play in private games where these games just aren't shared, whether it's in Macao or whether it's in a penthouse in New York or you know, a mansion in the Hollywood Hills, something like that.

Now, I differentiate here between tournament players and cash game players. There's tournaments—obviously these are televised, all of these results are public, and so you'll see people who have like twenty, thirty million dollars in winnings—

Jeff: Tournament, yeah.

Chris:—and earnings, right, but you don't know how much they've invested in buy-ins. And some of these guys have done extremely well, but it is not uncommon to see someone playing in a ten thousand dollar tournament with less than ten thousand dollars in their name. Generally, people who are playing these large tournaments have backers, outside investors who are putting up the capital, and so these guys just have a portion of the upside. Same thing when you see high-stakes televised cash games where people buy in for a hundred thousand. Usually, it's not their money, that someone has put up the money on their behalf. So potentially the biggest poker winners are those who are backing the right horses.

Jeff: And you've been—so that was—what was your screen name?

Chris: I'm a little bit embarrassed to admit it now. You have to keep in mind I was sixteen when I made this screen name. It was GoMukYaSelf. So the—

Jeff: Go Muck Yourself. I love it.

Chris: Yeah. So "muck," for those of you guys who are less familiar with poker, is you fold your cards—sorry. Yeah. You fold your cards without showing, or the other person folds without showing. So that's the whole idea, is like I'm making the other person fold and you know, I'm sticking it to them in a way. So this kind of brings up for me, there's a whole—when you don't have that much that you can give an image, a screen name says a lot. And so having a screen name that kind of gets under someone's skin—

Jeff: A little bit of aggression.

Chris: A little bit of aggression, it's a little bit aggressive, gives the impression of, "Hey, this is a crazy guy who takes things personally." All it's meant to do is just to get people to call me a little bit more, or just to stay out of my way. It's all this image creation.

Jeff: You mentioned analytics. How does that all work? So is that third-party software that you tack on? Is it available through the sites? What does that look like?

Chris: Yeah, both. So this was—My heyday, when I was really a pioneer in the poker world, was as I mentioned 2009-2011. And so at this point, you could download all of your hands from the sites, and there are third-party database tools, based on PostgresSQL, if you guys know that statistical program, where you could kind of slice and dice this type of stuff, either to see population-level data, what are people doing in these situations on average, or going really deep into one player, saying, "Hey, in a million hands this very specific long-tail scenario has only occurred twenty times, but they fold twenty times."

Jeff: So it's not just your hands, you can get anyone's hands? And each individual user by screen name?

Chris: So, we have access to our hands, but there were third-party data providers (back in the day, these got shut down since) where you could purchase all those hands. So that was the biggest line item on my taxes every year was purchasing hands, because I wanted to have every single hand ever played, because you know, data is power in this way. Because I'm really looking for these very long-tail scenarios, because these are—I talk about these in "Play To Win," which I'm sure we'll talk about, this concept of centrality is that everyone is studying the scenarios that are most common. So an example in poker is small blind versus big blind. This is a scenario that just happens so often that people know it extremely well, but there's these situations that happen very, very rarely that people don't know what the right move is, and thus they have very clear proclivities. But what I can do is I can steer the gameplay toward these long-tail scenarios that I've studied more and thus gain a relative advantage.

Jeff: Like, give—what's an example of one of those long-tail scenarios? Give an—

Chris: Could be something—could be something like 'Chuck' Ray bluffing on the river, it could be board-texture specific, like you know, four flush boards. So say four spades on board, or four straight boards like five/six/seven/nine, where any eight makes a straight. Scenarios that don't occur that often, but again they're much larger edges when those situations do occur because they're less studied.

Jeff: And so the people who don't study 'em are likely just going to fold. Like, "I don't have a strong opinion on this, I don't know this hand, I'm just gonna get out of the way." No?

Chris: It's a bit more nuanced than that. This is where knowledge, you know, playing the man comes into play.

Jeff: Yeah.

Chris: You have certain types of players who, when they aren't sure, will take the safer option. It's like, "I'm not sure what's going on, I'm just gonna not get involved, I don't wanna make a mistake." And then you have other players who will do the opposite, where normally they're just auto-piloting and all of a sudden they're in an unfamiliar situation and they're forced to think. And maybe someone who really likes being comfortable, likes being in these spots that are well-studied, isn't so good when they're forced to think on their feet.

Jeff: How do you—you said, "Play the man." Or woman. But if it's online, how do you play the man or woman, right? You can't read their face.

Chris: This is one of my favorite questions, and this is probably the question that people are like, "I have no idea what you're talking about." So how do I take a game that takes places completely inside of my head that is pre-language, right? I don't have language for the things that are occurring, how do I translate that into something that someone who hasn't experienced it can understand? The way that I usually describe it is I'll use a—because a lot of the people listening to this are investors, I'll use an investing metaphor. There's always a counter-party on the other side of the trade. So sometimes you know who that counter-party is, if you're dealing with them directly or you know there's a large buyer out there, but generally you don't know. And just because you can't see them doesn't mean there isn't another person on the other side.

And so when you're playing online, I am playing against other players. They have feelings, they breathe, they have moods, they have good days, they have bad days. And we have this lossy translation interface of a screen where even if I can't see/hear/touch/smell them, there's still another person on the other side, and there are still signals being transmitted. So, the speed with which they bet, the numbers that they type in, anything that they type in chat. These are all indicators (lossy, right? There's a lot of noise there) of what they're feeling in this moment. Not to mention we are all pattern-driven creatures, and so if I can discern someone has a behavioral pattern, right, I think all of us are deterministic. If you can determine the context you can determine the behavior. So if I can recreate this situation, I generally know I can recreate that behavior. So I'm looking for these patterns: either the way that they bet or the way that they value hands or undervalue hands, these are all things that I can exploit once I get a baseline for them, because I become very sensitive to deviations from that baseline.

So it's almost very intuitive. Intuitive in a sense, when I say 'intuition,' that it's just internalized experience. When I've seen millions of hands, I just have this fingertip feel that (even if I can't put it into words) I know this person is weak or I know this person is strong or I know this person is tilting or I know this person is pulling back and doesn't want to make a mistake. And—

Jeff: Even if they just showed up at the table? Right? That's the other thing. Like, a lot of that to me assumes, like, "I've been watching this—" You know, my user name would be some Star Wars thing. Like, AckbarJunior or something. So, be like, "I know Ackbar is weak 'cause I've been watching him at this table for three hours." Right? But what if I just show up at the table or—right? How do you still have that intuition even if you have relatively little knowledge of that specific user or screen name?

Chris: So, you touched on two things. First, I think, is session-level persona. So generally I'm playing with the same people every day. Especially with professional players, you're talking like fifty people in the world who I'm playing with every single day, and so most people I'm playing with I have a very, very good feel for. I've played hundreds of thousands of hands with them.

Jeff: So that is very investing world-ish, right? Of like, "I'm going into this market and it's the same fifty players at the—Citadel, Sesquehanna, et cetera."

Chris: Exactly. It's the same people who are showing up every single day. So there's a lot of meta-game there. A lot of losing battles in order to set up to win future wars, as I like to say, where losing plays look like winning plays.

