#239 Chris Sparks - How to Manage Risk with One of the Top Poker Players in the World

Chris Sparks is one of the top online poker players in the world and the Founder of The Forcing Function, a company which is empowering the next generation of entrepreneurship by transforming the way we think about work. In this conversation, Anthony and Chris discuss game theory, decision making frameworks, how to control emotions during times of stress, what it takes to walk away from imbalance risk-reward scenarios, how poker lessons relate to business and investing, and why routines are almost as important as plans. ===================================================================================================================If you enjoyed this episode and want to stay updated on everything Bitcoin, blockchain, and crypto. Check out Off the Chain newsletter by visiting offthechain.substack.com and join 35,000+ other investors currently subscribed to my daily investor letter.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to Off the Chain, simply the best podcast in crypto. Let's kick this thing off.

• 0:11Anthony Pompliano?

  Chris Sparks is one of the top online poker players in the world and is the founder of The Forcing Function, a company which is empowering the next generation of entrepreneurship by transforming the way we think about work. In this conversation, we discuss game theory, decision-making frameworks, how to control emotions during times of stress, what it takes to walk away from imbalanced risk-reward scenarios, how poker lessons relate to business and investing, and why routines are almost as important as plans. I really enjoyed this conversation and Chris's episode is super timely, given all of the economic uncertainty that investors are facing today. Also, don't

• 0:53Anthony Pompliano?

  forget, I don't just produce the podcast. Every morning, I wake up and I write a letter to over 40,000 investors. If you want to subscribe, you can go to pomp.substack.com. P-O-M-P dot S-U-B-S-T-A-C-K dot com. pomp.substack.com. Go subscribe today and let's get into the episode with Chris.

• 1:20Speaker 01

  Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only.

• 1:48Anthony Pompliano?

  Alright guys, bang, bang. I am here with Chris Sparks, who is one of the top poker players in the world, and I wanted to have a conversation about risk management. Given the current situation in the public markets especially, but even with the number of assets, we are going into very uncharted, risky time period in the financial markets. And so, what better than to talk to a poker player about how to make decisions with incomplete information? So, thanks so much for coming to do this.

• 2:23Speaker 02

  Thank you so much, Pomp. It's a pleasure to be here. I wish it was under more pleasant circumstances, but I'm sure it'll make for an interesting conversation.

• 2:30Anthony Pompliano?

  For sure. Let's just jump right into your background. People I think are fascinated by poker, especially kind of the highest, most elite levels. How do you go from the day you're born to one of the best poker players in the world?

• 2:45Speaker 02

  I'll give a Cliff Note and we can dive into specific examples as I drop some breadcrumbs in there. So I've always been into games, played card games growing up. I was one of the world's best gin players, which is a one-on-one version of Rummy. I was really proficient at a game called Microsoft Ants, which was an early realtime strategy game. At one point, I was ranked number one in the world in that game in a very small player pool. And this kind of seeded the ground for me to combine the two of those, where gin is essentially a form of heads-up poker, where you are analyzing your opponent, you are trying to give him

• 3:29Speaker 02

  an impression that you have a certain hand, or you're telling a story, but really you have something else. You have him believe that you need him to discard these cards, but actually you need the other cards. And the realtime strategy aspect, where you're in a very dynamic situation, the environment is changing very quickly, you have opponents who are the noise in the system that you can't account for, that you have to quickly adjust. You have this meta-game element. So you're trying to accomplish this goal, acquire resources, but at the same time, you have to take the system into account, you have to take outside forces into account, your opponents. So I already started, when

• 4:09Speaker 02

  the moneymaker bubble hit, this was, you have 2001 World Poker Tour starts broadcasting hole cards, so poker becomes a spectator sport. Then you have Chris Moneymaker winning the World Series of Poker on a, I believe, a $200 satellites. He was just an accountant in 2003. All of a sudden poker is on every station and ESPN. This is when I started university at Ohio State. So I was playing free role tournaments at this time on, you know, my parents' dial-up internet single line where I'd play for 12 hours trying to win, you know, a $5,000, you know, free role tournament with, you know, no entry because it's a free role, but with, you know,

• 4:53Speaker 02

  tens of thousands of people. So I had some practice. And then when I entered into university, poker was what everyone did. If you were a man in college at this time, you were playing poker. That's how we socialize. That's how we hang out. That's how we got social status. And I quickly realized that I had a knack for the game, that my previous experiences gave me quite an advantage. And so a few of my friends who I thought weren't very good players introduced me to online play and it immediately became an extra source of income for me to pay off my tuition. I'll fast forward, you know, senior year, I'm already winning at the mid-stakes levels. I had progressed from I first started playing, you know, large tournaments, you know, buy-ins

• 5:35Speaker 02

  from $10 to $1,000 to now is playing cash games mid-stakes online. So buy-ins ranging from $400 to $1,000, playing 24 tables simultaneously, up to 30, but it turns out 24 tables was the sweet spot. And I was ready to enter the workforce. So, you know, Midwest guy, I assumed that I was going to go into the corporate world and my dream from a young age was to make television commercials. The thread that ties a lot of my work together is I'm really driven to understand how we make decisions. And this aspect of how do brands tell a story that alters behavior, right? Every commercial is essentially selling

• 6:20Speaker 02

  some infinite value. You know, you have unlimited integrity, you have family, you have, you know, friendship, you have risk-taking, adventure. All these things are sold and then attached to a brand. And so we consume in order to affirm our infinite values. And that I found that infinitely fascinating. How could I learn the mechanisms of production to accomplish that myself? So I was in a reality show in my senior year called Quad Squads that ended up making an introduction to the head of Team Detroit, which does the advertising for Ford. So after having the opportunity to work on a Super Bowl campaign for Nationwide my junior year, I figured, why not go to the largest television advertiser in the world, which was Ford at

• 7:04Speaker 02

  the time. And so I'm going to try to sell cars. And so if you're doing your math, right, I started college 2004, and now we're getting to 2008. You know, seems like sometimes a decade happens in a week. And this was another one of those times where the week before I was supposed to start my full-time job at Ford, the auto industry collapses, total bailout, Ford goes on a hiring freeze, and I'm in hiring purgatory, essentially, hired but not hired, not on the payroll, but not able to seek other employment. And this was, on one hand, a very, you know, bad luck. I'd kind of put all my eggs in this basket. I'd actually moved up to Detroit, Michigan, where I knew no one, you know, ready to take on

• 7:47Speaker 02

  this position. But obviously, with the benefit of hindsight, this was a massive blessing in disguise. I mean, first, I escaped the corporate world, but I moved from having, you know, 10 to 20 hours a week to play poker while I was in college, because I was pretty, you know, involved, full course load, you know, multiple student organizations, you know, essentially, I'm foregoing sleep if I want to play, to now I have a completely open schedule with no responsibilities, total freedom. And I say, what does it look like to treat poker as a job? And it becomes an 80-hour-a-week thing. And within a couple years, I'm ranked in the top 20 online players in the world.

• 8:24Anthony Pompliano?

  So there's a whole bunch in there. The part to me that's wild is, when I think of online poker, I think about people sitting down and playing at one table. But the best players in the world, you're playing 24 tables at a time. How the hell do you do that?

• 8:42Speaker 02

  Intuition, it's a fuzzy word. My definition of intuition is internalized experience. And so when you have put in millions of poker hands like I have, so you know, by the time I was 22, I had played more hands of poker than people who had been playing professionally their entire lives. I have seen it all and my pattern recognition is extremely good. I'm very, very sensitive to nuance, to the difference between signal and noise. There's the classic study that, you know, we're thinking in terms of information, bits of information where we are taking in millions of bits of information,

• 9:26Speaker 02

  but we have a hard cap of our working memory and that we're only conscious of a couple dozen of those million bits. And so the power of this internalized experience is that I know exactly what information I need in order to make decisions. So while to an untrained eye, this looks like Minority Report, how do you heck do you keep track of all this stuff? The truth is the vast majority of it is just noise to be ignored and I'm only paying attention to the few signals that really matter.

• 9:57Anthony Pompliano?