There's also—generally my profits come from recreational players. And so you know, even if I don't see these recreational players every day, I'm taking notes on them, I'm observing them, I have a general idea of how they play, I'm sensitive—

Jeff: You know they're not one of the fifty, also.

Chris: I know they're not one of the fifty. If someone shows up that I don't know, I assume that I have an edge on them. Now, to your exact question, someone who shows up who I've never seen before who is just, you know, unknown player X, no information, what I'm trying to do is to collapse on an archetype of this player. So if you think about this as a 2x2, the basic dimensions of this archetype are, "Is this player tight or loose?" So, do they like to play lots of hands or do they like to play very few hands? And then the other dimension on this 2x2 is passive or aggressive. So, passive, do they tend to call, or aggressive, do they tend to bet and raise? And the way that I play against someone who collapses into this tight/passive box is very different than someone who collapses into this loose/aggressive box.

And then again, just collapsing on this archetype, I can generally have an idea of how they're going to play in these situations based on this archetype, but I also like the framework of Bayesian updating. Every hand that I see this player confirms or disconfirms one of my assumptions about them. And so the less I know about them, the more that I over-weight every single hand that I see them play, to the certain point that everything they do won't change my overall perception of them, except for how they're feeling in this moment.

Jeff: And then the trick is they're on the other side trying to fool you into putting them into an archetype, right, of, "I'm trying to make you think I'm passive until you think that, and then I go aggressive." Which is the—that's the trick.

So, you mentioned the "Play To Win" paper. Let's get into that. When did you write that, or when did you put that out?

Chris: I put it out a couple weeks ago. I've been writing on and off for a while.

Jeff: Okay, yeah. So, recent. At some point I was like, "Oh, did I just read it recently and you've had it out there a while?" But it was recent. So we'll put it in the show notes. Great paper. "Play To Win: Meta-Skills In High Stakes Poker." So give me kind of the elevator pitch, and then we can dig into a few of the specifics thing.

Chris: This is good practice. If I had a good elevator pitch it probably wouldn't have taken me six months and eight thousand words to encapsulate it.

Jeff: Yeah.

Chris: I would start by saying—so, obviously it's in the title. Playing to win. And the implication is that I don't think most people are playing to win. They're either playing to satisfy some other value or they're mistaking something they're doing as winning when it's not. So there's a subtle distinction that I make between someone who is skilled, at least defined by others, and someone who has the best results. And I think the primary determinant of that is what I refer to as "meta-skills." So, things that unlock adjacent conventional skills. And the over-arcing formula that I give for this is that "winning = opportunities x strategy x execution," and the idea being that winning is emergent, and it's also multi-dimensional, right? You have these three dimensions that are somewhat independent, and it's multiplicative. That if you're low on one of these dimensions it drags everything else down. This bottleneck framework, that you're only as good as your weakest attribute of these three. But also that, hey, if you improve one of these dimensions, your results will multiply.

So these three dimensions. Opportunities, right? Think of this as maximizing your surface area. You can't win the game if you don't get into the game is something that I've really learned about investing, and it's very true about poker: getting the opportunities to invest is a huge part of success. You can be the best player, but if you aren't playing, you aren't going to win. Strategy. I think of this as dynamics. So, a sensitivity to conditions as they change, and having a strategy that works across regimes, across situations, that is dynamic. That is able to reorient to these changing conditions. And then finally execution. The analogy I always give here is like, "The best diet is the diet that you can stick to." Right? The best strategy is no good if you can't stick to it when you need to.

So I think this is something that RCM does very well, as far as, "Hey, manage futures is something that, if you have in your portfolio, it will allow you to stick to the best strategy." That even though all of our analyses are based off of cold mathematics and logic, we are not mathematical, logical creatures, and we need a system that we can stick to.

Jeff: Oh. All right. Well, that was a long elevator, but I'll take it. The—

Chris: I'm assuming that we're going to the top floor.

Jeff: Yeah. And when you mentioned opportunities, it just popped into my brain. Like, half of Warren Buffett's success probably over the last twenty years has just been having the opportunities, right? Like in the way he got to buy the Goldman warrants and yielding five percent, right? He has that cash pile, he sits, he waits for the phone to ring. So is that sort of how you think of it, or dig more into the opportunities that you're talking about?

Chris: Absolutely. What you're referring to is deal flow. That if you can establish a reputation, if you can put yourself in the right networks, if you can be referrable, right? I think a lot of life is like google search results, in that if you're not the first person that someone thinks about, it's like, "Oh you need to talk to Chris about this," you're generally not going to hear about it. So you know, Warren's the first call, and so he gets the first crack at the bat. And you know, the opportunities section, I'm talking using this poker lens, how you can put yourself in this flow, or you can get through the backdoor where you don't have to be waiting in line using the same deals as everyone else, you're seeing things before they come out publicly.

Jeff: But in terms of your poker games, how does that look? So basically just getting invited to the right games?

Chris: So it varies greatly if you're talking about the live versus the online arena. So, I'll share both. When I lived in Vegas, it was knowing all of the floor managers in the poker rooms who could text you if a game was going. It was also all of the players who recreationally like to play for very large stakes, being friends with them and being someone they like to play with so they would save you a seat. I built an app that scraped the dashboard that the casinos used to share what games are running, and so I'd find out if a new high-stakes game was running, and I plotted my course so that I could get there in ten minutes from my bed. So that, "Hey, these seats fill very quickly, and I need to be the first one there." So you know, speed walking there. And that same—

Jeff: And that was like, 2:00 AM or something?

Chris: Yeah, there's an aspect to the higher you're playing the more you're on call, because these games completely run around a very small group of people, and essentially you play when they want to play. And you know, hey, they might go on for twelve, sixteen hours, and if you aren't there for minute one, you're not going to get a seat. So, it's useful to be on call should you want to get in there. Your hourly rates are very dynamic in that way.

In the online arena, the same concept applies, in that speed kills, as I like to say. It's like, the fastest person generally gets the seat. It's like a game of musical chairs. And the site that I currently play on—most sites have waiting lists, so you can wait in line. This site is a little bit different in that there are no waiting lists, and so you're waiting for someone to get up, and the first person who clicks on the seat gets the seat. And so it's anticipating when someone is going to leave and then furiously clicking on the seat trying to maximize your opportunity of getting it when it opens up.

And as I said, that becomes—because game selection is the most important thing, like if you are a decent player, when you play in amazing poker games you're gonna do great, and if you're an amazing poker player and you play in really tough games you're not going to have great results. That finding ways to be faster—and the way you're faster is, I use the analogy of a surfer, in that if you want to surf a really big wave, you're paddling for a long time and you're ready before the wave comes. It's anticipating when these opportunities are going to come up so that when these conditions emerge you can be the first one to strike.

Jeff: Although, if you're surfing a really, really big wave, you get towed in by a jet ski. But we'll argue that another day.

And so next, strategy. So talk through strategy. We could spend seventy days in a row, right? But high-level strategy.

Chris: High-level is—I approach strategy, and everything in my life (as I think you'll see) from a systems level. I think everything is a system, and so thinking about poker as a complex system with emergent behavior in an uncertain dynamic world has certain implications. Right? So I use this straw man of the game theory optimal player, which operates off of static models, when you really need to be thinking about how things evolve over time, as well as the second- and third-order effects of your decisions.

So an example in poker that's pretty simplistic is I make a bluff, and my opponent sees that I make a bluff. I show some garbage hand, like eight-five off-suit, and I'm having—me showing that bluff is going to cause my opponent to make an adjustment. And so before I make any move, I'm anticipating how my opponents are going to adjust, and I'm having a counter already in place to their adjustment, so that anything that I do can never be considered in a vacuum. It's part of a sequence of plays, each of which has second- and third-order effects. And because I'm playing with the same players every day for years, there's a lot of things that don't make sense on the surface, but make a ton of sense when you're zooming out to, "This is an iterated game over years."

Jeff: And what you said, like, you're willing to lose a skirmish or two to win the overall battle?

Chris: Absolutely. So you need to be giving action in order to get action. If you're never bluffing, people are never going to make big calls against you. But generally, people aren't very good at estimating probabilities. And so you can do things to create an impression of randomness and aggression that aren't actually in line with how you're actually playing. Right? It's the difference between strategy and tactics, that everyone can emulate your tactics, but they don't understand the strategy that's driving those moves.

Jeff: And how do you think—I keep coming back to these fifty, who've gotta be as smart as you—or you are better than them—Like, to me it's like they know what you're trying to do, right? So it's like the game within the game, is you're bluffing, they know you're trying to bluff, so they're gonna either dial it up or down based on what they think you're gonna do, so it's a constant back and forth of like, which I think is in your paper, of like a feint within a feint within a feint. Just, how do you conceptualize that? How do you think of, "Am I doing this for real?" Right? It seems to me maybe it's not as complex as I'm thinking of. Like, no, there's real information, and when you give that bluff they're gonna take some piece of that information. They're not just gonna totally discount it, knowing that you know that they know.

Chris: It's so complicated and nuanced. On average, I am making what I think is the best play for this hand. Like, every street, every hand is an opportunity to make the right decision, so if I think I have the best hand, I'm going to bet. If I think I don't have the best hand, I'm going to fold. If I think that other person is going to fold, I'm going to bluff. On average. Where I think the opportunity is is reorienting to these changing conditions, to these adjustments that opponents are making.

So I love this concept of a half-bluff. Let's say that I make a huge bluff on the river, and I have the nuts, and my opponent doesn't see my hand. And so I know, "Hey, I have the nuts, I was just betting as I was supposed to." But in their mind I could have been bluffing.

Jeff: Might've been bluffing.

Chris: And so because I bet and don't show, it's like in their mind it counts as a half-bluff. And so, say I win a few of these hands in a row, and I have it every time but I don't show, in their mind they're starting to get suspicious of me. And so even though I've been playing very snug in this small sample, I need to pull back, anticipating they're going to look me up when I try to bluff. So it's not only what is happening, but it's your opponent's perception of what's happening and being one step ahead.

My favorite mental model for this is John Boyd's OODA loop. I think it's the best framework for decision making in a rapidly changing, uncertain environment. So, you know, highly recommend those of you guys who aren't familiar with it to check it out. His conclusion—So, John Boyd was looking particularly at fighter pilots. So how does one fighter pilot that looks pretty evenly matched win an outsized percentage of the time, and they find that either the pilot is better to adapting or they have hardware, you know, the plane that they're flying, that allows for faster, more nuanced adjustments, and that if you can reorient to these changing conditions, that you are adjusting faster and more accurately, what happens is your opponent (whether you're talking warfare in the air or just mental combat in poker or investing) that your counterparty is operating off of an outdated model of reality, because they're adjust to where you were before, not where you are now.

So that's my kind of abstract answer to your question, is everyone is adjusting and anticipating, but can I adjust and anticipate faster, more accurately?

Jeff: Which is like the—which I love, that you're so confident, like—these fifty best players in the world—would you call them the best players in the world? Or, whatever. Fifty of the best players, anyway. Right? And they're all thinking the exact same thing, that they're smarter than you. That's why they show up. Right? And that they can adapt faster, and you're saying, "Well, let's see. Put your money on the table, let's see who can adapt faster."

Chris: You know, I think that's a good transition to execution, because I think on any given day anyone can win. And I think the key when things are pretty evenly matched—these are players who are making very few mistakes, particularly strategically. There are days when I'm not going to win because I'm not playing as my best self. And so I think there's a meta-skill here around execution, is this awareness of what is my current level of psychological capital? Does my mental game have an edge over these players? How is my decision making compared to my baseline? And so being comfortable with, "I am not making great decisions in this moment for a number of reasons, it's better for me not to play." Or, "I am really dialed in in this moment, everything I touch turns to gold, how can I ramp up the risk? How can I put more money into play, how can I increase my position sizing?" Because as I develop this sensitivity to what my edge is in this moment, I want to be able to dial that up or dial that back as I'm able to.

Jeff: And how do you think about a zero-sum game, obviously? If not negative-sum? Is there a rake?

Chris: Yep, exactly.

Jeff: So, but let's just call it a zero-sum game. So long-term you might have zero expectancy, right? If all of those players adapt correctly over ten years, fifteen years, whatever. Or do you need some of them to be net losers, and new blood to come in?

Chris: It's an ecosystem that depends upon new money, and their entering it, because of the rake being taken out of it. So, generally the business model of a poker site is very focused on attracting recreational players. The site that I play on spends their entire marketing budget on Facebook ads, just trying to get new blood into the system, because otherwise, it's just a bunch of piranhas.

Jeff: Right. But do you think the piranhas are all just—so are the piranhas eating all that new blood, and they're basically just even with each other? That's the other thing which I bring up with some investing companies that do like exotic, you know, over-the-counter options with these banks and whatnot. Like, over ten years if you keep taking advantage of them, probability is, you had better insight into what was gonna happen, they're just gonna stop trading with you. So it's kind of like a—the same thing here. Like, if you just keep killing them over and over, they're either gonna run out of money or they're gonna leave that game, right?

Chris: I think it's a little bit more complicated than that. I said—I think making it clear, hey. The edges here are very small. On a particular day I only win fifty-two to fifty-five percent of the time, and so someone who's not a superior player can have superior results for a long time. I think the world is super noisy. There's so much luck, as Nassim Taleb likes to tell us. And you know, people are generally inclined to fool themselves that their good results are due to their own skill and their bad results are due to bad luck.

That being said, on average, I am not making money from the other professional players. But I can. There's a lot of match-ups where certain players styles match up well against others. And I think, again, I like to describe this as, "I only play when I have an edge." And thus every time I'm playing, I'm winning. Where other players play when they don't have an edge, and so thus they dissipate their edge. And actually, some of the largest losses come from professional players, because they aren't sensitive to how they're playing on that particular day. They're like, "Hey, I have years of good results." And one day they show up and they just keep losing, and they're trapped in this narrative of, "I'm a winning player, I don't make bad decisions." And so these are the players who can wipe out their accounts, completely blow up, because they don't have good stops in place, or they don't realize that all the assumptions that they once made were no longer true.

So as an investor, I think this ties into my personality there, is I see lots of my friends have really outsized results. I don't think I'll ever have outlier outcomes, but I have basically zero chance of blowing up. I just have small edges repeated many, many times.