  Got it. And so let's walk through poker in general because really I want to have a conversation about your experience as a poker player with those millions of hands of poker. You constantly have to make decisions. You have to manage risk and a lot of times you're doing it with a portion of information, right? The things that are known to you, but you also have a number of things that are unknown to you, right? Kind of data points that you know are out there, but you don't have. That's very similar to financial investing, right? Is especially in a time like right now where there's high levels of volatility, people are having to make decisions and kind of manage risk and do it all under the guise of I have some data points that I know and that I know there's other data points that are out there, but I don't know whether they're future data points, etc.

• 10:42Anthony Pompliano?

  So I think there's a lot of parallels there. Let's start with poker first. How do you think about the decision making in, you know, on a per hand basis or a per game basis? And kind of walk us through that framework that you use for that risk management decision making?

• 10:58Speaker 02

  Sure, I'll verbalize it the best that I can. So first, coming in, you always want to have a plan, right? Classic, no plan survives contact with the enemy. But still, the exercise of planning is incredibly useful because it primes you for what new information is going to be important. So, when am I going to have to throw this plan away? How am I going to update it? And so, I'm coming into a session when I sit down to play with a game plan. And so, part of that is, what types of games am I looking to play? Who am I targeting at these tables? I am sitting down at these tables specifically to play with certain players who I believe will be profitable to play with.

• 11:41Speaker 02

  And so, what is my plan in order to get into hands with these players? My assumption is that the more hands that I play with these players, my small edge will be compounded. And then, within those, trying to anticipate, how could this go wrong? What are the obstacles? So, who else is at the table? Really, key is stack sizes. So, the game is very dynamic, based upon how deep you are playing, how much money is at stake, as well as your position. So, money tends to flow clockwise at a table. So, being in position where you're acting after someone in a hand versus out of position where you're acting afterwards makes a huge difference in terms of your expected value on the hand.

• 12:25Speaker 02

  And so, I might sit down at a game, and I might not sit down at that same game if my position is going to be different. And so, I'm trying to anticipate these things in advance, where I really like the Bayesian framework here, or another framework that's very useful is the OODA loop. So, observe, orient, decide, act. And particularly, the orient part of the loop, where I am paying attention to which variables are most important for my decisions at the table, and being very sensitive to when those variables are changing. Or essentially, trying to predict the future. So, part of that is, even though... Someone is, I can't see them, right? I'm not sitting across from them like you and I are. There is a person on the other side of the screen.

• 13:10Speaker 02

  And this online interface of a poker game is just an intermediary or a translator for their state of mind. And that is very noisy. I have to think about chat. I have to think about click speed. I think about bet size, that they bet 666 versus 665. All of these things can matter in the right circumstance. But it's all compared to a baseline. So you look at classic studies, say, like Paul Ekman's work as far as lie detection. And they always talk about a baseline where no behavior matters except for compared to a baseline. So how does this player play on average? And so a large part of the player pool, let's say I'm sitting down at a game of six players, including myself.

• 13:54Speaker 02

  It's going to be generally four other professional players and then one recreational player. The four professional players I tend to play with every single day. You have a player pool of maybe 100 people in the world and you play with them every day. So you get to know their game very, very well. And because they're professionals, they tend to be very consistent. But consistency can also be a downside in that they become predictable. So I'm base, I have a baseline of these players at the table and I'm sensitive to conditions that might cause them to deviate from that baseline. Most of my attention is directed towards the recreational player, where I'm quickly trying to thin slice them into an archetype. How is this player going to play on average? The four classic archetypes, you know, if you have a two by two grid,

• 14:39Speaker 02

  it's tight, loose, passive, aggressive. So my strategy against an opponent who's loose, aggressive, playing too many hands and playing them very aggressively is going to be very different from someone who's playing too many hands and playing them passively. And so, once I have them into a bucket, I can predict their decision making pretty accurately and I don't need to be as nuanced. So, yeah, I mean, that's, that's a kind of a sample as far as sitting down with the game plan. At the same time that I'm trying to track the state of mind of everyone else's table, at the table, I'm trying To track my own state of mind because this is dynamic throughout. You know, if I'm giving myself a grade A through F on, you know, what's my decision making ability? Trying to correlate that at any given time so that if I start to slip,

• 15:24Speaker 02

  I have a stop loss, I cut off the damage at the source. So sometimes I sit down, planning to play for a long time, I play for 15 minutes and I cut it off, I stop. Other times I'm like, oh, I'm just going to sit down and check it out and end up sitting down for 16 hours straight. It's very difficult to predict in advance and it's part of the success is just showing up and being ready for what comes. And it tends to fall under power law distribution where if you take out, say, my 10 biggest days of the year, I'm barely profitable, but if I hadn't, you know, if I couldn't have predicted those 10 days in advance.

• 15:58Anthony Pompliano?

  So a lot of what you are describing sounds like financial markets, right? One of the things that struck me in the description you just gave though is there's some very specific things that you can do that are in your control before you even play the game, right? And I'll break them into two buckets. So one is the whole idea of having a plan and going through that process can be valuable. And then the second is kind of how you position yourself, right? So whether this is who you're targeting, what seat you sit at, etc. How much of that is just repetition, right? Meaning that you've done it so many times that it's second nature versus you're actually sitting down and like

• 16:39Anthony Pompliano?

  writing out a plan and saying, I want to sit in the third seat and all of that, you know? How kind of sophisticated and intentional versus just you've done it so many times that now it's just intuition?

• 16:53Speaker 02

  I think that any paradigm can be subverted once it's been internalized. So in the beginning, I was extremely diligent about writing out this plan in advance, having a ritual that I'd follow before sitting down. Kind of a checklist that just to ensure that I've fully prepared. Now, as I've internalized that, I am less strict about the process and it's more of a mental exercise.

• 17:20Anthony Pompliano?

  What's on the checklist?

• 17:22Speaker 02

  So checklist, various things as far as my mental state. So have I done my habits today? Particularly have I journaled to empty my brain? Have I meditated to center myself? Have I stretched? I might be sitting down in this chair for 16 hours. Am I prepared for that? Do I have enough water? Have I eaten? Just like basic, you know, am I, am I ready for a big day? If this becomes a big day, you know, taking assessments of my mental state. I'll ping my network as far as, you know, how are the games looking? What to expect? Is there anyone I should be keeping an eye out for? Playing on one site versus another, trying to get an idea for the landscape.

• 18:05Speaker 02

  And then, you know, I was having music picked out in advance. So having a playlist that I'll roll through that kind of keeps me in flow. These sort of just basic checklist, like, am I ready to play? And it's kind of going through this ritual almost increases my discipline just by going through it because I'm primed, hey, this is important. And then, you know, I'm scanning the tables and while, you know, I'm trying to get on them because, you know, sometimes I have to wait in order to get on the game. Some games they have a waiting list, so people need to leave. Other times it's the first one to click, kind of a high frequency trading situation. You know, there's, there's some lag time where I'm not immediately playing 24 games. I ramp up to it.

• 18:45Anthony Pompliano?

  And it feels to me like a lot of what you just described is very focused on the, your emotional and mental state, right? So understanding that it's not so much the exact decisions you make as much as it is putting yourself in the position to make good decisions, right? Once you get into the game, so you've figured out what tables you want to sit at, you're in the right seat, you start to play, you've identified who the professional players are, who's not, et cetera. How do you think through the actual evaluation of the cards you have? The cards that are on the table, the cards that other people may have, but you don't know what they have? And kind of that framework of you have some of the information, but you don't have all of it and a lot of it's out of your control at that point?