Jeff: That's what I was gonna ask, if you kinda look at it from a like long-vol and short-vol trade, right, there might be some plays or kind of selling options, right, of risking a lot in order to make a little bit, and eventually they get called and they lose their huge pot. Or vice versa. I'm just trying to sneak into as many pots as possible, and I'm gonna get some big outlier payouts.

Chris: Yeah, that's a very good analogy.

Jeff: So you're saying you're more on the long-vol option buying side of that? And it's, again, not that simplistic, but. Or not. Maybe you're an options seller. Let's hear it.

Chris: So I have to—I'll stick to my lane as far as using poker, and I hope that the analogy comes across. So I don't know what's gonna happen when I show up on a particular day. I set it up so that I'm never going to lose very much. Either I have a stop in place, I'm only playing in games where my edge is very clear, you know, I know where it's coming from, I know who I'm going after. But my returns are very, very lumpy. So about I would say eighty percent of my returns in a given year come from like twenty days of playing. And so it's very power law. It's like realizing, "All right, conditions are very ripe today. I'm gonna cancel all my appointments, like grab another coffee, strap into my chair" sort of thing. That because most of the time, hey, I'm ready to leave if it's not all that good—I think a lot of investing in poker success is discipline. That, hey, we see us as hey, poker players play, investors invest, we're always looking for these excuses to get involved. I'm looking for excuses not to get involved, because there's always another game.

But when I realized that, hey, you know, all the stars are aligned today, that's when I am like putting everything I can—I'm playing as high stakes as I can, playing as many tables I can, playing as many hours as I can, because that hourly rate is so dynamic. These times where everything is aligned, I might be making ten times more per hour as I am during normal times. And so every hour is multiplied by ten. So I said, I think it's a little bit of both in that I'm really limited in my downside, but I have this positive convexity where when things are really good, I really take advantage of those positions.

Jeff: And how do you think about that as a—you're not officially a statistician or a quant, but kind of—right, a quant would say there's no such thing as hot streaks. Right? It's just a statistical distribution showing up in certain spots, and—

Chris: That has been debunked, actually.

Jeff: Okay.

Chris: Just like so many things coming out of psychology these days, and hey, I'm a psychology major, so I would know. The hot hand not existing has been debunked. Hot hand is a thing. Anyone who's played sports knows that it's a thing. Because sports, investing, poker, these are all mental games happening by people. So, hey. Even if statistically it all averages out, the person shooting the shots is changing, and so if you're confident, you're operating from this unconscious confidence in a like inner game of tennis sense, you're watching the seams instead of thinking about your footwork. Or, I know you play a little bit of golf, instead of thinking about whether your hips are in the right position you're just thinking about hitting the shot, just swinging.

Jeff: Yeah.

Chris: Exactly. If you are feeling it, if you are really dialed in, if you are operating out of this sense of flow, if you are performing at a high level, you just can't help but have better results. And so it's both getting yourself into a position where you can perform well, but also when you recognize that you're performing well, can I play more? Can I maximize this rare time where everything is dialed in?

Jeff: Yeah, and I would agree—Most of us have shot a basketball. If you're nervous, or even golfing, if you're hitting a putt and there's money on the line, you're nervous and you're gonna pull it or you might do something. And you can see for sure a basketball player, when they're loose they're just, their arm flies. If they're nervous it's gonna tighten up. And the statisticians kind of cheat of like, "Well, if you took all those shots and did a Monte Carlo you would come up with this period where they hit twenty-six in a row." Right? "It's just statistics."

Chris: As you can see from "Play To Win," I don't have a very strong opinion of most models, whether they are economic or statistical. I think that all of these static snapshots fail to capture most of the nuance.

Jeff: So when you're on this heater—can we call it a heater? What do you like to call it?

Chris: Absolutely.

Jeff: How do you do money management there? Do you have an actual—so does that come back to your execution and your discipline? So you're not just like, "This is great, I'm ramping up." Are you like, Kelly betting, or, right? What kind of metric are you using to size your bets and keep your bankroll alive?

Chris: I don't think there's an equation that captures this better than Kelly criterion. Essentially, the larger my edge in the moment, the more that I'm trying to risk. Larger percentage of my bank roll. So the levers on position sizing in poker are I can, you know, it's win rate times number of tables times average pot. And so, hey. Win rate, if I'm determining, "Hey, I'm on a heater, my average win rate is higher," either, hey, the games are better, there's more fish in the water (so to say) or I'm really dialed in and making good decisions, whatever it is, my win rate is high, I can either try to move up in stakes (so play bigger games) or I can add more tables. So where normally I wouldn't go after other professionals, maybe if I see a spot I'll play against professionals if I feel like I have an edge there. It's just looking for ways to multiply that edge that already exists by putting more money to work.

Jeff: So you're not literally like doing the math, and, "Okay, I'm going to move my average raise up 1.2."

Chris: Yeah.

Jeff: It's all intuitive, and just, "Hey, I know my edge has gone up, I'm going to increase my overall exposure," essentially.

Chris: Yeah. I mean, while the Rain Man type stuff makes for great TV or movies, that's not really what happens inside anyone's head. It's very intuitive.

Jeff: Right. But in theory, you could have some software that's calculating it for you and spitting out the optimal bet size. In theory.

Chris: Theoretically. I don't know anyone who does that.

Jeff: Which brings me to the next point. Is it possible ever that some of these are AI? That there's computers on the other side?

Chris: It's definitely a concern. The best players are now not beating an AI.

Jeff: Yeah.

Chris: So this is just an arms race that has been happening within poker. And the Carnegie Mellon papers are really good, if anyone wants to dive deeper into the subject, but yeah. Essentially as we've seen in every field where there is an abundance of data, that you know, machine learning just becomes better and better and better. And you know, people thought that poker wasn't going to be solved because unlike chess or Go, it's a game of incomplete information, but here we are, where it's moved from first limit poker and then heads up poker and now you have No Limit six-max poker. And the more players who are in the hand, the more branches on a decision tree, the harder the AI has converging on the optimal decision. And there's still edge cases where occasionally, we'll, you know, players gathering together will be like, "Hey, I think this player's a bot," and we'll determine some bug in it, so we can get, hey. If we bet a certain size we can get the bot to go all in, and we exploit this bot for a little while.

Jeff: Nice.

Chris: And so it's both an arms race with—

Jeff: John Connor fights back.

Chris: Exactly. It's an arms race with the sites on detection measures and anti-detection measures, it's an arms race with the players against the AI. It's like, hey, can we band together on these players, help all, you know, catch and report them together. It does seem like—

Jeff: Is it illegal? Is it against the site rules?

Chris: Oh, of course. Of course.

Jeff: Yeah.

Chris: Yeah, because I mean, you can't beat them. They play a game theory optimal style which is—it cannot be beat. It might not be making the maximum, but there's nothing you can do to beat it.

Jeff: Really?

Chris: Yeah. It's something that really concerns me in the long run, because just the incentives are in place that people building are going to beat over the long run people who are preventing the builds. So I do think it's kind of a matter of time for online poker where, you know, the writing is on the wall. Sites can't prevent all bots. So yeah, that's why I prefer kind of my more blue ocean ecosystems where there's less money at stake these days, because generally, the bot creators are going after the largest games, the largest player pools. So there's some protection there. And sites are getting better at detecting them. But yeah, they're taking money out of the ecosystem and in general. And I do think that, hey. Exponential growth, as we've seen this past year, is a very powerful phenomenon, and this is just an obvious thing where in everything we're experiencing, machine learning is growing exponentially. Exponentially in terms of the data sets, exponentially in the way that it's able to parse unstructured data, exponentially in the experience that it gains along the way. So yeah, it's definitely a factor.

Jeff: And so are you saying it's like they've got the execution part down cold, right? They're not gonna make mistakes. But are they also making huge strides in the strategy part, right? Is it like strategy that no one can anticipate 'cause it's doing fractal or, you know, multi-dimensional strategy analysis?

Chris: It is—that is the silver lining, in that it does have an interesting evolving effect on the game. So, for example, a different game, Go, if you've followed AlphaGo—

Jeff: It played like no one has ever seen before and beat the masters, right?

Chris: And so, yeah. Moves that people had never seen before and realized, being able to deconstruct, you know, to the best you can anthropomorphize here, like what is the rationale driving these unknown decisions? And the game advanced very quickly based off of, "Hey, we didn't even know that this was a possibility." And so this is something that we're seeing in poker. So I took the somewhat contrarian approach that I don't—I think that this is an evolutionary dead end, but along the way, the way that players study these days is essentially plugging in to these machine learning programs and seeing what the machine would do, and trying to understand, "What is the difference between what I would do and what the machine would do?" That the real answer is somewhere in the middle. So the game has really converged on these best practices very quickly based upon these tools.

Jeff: Right, and that's a trick too. Even if you had some site that's like, "We verify it's human" somehow, and that's foolproof, you could be sitting at home with the machine running next to you and telling you what to do. That's interesting.

I had a good idea for a new poker game. I was watching the volatility in BitCoin. Right? If you had a poker in BitCoin, which I'm sure they probably play for somewhere. But in BitCoin, and then it adds a new dimension, right? The pot is actually increasing/decreasing in value as you play the hand, which would add a new wrinkle of like, "Oh, I gotta get this pot quick, because the price might sell-off." Which brought me back to like, that's more like investing and trading options or something, right? You're playing all the players, you're playing the perfect strategy, but the thing you're trying to capture is gyrating wildly back and forth, which makes it that much harder of a game.

Chris: It's like four-dimensional chess. I'm very interested in playing that. Reminds me of a bar—this is not quite the same. A bar that I was in in Barcelona, where all of the prices are set by supply and demand, and so you're trying to create the optimal drinking strategy based on what drinks are undervalued. But yeah, certainly as we've seen this year where, hey, how long are fundamentals not going to matter, and volatility driving the day—I think it's easy to say what the right decision is in a vacuum, but because the situation is so dynamic, the timing is everything.

Jeff: I wanted to mention just real quick, like, a lot of what you had in that paper made me think of a prop firm, a prop trading firm here in Chicago or whatever. Like, the Citadels, the Sesquehannas, PEAK6es, right, they're maximizing their opportunity, they're playing in blue oceans, right, they don't wanna go fight—any little edge they can find anywhere, they're gonna put some money towards it. They're installing huge and sophisticated risk guardrails so they don't blow out, like you're saying, and they're playing the game within the game, right? Whether that be market microstructure or whatnot. And they're playing the players. They're identifying the players.

So I'll bring it just back to when you're taking that framework that you wrote in the paper, and you do consulting as well, right? So how do you think about the whole concept just in terms of what you do with the consulting and advising people on life or business or whatnot?

Chris: Sure, yeah. So my consultancy, Forcing Function, we do what I call Peak Performance Architecture. So we work with investors and other executives to help them install structures that allow them to make better decisions and perform at their optimal levels. And so some of the things that I do with my trading clients, or as you said, with the prop firms and making sure they have trading checklists, that they're doing decision journals where they have pre- and postmortems before they make any major moves, and installing routines to start and end their workday that allow them to show up with maximum energy, attention, presence, that type of thing. Where these are things that I saw in poker that extend very well to investing, that showing up as your best self, learning from every decision, approaching it very systemically just generally leads to much better outcomes.

And so what I love about what those firms are doing, using poker as a learning tool, is realizing that everything that we do is an investment, is a bet. Everything from the first thing we do when we wake up to what do we eat to what is the first site that we open up or the first thing that we do when we exit a call. When we show up, do we know the names that we're looking at, do we know the conditions in the market that we're watching out for? Are we going to get sucked in to what the news algorithmic vortex is serving us? All of these small microbets that we make compound, multiply, and lead towards the difference between you know, winning and rather pedestrian results.

Jeff: Some, like, old-school trader's like rolling over in his grave right now, right, like—

Chris: Good.

Jeff:—Oh my god, I've got to do all this work? Right? Like, "I just wanna go drinking at the series and the board of trade and show up the next day and sling trades around and make some money."

Chris: What got you there won't get you there, and hey. Hate to break it to you, but it's going to continue to get weirder. I think a lot of things are in this red queen race where you're having to run faster and faster just to run in place, and as you saw—I think the documentary "The Pit" captures this so well. As you saw in your experiences on the trading floor in Chicago that, you know, those who don't evolve die. Right? We're all running. The question is are we predator or prey?

Jeff: Yeah. And then I'll come back to like football, right? Everyone's sleeping in a hyperbolic chamber and you know, Tom Brady's like injecting cauliflower juice into him or whatever he's doing. So it's like in order to keep up you have to now do all this stuff.

Chris: Yeah.

Jeff: And right, in the old days they'd be smoking a cigarette ten minutes before the game and have a cocktail ten minutes after.

Chris: I think it's really critical if you're an investor to think of yourself as a cognitive athlete. So what we're seeing in poker and even in chess is that the best players are training as if they're going into the Olympics. Working out for multiple hours a day, being very, very careful about their information diet, doing everything like, "Hey, when I sit at the table I want to have the optimal posture so that I don't have energy leaks," taking calculated breaks—

Jeff: I'm having a major energy leak in my posture right now.

Chris: It's—so there's all these small adjustments that compound that over the course of a career, over a lifetime, lead to these outsize returns. And if our job is to make good decisions, removing all the friction and barriers to making good decisions and making those bad decisions harder—right? We make what we want to do easier and make what we don't want to do harder, and so what we're seeing in poker, we're seeing in chess, we're seeing in investing, is that those who take the most stock in "What can I do so that my life is supportive of making good decisions," whether that's being mentally ready, right? Managing emotions, managing life outside of work, you know, removing distractions type of thing. Or just that, hey. Our brain sits within our body. Are we exercising? Are we eating right? Are we sleeping? Are we staying away from stressors? Are we seeing people who love us who are reminding us why we do this, rather than just making a marginal dollar? All of these things add up to results.

That's really what I try to get across in "Play To Win" is you can be the best investor on paper and have really crappy results if you don't think about the meta-skills of who you are a person. You need to take care of your body, you need to take care of your mental being, if you want to realize your full potential.