• 19:31Speaker 02

  Cool. Well, I'm gonna try to bring it a little bit out of the abstract at the risk of, you know, losing a few of you guys who have less experience in poker, but, you know, pay attention to the principles rather than the specific terms. So I'll walk you through a hypothetical hand and the things that I'm thinking about. So, um, let's say that I decide to enter a hand that the hand reaches, you know, exceeds my minimum threshold for entering the pot, which is going to go up exponentially with my position. So from the earliest positions, playing very, a very tight range of hands, and as I get to the later positions, and especially the button and the small blind, if there has not been any action, my, my hand range opens up quite a bit. So sometime, in some cases, five times

• 20:12Speaker 02

  as many hands. That position is that important. Um, and if someone else has entered into the pot before me, obviously trying to think about what their range is, um, playing online for a regular player, I, sometimes, in some cases, I'll have enough hands to know the exact range that they have. And so I'm, I'm limiting the potential universe of all of the hands they could have, you know, we call this the potential range, down to a smaller set of that range, that they can only have one of these hands because they have done this. Um, and then, as the hand progresses, so we see a flop, there is a, let's say, let's, to simplify, I'll use a specific example. So let's say that, um, someone opens from

• 20:55Speaker 02

  early position, and so they have a tight range of hands, and I'm in the big blind, and so I have a little bit of money in there, and I'm closing out the action. Nothing else can happen after me, so I'm actually calling a wider range of hands. And, and the range that I'm calling is pretty well-known, too. Let's say we're playing against a good player, so a little bit more predictable. And there comes out a flop. And so I'm thinking about, how does this flop interact with their range versus my range? If it interacts with my range on average better than their range, I'm going to be aggressive regardless of my actual holdings. My holdings don't really matter all that much. If I win, like, it's, it only matters to the fact that my bluffs don't need to work as often. I have additional equity in the hand. I'm entitled to more of the pot. It's kind of a fail-safe if things go wrong. But I'm not playing my hand as much as the

• 21:40Speaker 02

  Hands that I could be having. And so if it comes out with a flop, that's, you know, better for my opponent's range, something with high cards. You know, the worst would be something like ace, king, queen. You know, I'm generally going to be playing, you know, very tight passive, folding a lot because I can get myself in a lot of trouble. The most expensive hands are second best hands and playing passively because as we say, my range is capped. I cannot have the best hands and he has all the best hands. Now, if the flop is something that's much better for my range of hands, say something like, you know, four, five, six with two spades. Well, he has very few fours, fives and sixes in his range because of the position that he opened and I have a lot more.

• 22:23Speaker 02

  And so he's going to have to play much more passively and I'm going to be able to play much more aggressively. And then that that continues as you go to the turn where you have one more card and then to the, which changes the placement, sometimes a great deal. So a card on four, five, six, four, something like a jack is a blank, doesn't change much. But a seven, or especially a seven of spades makes this board maximally wet. It changes things a great deal. And so that's where you make very, very large adjustments based upon new information. And then you have the river where all the information is known, except for the opponent's cards. And essentially is like, is this opponent bluffing enough in order to call? Or how much, how much do I need to bluff? We call this a minimum bluff frequency in order to remain balanced.

• 23:08Speaker 02

  And so I look at where my hand ranks in the range of all hands. So if I have one of the worst hands I could possibly have, I'm always bluffing. If I have one of the middle hands where sometimes I beat, beat him, I don't need to bluff. If I have the top range of my hands, one of my best hands, I'm always betting.

• 23:25Speaker 02

  And so you can see how this, yeah, these compounding probabilities where as new information is introduced to the game, you know, seeing what positions where they raised the action and then the cards, how they, with this new information they react. I can continually limit down the range of possible hands they have, you know, combinatorially weighted to the, to, I say, oh, well, given that he has these hands, I need to be bluffing this percentage of the time, that type of thing.

• 23:53Anthony Pompliano?

  Got it. And so at what point do you go from probabilities to certainty? Or do you never actually get to certainty unless it's the cards that you hold? And you know, with 100% certainty, you have the best hand?

• 24:08Speaker 02

  Certainty is a very dangerous thing. There's, there's no case in that you're certain. And even if you are certain what the best move is, there is the additional variable of bet sizing. Where, you know, it's, you, you, there's, there's situations where you can be very elastic to bet sizing or versus being very inelastic. So certainty would be is I am folding no matter what they bet. And elastic is, well, if they bet a lot, I might have to fold. If they bet really small, I might have to call because you're getting a better price. For example, if someone bets half the pot, I only need to be right 33% of the time in order to make a profitable call. This is something that's very, very difficult for non-expert players to internalize.

• 24:49Speaker 02

  Is you can be making these decisions where we're so, we're so weighted like, you know, it is or it isn't. Like, you know, well, I called and he had it, it was a bad call. There are calls that I make where I know I'm going to be wrong 90% of the time, but I still have to call it. And it's very difficult to know the difference between, you know, I'm wrong. You know, he has a 10% of the time and 20% of the time. And to be, to get that feedback that you were wrong, but still believe in what your system's like, hey, that was the right call because I was getting a very good price. That's a very, very important skill. And, and that kind of goes into the intuition of the numbers where I don't know the exact percentages for a lot of these situations, but over time I've built a very good fingertip feel for them.

• 25:33Anthony Pompliano?

  And so this idea of price is really interesting, right? I've never really heard somebody describe, especially poker that way, where you're making decisions and the probability and price create a equation that ultimately drives the decision that you make.

• 25:50Anthony Pompliano?

  And immediately my mind jumps to like financial assets, right? Obviously you might buy a good asset at a great price or you might buy a, you know, a less than good asset at a really, really great price. And either one of those could be a good or bad decision, depending on when you do it, the future price movements, etc. There's a lot of analysis that goes into it. In the game, how do you control yourself mentally and emotionally when you are given the feedback of "bad decision," I kind of put that in air quotes, meaning that you lost a hand, or somebody bluffed you, or whatever happened, but it's still fit within the framework that you had, that you made a sound decision?

• 26:33Anthony Pompliano?

  Like, what is that kind of control mechanism that you use in order to make sure that you don't kind of lose faith in your decision-making and frameworks that you use?

• 26:43Speaker 02

  That's a fantastic analogy. Yeah, there's no good or bad investments without price included. So, something could be very cheap and be a bad investment, and something could be very expensive and be a good investment. It's all about underlying value, and there's a lot of people who go through life saying, "Is this a buy or sell?" and don't actually look at the price. And so, in a poker sense, it's very, very important to be process-oriented rather than results-oriented, because results in poker and in the markets are extremely noisy, and we can make good decisions and have bad results, and vice versa.

• 27:24Speaker 02

  And so, as you said, we still want to be taking new information into account. And so, this is where that concept that I introduced earlier of range comes into play, is that I have an expectation that this player, based on the actions they have taken, has one of these hands. There's a composition of this range. It's X percentage value hands, X percentage bluffs. And the only information that is useful for me is information that disproves this range, and that it falls outside of this range. They show up with a hand as a bluff that I didn't think they could have, or they bet a hand for value that I didn't think they could bet for value.

• 28:09Speaker 02

  And that means, "Well, my assumptions were wrong here." And that's when I adjust. I think the key to improvement in anything in this world is tightness of your feedback loops, that you make a decision, and ideally you get Immediate feedback, how does this change the assumptions that you use to make this decision?

• 28:28Speaker 02

  And so that's how I'm reorienting myself is I was bluffed, but they had a hand that I thought they could bluff me with. That doesn't tell me anything, but oh, I didn't expect that. And I want to have this part of my brain light up and say, that's fantastic. I have just learned, this is very useful. So even if I'm wrong, not making the same mistake twice, right? I've already paid tuition, now I need to make the right adjustment.

• 28:54Anthony Pompliano?

  Got it. And so in poker, you know, I'm just thinking out loud here. So you've got, let's call it six people sitting at a table. Each person can provide a certain number of variables to your decision making, right? You describe some of them around the chat, the speed of clicking, the bet size, the position at the table, and all these different things. And so, you know, I don't know, let's say there's 10 variables that each player times the six players at the table. That's a-

• 29:19Speaker 02

  At a couple orders of magnitude.

• 29:21Anthony Pompliano?

  Okay, explain.

• 29:24Speaker 02

  So you mentioned the visible examples, but there's many examples that are very invisible.

• 29:32Anthony Pompliano?

  Okay, like what?

• 29:36Speaker 02

  Hypersituational things. So I would introduce the concept of centrality here, which has an analogy to Buffett's circle of competence. That players have certain situations that they're most comfortable in, where they've solved it. They know they have a good strategy that works. And this becomes a crutch for them and that they continually try to stay within the circle of competence. And so if you can shift the field of play, think about maybe a basketball game where teams prefer to slow it down versus run on the break. And you take them out of their comfort zone, you put them into situations that are central for you, but not central for them.