Jeff: So they're almost like micro-skills instead of meta-skills, right? 'Cause you're saying like things down to your posture and what you eat—So it's like incremental change can lead to huge compounded results, right? What's the David Brailsford and the Sky Cycling Team—if you've ever read that piece.

Chris: All of the one percent improvements that he made to turn around the British team, from diet and tire pressure—

Jeff: And then he got accused of feeding 'em performance-enhancing drugs, so who knows what the real truth is. But the paper was good.

Chris: My impression is that every one—

Jeff: If you do both, you're that much better with the incremental change as well.

Chris: I mean my impression is that everyone is taking performance-enhancing drugs, it's just not everyone is getting caught.

Jeff: Right. Are there any trading performance-enhancing drugs?

Chris: I think if there's one, it's probably Modafinil. But I mean Modafinil's primarily for sleeping—

Jeff: I meant poker, but training too, yeah.

Chris: For poker it's probably Adderall, is what people do. It's like, staying dialed in for long periods of time. I'm a little bit more boring there. I think that that type of stuff tends to be last mile. Hey, if I can solve my diet, exercise, and sleep, I'm ninety percent of the way there. And what I try to avoid is, I want to—I think of everything experimentally. So if I need this substance, if I need this outside thing, that becomes a crutch. And so when I'm playing poker, I don't have anything in my body. My diet, my sleep are completely controlled for. Like, no caffeine, no sugar. It's like anything that could negatively affect my decision-making is just a no.

So I think that's you know, hey. Performance-enhancing, but I'm thinking very long time scales. Right? If I'm like, "Okay, how can I perform optimally for this single Super Bowl type event, I'm pulling out all the stops." You know, anything I can do, even if it's like grey area. But if I'm thinking like, "How do I show up consistently every single day, and how can I be really in tune with where am I now controlling for all these other variables?" Right? I don't want to be thinking about, "Oh, am I playing badly because I didn't sleep well or because I had a fight with my partner earlier or because like I'm feeling this existential angst?" I want to solve for all that stuff. So anything that creeps into my mind, or any lack of decision-making ability is attributable to something else that's outside of my control.

Jeff: And you don't have kids yet.

Chris: No.

Jeff: That's gonna be a whole new equation, 'cause it's hard to get that out of your head. All those—but I'm coming back to how do you square, like, you still need the joy in it, right? Like so if you make everything so, "Oh, I gotta wake up at 5:45 and do this and go over here and make sure I don't have this," it becomes such a checklist that it might remove the joy from not just poker but from whatever you're doing, of like—Right? I played football in college. I only played two, three years, 'cause I'd lost the joy. It was like, I had to go run at 5:30 in the morning. Like in high school, you're playing with your buddies and it was all about the fun of the game, and then it became more of a job and you had to do all these things. You know, I was doing one-tenth of what you're talking about, but to be that good, to get to that level, you had to increase your commitment exactly, and I was like, "Ah, doesn't seem like as much fun." So how do you square that of like, how do you keep the joy while being excellent? Can you, I guess would be the question?

Chris: I certainly believe you can, and I don't know if this will be a satisfying answer, but you choose to enjoy it, just like we choose to be happy, we choose the level of depth with which we explore everything. I think our intelligence is only limited by our curiosity. So even if I'm doing something like washing the dishes, it's an opportunity to practice being present, to be aware, to be curious about what's going on. And so even if I'm going through the same rituals, going through the same checklist, I can be curious. How do things feel today? Is anything different? Is there anything that I could do to improve? But I think this is the infinite gain, is finding ways to stay in the game. To keep it fresh, to keep it interesting. And I said, I think that the only limiting factor to life's level of depth is our willingness to pay attention to it. And so hey, anyone who, you know, loses touch with why they're doing it, get back in touch or pick something else, because the person who's having the most fun is the person who can't be beat.

Jeff: Yeah.

Chris: I think that's something that's been a really big part of my staying power in poker is, hey, I've been doing this damn game for fifteen years and I still have no idea what I'm doing and I still love learning about it every day and I still welcome the challenge of getting a little bit better. And if I can get like a little bit better every single day, I can just know that that score is going to take care of itself. But as soon as we let that light turn off, as soon as we stop being curious, as soon as we stop improving, as soon as we start coasting and thinking that we're entitled, that we deserve certain results, that's the path to obsolescence. That's the slow death.

Jeff: And so are you a fan of Bryson DeChambeau? 'Cause he kind of took this to the extreme, right, of like, "Oh, I'm gonna beat the game, I'm gonna figure out the math, I'm gonna figure out the proper eating, I'm gonna put on all this weight." Like he did all these incremental changes to improve his game, and played it—

Chris: I'm not familiar with it, but it sounds like a great approach.

Jeff: Oh, yeah. He put on forty pounds of muscle, started driving the ball way further. At the last US Open he's like, "You know what? Everybody's trying to put the ball on the fairway. I'm gonna go with driver, I'm gonna miss half the fairways, but I'm gonna be that much further up that even though I'm hitting out of the rough," so it was just a total game theory approach that we haven't really seen in golf before.

Chris: Yeah. What I take away from that is if you want to have the best results, you need to be willing to look incredibly stupid.

Jeff: Yeah.

Chris: Hey, if you're making the same trades as everyone else you're going to have the same results as everyone else. In order to have outside results, you need to be both contrarian and right. And that means exploring, and that means trying things that, hey, if you control your downside, you get to approach this as an experiment. "Hey, we're doing this to learn." This is how you find those blue oceans, is through exploration. And you know, a lot of people (whether it's within their mandate or their personality) are just unwilling to look stupid.

Jeff: Yeah. And talk for a second—Like I feel, your article is called "Play To Win," you said you're trying to win the game. I feel like some of these coaching strategies are more about, especially in golf, right, "Hey, do the process and let the results take care of themself." So do you kinda draw the line there of like, "No, the process is to win, not just . . . " You know, I think it might help in a physical sport of like, "Hey, don't worry about the result of that shot as long as your process was all clean and good and you did what you wanted to." The result, you know, in that—In poker too, the result, maybe they got lucky or maybe something happened. Don't let that throw you off your process.

I don't know if there's a question there. But just, is it more about—Are you saying, "Stick to a process and you're gonna be healthier and the outcomes will come as they will," or, "No, create a process in order to win"?

Chris: Both. I don't think those two are mutually exclusive. So inherent to having a process is regularly reflecting and checking in, "Is this process leading me to where I want to go?" Obviously, if we just keep mindlessly doing the same thing, we're gonna get off track from this North Star. So yeah, I'm following a process, but I'm always iterating on this process, and there come regular periods in my life where I'm willing to just throw everything away and start from scratch and pick a new course. But I'm not thinking about that every day. Right? I'm either like all the way on confident or I'm all the way on critical. Right? When I'm playing, I believe that I'm the best player at the table and everything that I do is the right decision. And then the second that I hop off the table I am incredibly critical and assume that I was messing up all the time, that I was making all these poor decisions. And my opportunity to identify these bugs in my own thinking, to improve myself.

So yeah, I think that process is incredibly important, but it's also important not to become myopically focused on that, to think about, "Hey, am I on the most direct path to where I want to be?" And that usually comes from a lack of vision, a lack of understanding where we're going, what are we really trying to accomplish here.

Jeff: All right, let's just talk quickly how you view the investing world. So kind of everything we've talked about, or do you kind of tweak your concept a little bit?

Chris: I'm still learning, man. I'm just an egg. I do approach everything from this lens of expected value and bets, and that I'm trying to capture maximum upside with exposure to minimum downside. And that's generally my approach to investing. I think my edge, if there is any in this investing world, it's—I mean, who knows if I have one at this point—is playing the player. So I love trying to invest in people. Is this someone who I trust? Is this someone who—especially when the chips are down, 'cause the chips are gonna be down at some point, is this someone who I think is gonna run with it for a long enough time frame necessary to harvest the gains? Is this some who's thinking about ways to get better when they're in the shower, when they're asleep in the middle of the night. It's like, is this an obsession for them or is it a way to make a living? I don't plan—

Jeff: But you mean—is that like an Elon Musk and running a company, or are you saying like a hedge fund manager, and like who cares about the track record, if you're believing that they're doing their best to deliver day in, day out, you're gonna go with them?

Chris: I'm thinking as an LP when I'm looking at managers. I think when we're looking at individual executors, that's where market industry model understanding come into a lot more play. And so I don't pretend to have an edge there. But if I can pick the right horse and trust them to find these people, that's what I'm aiming for. And obviously from a personal portfolio allocation perspective, right, think about what we're optimizing for. If we are optimizing for maximum profit, we might be doing things a little bit differently. I'm optimizing for lack of regret. Being able to put my head on the pillow at night, sleep well, not be stressed, know that all of the most important things are going up and to the right, so I'm willing to leave a little bit of expected value on the table for less volatility, for more peace of mind. And so that affects what I bet in and my sizing and levels of correlation on things. And at the end of the day, just trying to stick to what I know. Generally that's within poker and that's within people who I have this long range of experience of I've shown that, hey, this is an outlier person who's going on to great things, I would love to get on the ground floor of whatever they're doing.

Jeff: The two things I want—we just recorded yesterday, but it's actually going to be released the week after this pod, but with Wayne Himelsein, and he was talking about how he approaches quant in building the models, and he says, you know, the fittest model is the one we go with. And I go, "Hold on. Fittest model." So he's optimizing for the least likely to fail. Right? Instead of the most profitable or what we just talked about, it's, okay, I want the fittest in terms of the most likely to survive.

Chris: Yeah, I like that.

Jeff: Which was an interesting concept. And then I also want to say—so you, doing any of this Robinhood trading—cause for you, right, like even in the online poker world, insanely hard to get information. Like you're in the top one percent of people able to get information from screen names and that intuition you talked about, but there's not big huge corporations with infinite assets and computing power fighting against you there, right? Well, maybe there is, but as far as we know there's not. If you're just an option trader, retail option trader, you have all these huge forces trading against. So I was wondering if you ever think about that, or you've sidestepped that market, and be like, "I don't have any information here, so I'm just not gonna play."

Chris: I don't wanna be retail in anything that I do.

Jeff: Right. Retail's not necessarily a bad word. Hey, they all did pretty well in this last bump up. But yeah, how do you do that? Because you don't have any edge, because you don't have any information?

Chris: The level of attention and experience that I would need in order to be confident in my level of edge there—you know, we'll talk again in a couple decades and I'll see if I get there. I'm really big on education. I think my edge in any game or any pursuit is that I tend to get better faster. I'm all about compounding in everything. And hey, I've been studying investors, either through reading, working directly with some of the most successful investors, watching from the sidelines of the market, having tiny bits of skin in the game, just enough to like actually feel the pain and realize that, hey, all my thoughts about emotions, sometimes I can go against them when things are on the line.

I am moving more and more into becoming the professional investor that I emulate, that I admire, that I want myself to be. But man, I mean I'm thinking on like a lifetime timescale.

Jeff: Yeah.

Chris: I'm still—I have a lifetime of learning and capital appreciation ahead of me. I don't feel this time scarcity. I said, I hate to throw everyone into this box of like the Robinhood of like gambling, just in it for fun and community. I'm here to win, and I'm playing the super, super long game. And hey, times are crazy right now. I think everyone will agree with that. But times are gonna be crazy for a long time. There's gonna be lots of fat pitches coming down the plate. I expect my surface areas of opportunities as I continue to grow my skillset and my network to only exponentially multiply. So I'm trying to think, like, how can I continue to grow and how can I can I put myself in a position that I can't lose, that I'm not gambling, that I'm not retail. Cause like I said, I'm either playing to win, or I'm not playing. There's no point otherwise.

Jeff: Which is insane, right, to hear you say that, because here you are, a professional. You gamble for a living, so, "No way I'm gonna gamble with my investment." Right? So it's like, vice versa, those other people don't gamble for a living so they're gonna gamble with their investments. It's an interesting comment on society as a whole.

Great. Any other thoughts on the overall paper approach before we wrap up?

Chris: No, I think I'm good.

Jeff: Yeah, I think we've covered a lot.

So, a few quick-fire favorites here for you. Favorite poker hand? You're gonna say it's way more nuanced than that.

Chris: Aces. So, I know, that could be my answer to every question. Yeah, aces, obviously. I think it's very unlucky to be superstitious, as they say. Let's say, I think a more interesting question is, what is an underrated poker hand? And I think most amateurs don't realize that Ace-Five suited is a very underrated hand, because it's the hand that has the most equity against premiums, premiums being jacks plus, ace/king. Where it has thirty percent equity against those hands. And so a lot of professionals treat ace-five as aces in order to keep their ranges balanced.

Jeff: I like it. Along those lines, could you give one piece of advice (which again is way more nuanced than that) for the amateur poker player to help win his neighborhood kitchen table game? What would be one quick piece of advice?

Chris: Yes. So the one I shared before I think is a good one, figure out what your opponents are trying to get you to do and do the opposite. You know, understand their perception of how things are going, understand what they're thinking, what they're trying to get you to do. Another general one—

Jeff: If they're all trying to get you to call, don't call. Yeah.

Chris: Exactly. Another general one which I think also applies to life is to be tight but aggressive. Be very particular in discerning the situations that you get involved, but once you do pursue them very aggressively. In a forcing function context, I'm working with clients, I advise them, "More wood behind fewer arrows." That, you know, take all the things that you're paying attention to, draw a line through half of them. Take all of your open projects, draw a line through half of them. Yeah. Direct more of your energy and attention towards fewer objects of higher average importance.

Jeff: I like it. Favorite poker room. Physical.

Chris: I just think, 'cause there are trade-offs here—I—so I used to spend the summers in Vegas. I like the Aria room a lot in terms of setup. The biggest games tend to be in the Belaggio, but I think it's a little bit cramped in there, not as fun to play. I think the Wynn is pretty high up there as well, you get a lot of people wandering in from golf, so it's like one of the rare places in the poker world where the games can be best at 8:00 in the morning. Those are all fun places in Vegas. I don't play live as much anymore. I was playing in Atlantic City. I think Borgata is a pretty good room as well.

Jeff: I wanted some like Brooklyn, Teddy KGB type place.