• 30:18Speaker 02

  Meaning that you have more experience and insight into the situation than they do. You've studied it more. And when people get uncomfortable, they make bad decisions. And that's a lot of poker playing is forcing people into making bad decisions.

• 30:33Speaker 02

  And so that's where a lot of the variables come into play. It's essentially combinations of these variables and how do players play in very specific situations?

• 30:45Anthony Pompliano?

  Got it. How do you think this overlays with the financial markets? Right, like there's very obvious comparisons, right? If you think of just, there's a potential prize and I have to make a number of decisions that go into what price am I paying, kind of what's my downside risk, what's my upside, potential profit, there's other players in the market, etc. But how do you, coming from such a high level in the poker world, think about the crossover to the finance world?

• 31:19Speaker 02

  I mean, we could do a whole episode on that. I'll give a couple of highlights that maybe we can dive into for today. So, one that I always love to talk about is, people always forget that there's someone on the other side of the trade. And so, when you're playing poker, the most important thing is who else is at the table. So, you can be a little league player, but if you're in a T-ball league, you're the MVP. And a lot of being one of the best poker players, which my definition is who's winning the most, because why else are you playing? Everyone's, you know, who's the most skilled, they're like, well, you know, all that matters is your bank account at the end of the day, that's why you're playing poker.

• 32:01Speaker 02

  And the best poker players in this sense are the ones who are playing in the best games, because it's relativistic skill. And so, I mean, that gets into a whole nother rabbit hole around, you know, online, where, you know, you're taking the games that are there and trying to get into them versus live, where, you know, the big, it's much more soft skills and cultivating relationships and getting into games where, you know, you might not be good, but the players are worse. Putting that aside for a second, thinking about who is on the other side of the trade and understanding them deeply, what are their motivations? So, at the poker table, a lot of people think they're playing to make money, but they're usually playing for some other purpose. They're playing for diversion, they want to gamble, they want to test their skills.

• 32:44Speaker 02

  And if you can figure out what their internal driver is, their id, you can predict their decision-making in some interesting situations. The same thing in trades, knowing what people's risk threshold is, what their targets are, what information might they have that you don't, what is driving their decision-making? Are they motivated? Everyone's motivated, but what are they motivated by? All of these factors where you need to understand the other player, the other person on your side of the trade, you understand their position, their mental state better than they understand their own.

• 33:15Anthony Pompliano?

  Can you change it in the financial markets? Like in poker, you definitely can, right? Because you're literally sitting at a table staring at them or you're playing with them online. In the financial markets, if I'm buying and selling stocks or doing other things, can I have an impact? Or do you think that's more market dynamics and less kind of 1v1, if you will?

• 33:36Speaker 02

  I mean, that's probably above my pay grade as a retail investor. I'm imagining there's people who are listening to this, who are doing things, you know, relationship-based over the phone, where they know their counterparty personally in some cases. And I assume that there's a lot more of those dynamics at play, but I wouldn't be able to speak to them.

• 33:56Anthony Pompliano?

  Yeah, I think that's fair. Okay, and then in the financial markets, one of the things I think is really timely right now is this idea of emotional control, right? And kind of risk management. You talked earlier about kind of cutting your losses, right? So you sit down to play poker and you don't know if you're going to play for 16 hours or 15 minutes. And at some point, you make the decision, today's not my day, and you get up and you walk away. Having the ability to do that and kind of the maturity and the emotional stability to do that, I think is obviously a really important skill because it essentially prevents losses, right? And as you said, kind of your 10 best days

• 34:38Anthony Pompliano?

  make up the majority of the returns for the year. How does that play out in the financial markets, especially on days like today where we're watching, you know, literally the stock market opened and it's down 7% and within the first 10 minutes, they halt trading. So it's obvious that there's incredible emotion and fear and greed and kind of all of these things that kind of coming together in this cocktail of all the things that make humans, humans, but also all the things that make humans really bad sometimes at investing. You've spent your entire career trying to avoid or sidestep that stuff. How do you think about it?

• 35:16Speaker 02

  I mean, this one is so timely and is so in line with what I'm thinking right now. A post I'm releasing this week is all about this. It's called "The Perils of Over-Optimization."

• 35:29Anthony Pompliano?

  Apperils?

• 35:31Speaker 02

  The perils of over-optimization, as in optimization being a trap. And let's say peace times, we're always trying to perfect things, our systems, our routines, our tools. And when we're in war times, sorry for the bad analogy, all those things go out the window. I mean, who cares what our task manager is? Who cares if our emails are well-formatted? Oh, I don't need to do my full routine today. Everything goes out the window. And that's a problem because you need to practice, like, every day is game day. And you don't know when you wake up, what the day is going to be like.

• 36:12Speaker 02

  And if you're completely unprepared for it, you're in a position to make very poor decisions. And so you have to wake up ready for anything. And hopefully, you're pleasantly surprised and say, "Well, okay, I can go back to doing the things that I would normally do." Or you're ready for, "Hey, this is what we were waiting for. Now is the time to take this as a faction." But that happens through preparation. And the antidote to this over-optimization is showing up and being consistent. And those are the best systems and the best tools and structures you use a day, is that you show up every day that if today is game day, you are ready to play.

• 36:52Anthony Pompliano?

  Elaborate on that a little bit, right? Because I think that it's very obvious, when you talk about it from a poker standpoint, of like, "I'm making the choice to sit down and I'm gonna play. And if it's my day, I'm gonna play for 16 hours. If not, then it'll be a short period of time." And a lot of the things that you described, I think, were very concrete in the sense of you're clearing your mind, you're getting that emotional balance, and then you start to play. And it's all centered around making sound decisions, or that framework or focus on process. In the investing world, it's a little bit different. Now, if you're a day trader, then I think that it has a very similar kind of mechanism to poker, right? Because you're making a lot of smaller decisions, going through that framework over and over and

• 37:37Anthony Pompliano?

  over again throughout a single day. But if you're not trading in the sense of kind of multiple trades per day, if you're making more longer-term decisions, how do you think about applying that framework or that plan to that when it's not, let's make a decision every day? Sometimes, actually, it's, we are going to resist making decisions and instead what we're going to do is we're going to not participate, right? We're going to basically wait months and months and months, or years, and not do anything, but still come to work every day, kind of ready for game day, if you will.

• 38:08Speaker 02

  Absolutely. So I think there's two dimensions of this. The first is having principles or rules in place that you look at past experience and with the benefit of hindsight and how you made decisions, continually keeping track of that, having what rules, what structures could we have had in place at the time in order to have made better decisions? And putting those things in place and trusting them when the situation comes up. And so I'm very principle-driven, is that I want to eliminate as many trivial decisions as I can to essentially outsource these to principles so that an algorithm could follow it, i.e. Bridgewater. And if I have seen that this strategy performs well over time, that if I do this every day,

• 38:53Speaker 02

  I do well, if I do this first, I do well, if I check these things before making a decision, I do well, I put that principle in place and I follow it in good times and in bad. And so that raises the floor, limits the downside, but also causes us not to miss things. I think on the other side, being maybe a little bit more tactical, if I can talk about a couple of things I've done with some of my portfolio manager clients, it comes to structuring the day in that the most important things are moving forward. You're being intentional with what you do, especially how you start the day before you let the flood, the stream of market information flood. And so something that I always talk about, if the market is opening up at nine,

• 39:37Speaker 02

  like your day doesn't start at nine, your day starts at six, six to seven, you have a morning routine that allows you to perform at peak. And then you have, you know, seven to eight, you take care of anything that you need to do so you can have your mind on the day. It's like, so that when you're at the office, you could be at the office where they open. And then I think from eight to nine is you've pre-selected one hour. I call this the power hour. What is your most important thing? In other terms, like, what are you going to do? Is this, you have a company that you want to do a deep dive on? Is it, you're writing a memo that's going to, you know, promote your position to help you get some deal flow? It's like, there's something that is holding you back from, you know, growing your portfolio, growing your investment base.

• 40:19Speaker 02

  What, if, my perspective is, if you prepared yourself, you've planned out what you want to do from that hour. And for that one hour, that is all you do, you single task? The rest of the day is a complete bonus. Market bell hits, you can be completely reactive as much as you want. Generally going from proactive to reactive is a one-way street. The second you check your phone, the second you check your email, the second you check, you know, the tickers, you're not going back to doing deep dive research. And that's why it's critical that you get it out of the way so that you're starting the day from a good place, that you're already moving forward. And then you can be opportunistic with no regrets. You know, you have full attention, you're very in tune with the dynamics of what's happening because you've cleared your mind, you've made progress.

• 41:02Speaker 02

  I think that that simple structure, thinking about how you start to the day in order to set yourself up well, it extends to investing, it extends to, you know, founders of companies. And it's just a matter of knowing, what are the important activities that are moving your business forward? And what are your bottlenecks? What is most holding you back? What can you do to attack that?

• 41:20Anthony Pompliano?

  I'm a huge believer in this. I mean, every morning I wake up and the first thing that I do is I write, right? And it's a way for me to basically organize my thoughts, et cetera, and I And probably one of the rare ones that I send it to people, but there's plenty of people who write in a journal or do whatever.

• 41:35Speaker 02

  This is what I call a forcing function, that if you've externalized your goals, there are others involved, even if, even if you think they might be reading it, that causes us to show up. It's a classic study, if you have a loose, loose idea, hey, I'd like to go to the gym tomorrow, on average, your chances are 10%. And you can continually raise that percentage as you add more forcing functions into place. Or if you get to the point where, hey, I'm meeting this specific person at this specific time at the gym, and we're going to do this workout, you go from 10% to 95% because you're going to show up.

• 42:09Anthony Pompliano?

  Yeah. It's crazy how science works, right? Like, a lot of people know this stuff, but they just don't take the time to actually put it in place to increase the probability of them doing it.

• 42:20Speaker 02

  Everyone's trying to reinvent the wheel, you know, looking for new diets, all these like last mile nootropic solutions, like, the right ways of doing things haven't really changed much in four decades, they're just not evenly distributed.

• 42:33Anthony Pompliano?

  Yeah. The planning part, I think most people say that makes a ton of sense, right? Put together your plan, clear your head, be ready for whatever comes to you that day. What comes to you that day, though, can drastically throw people off. And so it's kind of the Mike Tyson, everyone's got a plan until they get punched in the face. Today is a great day to have a conversation about getting punched in the face. Last night, oil dropped, you know, 30%. There was multiple circuit breakers that have gotten hit, both in the futures market and the stock market. We have seen the interest rate of, or the treasury yield drop to 0.5%, right? I think all of the treasuries now are below 1% for the first time in history. Just like, this is like, we're in a heavyweight battle.

• 43:18Speaker 02

  There's been a lot of firsts in histories recently.

• 43:20Anthony Pompliano?

  Yeah, and it's just, the reason I go to the heavyweight battles is because it's not like people got punched once in the face. They've got punched over and over and over again, right? It's kind of like the Marshawn Lynch, he's like, my job is to run them over and over and over and over again.

• 43:34Speaker 02

  Wear them down.

• 43:35Anthony Pompliano?

  That's what's happening in the financial markets right now. All of those people with plans, all of a sudden, aren't so confident in those plans. If you were talking to them or advising them, etc., like, what do you put them through? How do you have that conversation and keep them kind of as on task and on target as possible, given that they're getting those punches in the face continuously over the last couple of days?

• 44:04Speaker 02

  So, maybe I can propose a framework, maybe a visual interface, where we're talking about managing one's emotional state in the face of quickly changing circumstances. And so, I would have you manage... Let's say you visualize a continuum in front of you. So, you know, an arrow going from your left hand to your right hand. And one that we could do would be you have your parasympathetic nervous system and you have your sympathetic nervous system. So, sympathetic, essentially, fight or flight, heart rate pounding out of your chest. Like, you could outrun a bear at this moment. You are fully engaged. That is the full, you know, far right of the spectrum.

• 44:46Speaker 02

  And then, you have parasympathetic nervous system, you know, far left. Like, you've been meditating in a cave for the last 10 years and you've just emerged. You have reached nirvana. You are oneness. And thinking about, where are you on this continuum at this very moment? That is the first step, is awareness. If you can bring awareness, think about in terms of a measurement, you're making something that is subjective a little bit more objective, you can make better decisions. And the meta-skill here, the next level of this, is where on the spectrum is it best for you to be right now? Sometimes it makes sense to be full fight or flight. Sometimes it makes sense for you to be full guru. Usually, it's somewhere in the middle, but there's a great deal of nuance in there.

• 45:31Speaker 02

  Another one that I would propose, and, you know, maybe we could talk about making this into another two by two, would be you have fully confident on one side. You 100% know the right move. You're a maximalist. You're all in. You're leveraged if necessary. No news that could come out would ever change your mind. You have 100% priors. You are... Certain in black edge terms, you have the far left, which is hypercritical. Every new piece of information that comes out flips your flips your mind. You are, you know, on the razor's edge, a straw breaking the camel's back. You are extremely critical of your own thinking processes. What have I been missing this whole time? How have I gotten myself into this?

• 46:13Speaker 02

  You're maximally critical and the same times like recognizing where are you on this spectrum? Some of you listening today might be fully critical. You're thinking about, man, I should have acted sooner. Why didn't I see this coming? What do I do now? Everything is getting out of control. Maybe today is the day where you can recognize I need to shift more into confidence. Like this hasn't happened before, but similar things have happened before. Generally, best decisions are made by looking at base rates, by taking the outside view. Like what previous experience do you have to shed some light on this situation? Who can you talk to? What, how, when you've made decisions in the past, when they've gone well, what have you done? When they've gone well, how have they gone poorly?

• 46:58Speaker 02

  And can you do a pre-mortem in that to prevent yourself from making a bad decision today? Think about if I made a terrible decision today, you know, if I overreacted, if I'd made the wrong move, how did I fail and not doing that?

• 47:11Anthony Pompliano?

  Yeah. And I think this idea of measuring failure is really important because one of the things that I see this play out all the time in investing is really around if I sell today. Right? And the way that I always think about it is baby boomers are a great example. So I had this tweet storm over the weekend where I basically said, baby boomers basically started saving when they should have been investing over the last decade and have just started to invest when they should have been saving. So the whole idea is baby boomers had two core assumptions. One was that the financial system was bulletproof in the United States. And two was that their greatest asset was their home. The financial crisis obviously shook that to the core.

• 47:54Anthony Pompliano?

  And so all of a sudden, what happens is between 2007 and 2009, you see baby boomers get incredibly Unconfident in their decision making, they get unconfident in the financial system, and they start to break down. And so what they did was rather than start investing at what became the longest bull market in history, they actually became very kind of close-chested, and they started to save money rather than invest it. So as they're saving the money, stock market explodes, they're not exposed to that upside. Well, over time, they realize, hey, maybe I shouldn't be saving, I should be investing. This thing has been running like crazy. 2015, 16, 17, and 18, 19, they start saying, maybe I should be investing a little

• 48:38Anthony Pompliano?

  bit more. And so what do they do? They start to get a little bit of exposure, then more, then more, then more, and they start to realize, oh shit, I'm behind my financial goals, and they break down that decision-making process and then become so overexposed because they are more aggressive in their risk appetite to get yield and to get returns, that now, as the market turns over, basically right at the moment when they are, you know, no governor on this, 100% exposure to markets, etc., or incredibly high exposure to markets, bam, it turns over and is going to crush them a second time. And to me, like, although that plays out over a 12-year period, give or take, you know, 13-year period, that is

• 49:19Anthony Pompliano?

  the essence of really bad decision-making, and it shows a perfect example of how human emotion can take what are generally intelligent people and completely flip it on their head, and they do things out of comfort rather than out of sound decision-making. And it seems like that's what you've spent most of your life trying to combat and make sure that you yourself don't make those decisions.

• 49:44Speaker 02

  Wow, that was a total value bomb. I hope you guys are paying attention there. I know I was. In a quick word, yes, that's what I think about. I think everything really comes down to making good decisions, and everything essentially is a bet. You know, there's some risk to crossing the street, but I make that bet every day because I need to get to the other side. And it's very important to closely examine the way that you make decisions and to Have these principles in place to understand your own situation well enough and to step outside of it well enough. And so that if circumstances change, you can act appropriately, not overreact, not underreact.