Chris: Oh hey, if anyone's listening and you're looking for a semi-professional person who likes talking about poker on investment podcasts, I'm happy to take a seat. I'm guessing that my favorite poker room is a room that I don't know about yet.

Jeff: I love it. Favorite poker movie, that we just mentioned one.

Chris: I think there's Rounders and a very, very large gap between every other movie. I think I would put an honorable mention for Molly's Game recently, and then the dozens of others that are not even worth mentioning.

Jeff: Oh, and I forgot to ask you on the poker room, the whole thing of the guy in the Sacramento poker room. Was it Sacramento? Of the guy who couldn't lose, and people were accusing him of cheating.

Chris: Hmm.

Jeff: What's your take on that?

Chris: Oh, it was very clear and proven that he was cheating. So I have to give a little bit of context for this, because hey, don't want to throw the baby out of the bathwater. What was interesting is that he was using kind of bone induction to communicate with a confederate—so, in these televised games they use RFID cards, which relays the cards to the televised stream overlay that says, hey, what cards the players have. And so he had a confederate who was monitoring the cameras and was communicating via this bone induction tool that was hidden beneath the hat, so he literally knew the cards that other players had. And the way—

Jeff: Wait, what is bone induction? It's like rattling his skull?

Chris: Yeah, I'm gonna look really dumb if I try to explain it. If I remember correctly, it's some sort of vibration. I'm gonna have to look it up, I'm not really going there.

Jeff: And for a while they thought he was just looking in his lap at his phone. Right? But they were like, "Oh, it's more complex than that. Thank goodness."

Chris: Yep. So imagine, it would be very hard to lose if you knew what players had, but the way—

Jeff: But then he was terrible at the meta-game, because he won so much that he brought attention to himself.

Chris: Yes. Most things of this nature come down because people are too greedy. So, hey, had he been a little bit less greedy maybe he would have gotten away with it for longer. And that was the primary way that people proved it, it was just statistically his win rate was so high—it was like twenty standard deviations beyond the mean. It was just impossible. Plus there were a couple times where the cards had a defect, where the overlay was showing a different card than what the player actually had, so he was playing based off of the overlay, and made some pretty funny errors.

So yeah, these situations are so rare within the poker world that when they do, yeah. They create quite a scandal.

Jeff: And he was like talking smack that he was so good, right? Like, come on. Just be humble.

Chris: Ego and greed. Hubris is our great downfall, always.

Jeff: Favorite poker book?

Chris: Poker book. I have to give a shout out to a recent book that has come out by Maria Konnikova called The Biggest Bluff. What I love about this book—so, Maria is a psychologist by background. Where I'm very armchair psychologist, she actually studied PhD psychology, so came in with a better understanding than just about everyone about how bad we are at making decisions, about how our lives are a life of bias and fooling ourselves into thinking we're great. And so she thought, hey, this poker thing is gonna be a really great proving ground. And starting off from complete zero, never played before, worked with a coach and other mentors to improve her game through practice. And this is sort of an exploration about overcoming her own bias. That knowing the biases doesn't mean that you aren't going to act upon them anyway. So I think it's a great introduction for someone who's new, or in my sense—I took things away from it—old to poker, to think about how to make decisions better and about how to be the observer of our own decision-making process.

Jeff: So what were her findings? That even poker players were terrible decision-makers? Like it's a human trait, or did she find that they were better at it?

Chris: She was able to overcome and improve this skill over time, essentially (as I like to say) by getting punched in the mouth enough times. By realizing, "Oh, that was a really dumb thing that I did," or, "Oh, I let that guy get under my skin," or, "Oh, I didn't want to do anything dumb on TV so I played a little bit more tight." Needing to observe self through mistaken experience in order to create these new connections. I said, it's like rewarding yourself by catching these bugs in the software in order to fix them.

Jeff: Right. My favorite was—I haven't read a lot of them, but The Professor, The Banker, and The Suicide King.

Chris: Oh, that's a lovely one as well, yeah, 'cause it gets into—I said, the biggest games are generally with people you've never heard of, where in this book, Andy still plays, a very wealthy banker. You know, someone who made a lot of money from oil markets, shows up and says, "Hey, I want to play the biggest game that anyone's ever played against the best players." Just to challenge himself. And he actually got pretty good pretty quick. And what you understand is that he had a bit of an advantage, is that the stakes were so large that everyone was so uncomfortable. Everyone has a number that they start making bad decisions.

Jeff: That was his game theory, right, that, "I'm gonna make it so uncomfortable with so much money that's still relatively small for me," but right then they banded together to make it less painful for themselves and started to win. Right?

Chris: Yeah.

Jeff: But that was cool, he had like a buzzer to tell him to wait until his buzzer went off, and all that stuff.

Chris: Yeah, I would give an honorable mention to Fortune's Formula. So this is the book with Claude Shannon and John Kelly. Not a book about—It's a book more about gambling and bets than poker, but this is kind of the emergence—

Jeff: Isn't there mobsters in there too? That's a great book.

Chris: Oh yeah, it's a wonderful. So talking about trying to beat Vegas through Blackjack and Roulette, and the notion of Kelly criterion, how do you size your bets, this you know, Thorpe leading to like options pricing and all that stuff. It's sort of like the history of risk and pricing your edge. So that's a fun one as well.

Jeff: Agreed. We've written that up—we'll put that in the show notes. We did a little book review in the blog once on that. And lastly, favorite Star Wars character.

Chris: I think I'd have to go with Obi-Wan. I tend to resonate with the teacher/mentor character, 'cause maybe that's how I like to see myself, as a guide. Someone who's going to show where the holes are in the ground, so that someone else doesn't step in them. And you know, I think that there's a lot of leverage and mentorship and guiding, and I think that he has an underappreciated role, even if, hey, Anakin becomes—you know, he goes over to the dark side. Even if the results didn't turn out so well, still a pretty good process. Right? You can only—it's hard to know how much nature versus nature was at stock there.

Jeff: I thought you were gonna go with Han Solo because he won the Millennium Falcon playing cards. Their Star Wars universe version of poker is Sabacc, where the cards change in the middle of the hand.

Chris: Oh, yeah. I—if I were still in this meta-game form of my life, that I'm trying to give an outside perception to who I am that's different to who I am, I would certainly say Han Solo, because I want everyone to think that I'm the reckless gambler who's betting the entire mission on the turn of a card.

Jeff: "Never tell me the odds!"

Chris: Yeah, exactly.

Jeff: Awesome. This has been fun, Chris. Thanks so much for joining us. We'll put Forcing Function and all the contact info in the show notes, and we'll talk to you soon.

Chris: Awesome, Jeff. Yeah, thank you so much for having me. It was a lovely conversation. I appreciated the opportunity, in being such a great conversational partner.

Jeff: Awesome. We'll look you up the next time we're in Austin or New York.

Chris: Please do.

Jeff: All right. Thank you.

Outro: You've been listening to "The Derivative." Links from this episode will be in the episode description of this channel. Follow us on Twitter @rcmAlts, and visit our website to read our blog or subscribe to our newsletter at rcmalts.com. If you liked our show, introduce a friend and show them how to subscribe. And be sure to leave comments. We'd love to hear from you.

 
Chris Sparks