• 50:25Speaker 02

  That you have conviction because you've done the hard work ahead of time that, you know, this just becomes a litmus test essentially.

• 50:33Speaker 02

  But that you know how you're going to make bad decisions and you prevent that in advance.

• 50:38Anthony Pompliano?

  How do you think about measuring downside risk and understanding when to kind of cut your losses and walk away? Or kind of shut down for the day versus continuing to experience losses or pain? Like, what's the framework that you use there?

• 50:55Speaker 02

  Well, I think this one's probably best illustrated by an example. So, we were talking about how a key advantage in poker is, we were talking about comfort a little bit, is getting another player out of their comfort zone. And so I was playing in a game the other night. The game's live online, they livestreamed it. I'm a little bit embarrassed by it, but to be honest, I think some of my decision making could have been better. But it's been, it was a very valuable experience to watch yourself making decisions. It's a very quick way to improve. I hadn't done that before. And the dynamic of this game changed very drastically. And so I had showed up for what was supposed to be a 5-10 no limit game.

• 51:38Speaker 02

  And so typically, in a no limit game, you buy in for $1,000. And in these games, they play a little bit bigger, so I was expecting to buy in for $3,000 or $4,000. And, you know, just to cover my downside so that I could play well, I brought $13,000. Alright, so this is, well, if things go really badly, I could lose $13,000, but my downside is capped. Like, I can only lose what I brought.

• 52:03Speaker 02

  I show up and I realize that there's some new faces in the room that I hadn't seen before. And a acquaintance and now, you know, trusted friend after he gives me this tip is like, hey, you see that guy? There's like five players at the table I recognized, one guy I didn't recognize, kind of, kind of slobby, kind of, you know, he had a giant thing of vodka in his hand. I'm like, wow, this guy is the target. And he says, hey, like, that's the best player in the city. Like, watch out, like, keep an eye on him. I'm like, oh, wow, that's, that's really interesting. And this guy goes on, there's 10, you know, 10 players at the table. And in a 10, 10 handed game, you'd probably want to be playing, depending on how good your cards are, between 10 and 20% of hands.

• 52:45Speaker 02

  It's just like, there's a lot of players at the table and it's just not profitable to play many hands. This guy is playing 50% of hands, so half of all hands he is playing. And it's just impossible to play profitably in this point. And he continues to consume alcohol and, you know, make some, some pretty questionable decisions. Like, clearly some thought behind it, but taking on way too much risk. And because he's losing and, you know, wants to try to get back to this even, right? This, this is a theme that occurs a lot in investment is we think about, you know, we're down. How can I get back to where I was before? He keeps trying to raise the stakes. And so what was a 5-10 game, because a 5-10, 20, 40, 80, 160, 320 game.

• 53:29Speaker 02

  Where now we are playing for 30 times the stakes that I had shown up for. And some hands, you know, these are some amongst the biggest games I've ever played. And I clearly am undercapitalized for this game. I didn't bring enough. And so I'm trying to think of my own strategy is, well, should I put all my money on the game? And to, because there's clearly a really big opportunity here. But if I get unlucky and I bust, then, you know, I have to go home. And, you know, I've, you know, blown my load. I have like, I have all my chips on the table. And so, you know, trying to play that dynamic strategy when these are dynamics that are so different. And what was very apparent to me, these are very, very skilled live players who are used to playing in very dynamic environments and very large games.

• 54:11Speaker 02

  And it has shifted from a situation from was completely in my comfort zone and very underneath my control. Where I know the exact strategy to is like, I don't really know what the exact strategy is in this game. And these guys have made it more central. Like, they understand these dynamics better. They're clearly playing really bad, badly fundamentally, but they're just going to be in situations.

• 54:32Speaker 02

  That they know well and I don't know at all. And so it reached, it reached a point where it said, well, even though on paper, I know I have a large edge in this game. Today, I don't think I have a large edge. And so at a certain point, after about six hours, I said, hey, guys, it's been, it's been fun. You know, the stream had ended at that point. I said, I'm, I'm gonna go home and, uh, you know, sleep it off. Um, and, you know, normally in a lot of these situations, I would have been up until 6 a.m. playing with these guys because the, this is, you know, this is like a once a month, you know, once a year potentially type game. You know, these, these guys could, you know, win and lose six figures in a night. Um, but I said, hey, given these, this, these dynamics, I don't think they're favorable to me. And I'm gonna make the, the smart decision to step away.

• 55:15Speaker 02

  And so I think maybe giving that example illustrates, you know, some of the things that I would think about.

• 55:20Anthony Pompliano?

  And, and part of it, I guess, is really, uh, understanding that even though you might be the better player at that table. Right? And, and maybe that's accurate or close to accurate.

• 55:32Anthony Pompliano?

  Being the best player doesn't always mean that you're going to go home winning. And so it's understanding not only the skill set of you and all the other players at the table, but also the environment and your comfort level. And kind of multiple variables there just not lining up. And so you decided to walk away.

• 55:47Speaker 02

  Exactly. And, and that's, that's really why keeping identity small is very important. And, you know, I've had issue and everyone has issues of thinking, you know, I'm the best. And, you know, my results show that I, on average, I am probably amongst the best, if not the best players. And actually I would, I would assume that some of these players have won quite a bit more than me, but just in games that I don't know about. And it, it required a humbleness of saying that, hey, in my environment, you know, particularly online. You know, six max cash games or a typical five, 10 game where I have a lot of experience. I would play against any of these guys any day of the week for as long as they would sit down with me. But today, given these dynamics, I am not the best player at the

• 56:31Speaker 02

  table. In fact, I might not be amongst the best players at this table. And so recognizing that and adjusting my perception and say, hey, that's okay, that's fine. And I know I win because I play the games where I'm amongst the best.

• 56:45Anthony Pompliano?

  So I tweeted this quote earlier today, and I actually didn't have anything to do with you coming in here, but now it makes a lot of sense, which is basically, you know, one of the big rules of risk management is to make sure that you never blow yourself up. You don't ever get to the situation where you can't live to fight another day. And essentially, that's what you're talking about here was even though there is potential high payoff, the I'm gonna go home without any money is not a good kind of risk reward trade off. And so walking away ends up being the right decision to make. Right? Tell me about this. So you've got a workbook. It is called Experiment Without Limits: Personal

• 57:26Anthony Pompliano?

  Experiments for Peak Performance and Productivity. You've got this life outside of poker, but you take a lot of the things that you do with poker, and you spend time with portfolio managers at financial firms, founders, executives, etc. Tell us a little bit about that work and then kind of how this workbook came together.

• 57:46Speaker 02

  Well, sure. So I mean, in the poker world, I coached hundreds of poker players who were already amongst the world. And I took them from, you know, top 2% to top 0.01%. And I realized that many of the skills that were instrumental to becoming one of the world's best poker players were highly transferable to other fields as well. So fast-growing companies, to executives who are, you know, high up in a large corporation, to especially, I love working with portfolio managers and other active investors. So, you know, real estate, crypto, that type of thing. And I've found that having these frameworks

• 58:27Speaker 02

  for decision-making, and essentially what I call peak performance, and that you are showing Your best self is showing up every day so that you are in the best position in order to make good decisions and just generally succeed. That I was able to take a lot of the things that I had developed in my, in my journey from going from being a pretty good poker player to one of the best, teaching this to other poker players and now taking some of those frameworks and teaching them to others who they can apply in their day-to-day job and day-to-day decision making. And so Experiment Without Limits was my attempt to distill down everything that I've learned in the past decade. So millions of hands of poker playing, four years of working with high

• 59:09Speaker 02

  performing executives into what are the few things that work reliably in order to perform? And so, you know, there's building block chapters as far as how do you set goals? How do you build systems? How do you develop habits and routines? And then I get hyper tactical around how do you optimize your time? How do you optimize your focus? How do you optimize your energy levels? How do you accelerate your learning? How do you eliminate procrastination? How do you optimize your mental game? These are their principles in there that are distilled down. And then I break them into what I call experiments where you can follow this step by step and implement this into your life and see the results for yourself.

• 59:48Speaker 02

  And yeah, I give it away for free. It's available for download on my website at theforcingfunction.com/workbook. I think we'll probably put a link in the show notes. And yeah, if what I've been talking about today is of interest, you know, highly recommend you check it out.

• 1:00:04Anthony Pompliano?

  Can you tell us a story about somebody that you've put through the program and kind of like has wild results? Cause it, it's one of these weird things where I think when people hear like, "Oh, you shouldn't procrastinate," right? Or, "Oh, you should like focus and you should prepare." Like, it sounds stupid, but then when people actually go through something like this, they're like, "Holy shit, my life can change," right? The results of what I am doing can change. So maybe, can you tell us a story of kind of what you've seen and impact it can have?

• 1:00:33Speaker 02

  Sure. So, right now, I think about taking people who are already performing in a very high level, let's say they're in the top 5%, and how do I get them into the top 1%? This is not a 0 to 60 type thing. These are already people who are having amazing results and want to improve even more. And I'll give maybe an example is, on the outside, it looks like this person has everything put together, right? I don't want to get too specific about clients just to protect their anonymity, but they have everything put together. No one would ever guess that they think of themselves a procrastinator, that they don't really stick to their routines, that they wake up and just kind of do whatever they feel like, or don't really have a good plan, that they're constantly getting distracted

• 1:01:17Speaker 02

  by Twitter or on their phone, and at the end of the day, they just don't feel like they're very effective. Like, from the outside, it looks like everything is going well, and they're getting the things they need to do done, but they're not moving the right things forward, they're not doing the right work, their time is not really a reflection of their priorities, and, you know, some of those priorities are being neglected completely, whether it's their health, whether it's their family, whether it's their relationships, and in some points, their business. And so, I think about what are the habits and systems that this person needs to put in place in order to make sure that they're moving forward in all these right ways. And, once we start collecting data together, what's working, what's not working, we can identify ways to double down and accelerate that progress.

• 1:02:01Anthony Pompliano?

  Yeah. How much of it is doubling down on kind of what they're good at and ignoring the things they're bad at, versus trying to cut out the things they're bad at?

• 1:02:07Speaker 02

  Cut your losses early, double down on your winners.

• 1:02:09Anthony Pompliano?

  Really? And so, it's if you know that, "Hey, I procrastinate a lot, but when I'm hyper-focused, I'm incredibly effective at what I do," do you basically then say, "Look, forget about the procrastination component, let's figure out how do we get you in that hyper-productive state," and just double and triple down on that?

• 1:02:27Speaker 02

  Hundred percent. So-

• 1:02:30Speaker 02

  Focus means being focused. And so, pick one thing and focus on it. And I will compress this down to a book title, which is the goal. And this talks about the theory of constraints, or the notion of bottlenecks, that everything is a linear process. And along this process, there is one point that is most holding up, going from input to output. And so you said, maybe for this person, it's procrastination. Maybe it's they're not planning. Maybe it's that they don't have good eating habits. Maybe they're not getting the right level of sleep. Maybe they have too many distractions. Their work environment is not supportive, right? I try to be a detective and suss this out of them, because what people think is the problem is never the problem. And try to uncover, what is the bottleneck?

• 1:03:13Speaker 02

  What is most holding back progress? And the really, really counterintuitive idea of the goal is that any effort spent on something that's not the bottleneck is wasted, because it is not proving overall output. And so, the key is first identify the bottleneck, then keep trying things until the situation improves by attacking that bottleneck. If nothing is changing, you know you don't actually have the bottleneck.

• 1:03:39Anthony Pompliano?

  Yeah, it's fascinating when you really break down what I think are commonly understood or accepted issues, right? So, hey, I don't follow my routine. I don't focus, and all these things. But when you scientifically break it down as to why, how do we correct that? And start having that conversation? It's pretty simple to figure out. It's just the fact that there's somebody holding you accountable and asking you the questions and forcing you, right? Kind of that forcing function of changing or improving.

• 1:04:09Speaker 02

  Simple does not mean easy, right? If knowing how to do it meant we were all doing it, I mean, why are we even having this conversation? You know, we're already doing everything we wanted to do. Clearly, there is a gap there, that there are things that we know, we quote-unquote "should be doing", but we aren't consistent with doing. And that's part of my functionality, right? I call myself "the forcing function", because I force you to do these things in order so you can start having the results, to internalize this. This is something that I should be doing to the point that it crystallizes into your identity. That it no longer becomes a habit that you need to keep in the air. It's just something that you do. But the first part of that process is you need to be taking action in order to have those early gains.

• 1:04:54Speaker 02

  Right? Classic newbie gains when you go into the gym, you haven't been in the gym in a year and you start working out and oh my God, I'm jacked. Well, you're going to hit a plateau eventually, but those newbie gains are what keep you coming back through the pain. And that is all growth is stretching. It's having that pain, creating new muscles and you break through that plateau.

• 1:05:13Anthony Pompliano?

  Yeah, the gym is a great example where I always wonder how much of the like, let's say a fitness trainer. Is the actual exercises they're asking somebody to do versus just the trainer being there. So you show up, right?

• 1:05:28Speaker 02

  I think, I think, I think the trainer having you show up is worth the price of admission. I work with a trainer myself. And if that's all it was, that would be worth it. But what I think the really interesting value is you outsource your decision making to them.

• 1:05:44Anthony Pompliano?

  Interesting.

• 1:05:45Speaker 02

  You don't need to have your routine. You show up and you do what you told. And it's much easier to follow through if you don't have to think about, oh, how long do I have in between sets? Should I be doing Chester back today? Oh, am I, should I make it through the full hour? Right? It's like you're outsourcing this decision making to someone and by releasing that load, you increase your performance. You actually make a lot more out of that time that you have.

• 1:06:09Anthony Pompliano?

  Do you think it all about kind of, what is it like the exhaustion from decision making throughout the day? How do you think about that in terms of, you just talked about outsourcing decision making to somebody else for working out. But what are your thoughts on just like in general? People make too many decisions or they don't make enough decisions during the day and can you actually kind of get tired?

• 1:06:32Speaker 02

  Yeah, I mean, the research on some of this stuff that's come out in psychology is kind of a cluster duck. Yeah, I mean, the actual word, obviously. This one in particular, it's, it could go either way. And so it's shown that, some people have shown that willpower is a muscle. And so you get stronger the more that you exercise it. Other people have shown, pretty convincingly, decision fatigue.

• 1:06:59Anthony Pompliano?

  That's the word I was looking for. That's the intelligent way to describe the question.

• 1:07:03Speaker 02

  And so you've seen, you know, classic Steve Jobs wearing the turtleneck. I kind of pulled it off a little bit today. You know, Obama wearing the same suit every day. It's like, you try to eliminate trivial decisions because you have a limited supply and you want to save that capacity for decisions that really matter. And I subscribe to that a little bit. And I also subscribe to the over, the long run. I want to do things that are hard to make those hard things easier. It's inconclusive and the latest findings, which, you know, who knows how long the Lindy on in this is, is if you believe that you have unlimited willpower, you have unlimited willpower. If you believe that willpower is limited, you have limited willpower. So in some cases where the science is unclear, you choose a belief that's most helpful for you taking action.

• 1:07:45Anthony Pompliano?

  I love it. What are your thoughts on Bitcoin and crypto?

• 1:07:48Speaker 02

  Oh, this is where I get into speculative territory, pun intended. You know, I think most people listening to this will know more than I. I will only say personally, I've had large positions in the past and I intend to have large positions in the future and I have no position currently.

• 1:08:08Anthony Pompliano?

  No position? Oh, interesting. Why no position?

• 1:08:15Speaker 02

  We live in very interesting times. Things that are generally uncorrelated over a long time scales can become hyper-correlated on shorter time scales. I am of the perspective, again, limited, many of you know more than I, that crypto at the moment is performing as a risk-on asset and we're in a risk-off environment. I'm very bullish on Bitcoin's long-term process.

• 1:08:42Speaker 02

  Potential prospects, exactly. And I intend to be, you know, a large holder in the future, but at this moment I am not.

• 1:08:50Anthony Pompliano?

  It's interesting that you think of it, kind of the short-term timeframes and actually take the position on and off. I think a lot of people are either, I believe or I don't believe. It's kind of a very binary type thing and it's almost more religious than it is risk analysis, right? And so it's refreshing to hear somebody who basically says, no, actually, I can be a long-term believer and a short-term, maybe not a non-believer, but just a bear or a neutral party in the short-term, even though it is in contradiction to my long-term beliefs.

• 1:09:27Speaker 02

  The biggest costs are always hidden. And so two I would mention here, first is sunk cost. And the biggest sunk cost is identity. Like you said, if any belief becomes religious, to, you know, go against that belief is to give up your religion. And we have a lot of case studies on how hard that is. So someone is invested and so they stay invested, right? So if someone is uninvested, and so they stay uninvested, because they have a sunk cost of identity. The other one is opportunity cost, is there, I have a limited amount of capital to invest. And so anything that I am invested in, this could be time, money, energy, relationships, et cetera, are resources that are coming away from everything else. You and I having this conversation right now is coming at the expense of everything

• 1:10:12Speaker 02

  else that you could be doing. Everyone else could be doing different things instead of listening, but they're here with us. And that's amazing. But this opportunity cost is so pervasive, because you have to think about, I am not forced to be in any position at any given time. And being in this position comes at the expense of all the other positions that I could be in. And so in life, it's waking up in every day and not saying, am I holding? It's that I assume that I have sold everything before, and does it make sense to buy back in? Right? It's like, I am never committed to any position. I continually buy back in, right? I reinvest with my relationships. I want to keep showing up.

• 1:10:53Anthony Pompliano?

  This meme that Joe has pulled up here is when you buy the dip, but it keeps dipping, which I think is kind of your point, right?

• 1:10:59Speaker 02

  Exactly. You have to, you have to update with new information. And that could, that could lead you in both sides today. So I think keeping in mind both of those, the sunk cost and the opportunity cost, you know, it's important to be rational to keep identity out of it. And if times are changing, change with them.

• 1:11:18Anthony Pompliano?

  And how much of this is an analysis of price versus price intersected with future prospect, right? Meaning that is it more of a macro decision for you risk on, risk off? Or is it risk on, risk off is one perspective, but then you overlay that with, well, is Bitcoin at 10,000 or 2,000 right now? And kind of these other variables that go into it?

• 1:11:41Speaker 02

  Sure. For me, it's definitely an overlay. Obviously, current volatility plays into that where being able to have limit orders in is very beneficial. It's also thinking about, you know, what am I comfortable with? And at what point am I, am I making good decisions, right? Taking the, taking the personal into account. I think it's important to come in that I have a target. I have these principles that I'm going to use to make decisions and evaluating on an ongoing basis. Like, are these conditions still correct?

• 1:12:11Anthony Pompliano?

  Yeah, I think it's a very rational and frankly, pretty even keeled way to think about it, which doesn't surprise me that that's

• 1:12:18Speaker 02

  I'm biased, but I think it's a good way about going on in life.

• 1:12:22Anthony Pompliano?

  What's the best book that you've ever read?

• 1:12:26Speaker 02

  Oh, man. I mean, it really, book recommendations are tough because they're so personal and it really depends upon, you know, what the person is, you know, where they are in their life right now. What's the message that they need?

• 1:12:36Anthony Pompliano?

  Completely.

• 1:12:37Speaker 02

  Some of the best books that I've ever read aren't objectively the best, but they have the message that I needed to hear. I think people think about reading as a way to accumulate knowledge when really it's a way of priming thought. So, you know, what do you want to be thinking about right now? I mentioned the goal earlier. I think for anyone who is looking to improve their processes, which I believe should be anyone, that's a very good place to start. I read House of Morgan very earlier this year. I think he's a, Chernow is a fantastic writer, anything he's put out. And if you want to understand, you know, the history of the financial system, you know, generally seeing where we've been, all of this has happened before in some, some sense, you can have a better understanding of what's happening in the present because we're a little bit too close to it in a sense.

• 1:13:22Speaker 02

  Having a little bit more, you know, time perspective can be useful for evaluating the present.

• 1:13:30Speaker 02

  As far as best book that I have read all time, you know, the book that I reread every year probably qualifies. It's called, it's one of those old school self-help classic that's been in and out of print for 50 years. It's called The Magic of Thinking Big.

• 1:13:47Anthony Pompliano?

  The Magic of Thinking Big?

• 1:13:49Speaker 02

  The Magic of Thinking Big. And, you know, it kind of has some of that Dale Carnegie feel, where it's a little bit folksy, a little bit dated, but the message is so, so important. And for me, where I'm trying to think about bets, and particularly bet sizing, it's a very good frame for thinking about, I want to place fewer bets, but I want to place much larger bets. How can I think bigger? This has kind of been outblown in terms of the 10x mindset, but it comes into play a lot with bottlenecks. Rather than trying to do a bunch of things, I want to put a lot of effort into the thing that's going to have the maximal outsized impact.

• 1:14:24Anthony Pompliano?

  Yeah, I love that. I'm a huge believer in the mindset of going larger, thinking bigger, etc., and how people generally, they just avoid it because it's scary, right? The idea that by going larger, you can actually benefit, but you might even be able to keep the same downside risk is usually lost. What about Aliens? Believer, non-believer?

• 1:14:51Speaker 02

  Agnostic.

• 1:14:52Anthony Pompliano?

  Oh, come on. Agnostic?

• 1:14:58Speaker 02

  Yeah, yeah. One more I'll add to the list that's very, very topical and timely. It's been quite a, you know, trippy experience. We were talking about, you know, understanding the historical in order to have a better perspective on the present. The book is called The Hot Zone by Richard Preston, and this is about the Ebola outbreak in the 80s.

• 1:15:19Anthony Pompliano?

  Interesting.

• 1:15:20Speaker 02

  Some interesting parallels there that you can see in terms of headlines and otherwise. And so, reading that in parallel today has been a very, very interesting experience. Really recommend that one if you're looking for what do I pick up today, you know, while you're hopefully not sitting on a plane, maybe sitting on a beach. Back to Aliens.

• 1:15:40Speaker 02

  You know, we're getting into books now. You know, one of the biggest red pill moments for me last year was reading the Three Body Problem trilogy. It's been coming up a lot in the hacker communities and I ignored it, ignored it. It's like, the writing is not amazing. It's like, stick with it, stick with it. And the ideas are so good and the perspective is so big. And it goes through, you know, many dimensions and billions of years and, you know, always out to the further reaches of the galaxy. But it's not a space opera. It's a metaphor for communism versus capitalism. And the layers go so, so deep. And part of it is the perspective that, you know, aliens are other forms of life forms

• 1:16:22Speaker 02

  that just took a slightly different branch on the evolutionary tree. And due to different outside constraints, turned out very differently. You know, that we breathe oxygen, that we have skin or are made of meat. All these things that we completely take for granted are just a function of the constraints of the primordial soup that we are formed in. And so, for me, it's very clear that there are other beings who we might even construe as gods. You think about typical, you know, flatland, a fourth dimensional creature coming through the third dimensional is kind of analogous to if you had a sphere going through a page where it just looks like a expanding and a decreasing circle where something like that

• 1:17:05Speaker 02

  would be so beyond our comprehension, we wouldn't even know how to explain it. That there are clearly many physical dimensions out there and that the universe is a very, very big place. You think Fermi-type calculations. It's very possible and even probable that there is some form of life form out there that we construe as alien that exists. And I think as, you know, augmentation, genetic and otherwise becomes a thing, that will become a very interesting conversation in the coming decades as far as what is this definition of human? And we might have aliens amongst us who started human.

• 1:17:45Anthony Pompliano?

  That might be one of the best answers I've heard.

• 1:17:48Speaker 02

  Good, I should write it down.

• 1:17:50Anthony Pompliano?

  It is a, it's a great way to look at question the definition of alien, question the definition of us, right? And also how those two things relate over time.

• 1:18:01Speaker 02

  I mean, I mean, that just opens up the whole rabbit hole of language and fuzzy definitions where we're trying to communicate right now. And I'm using words and hopefully we're pointing to the same thing, but that many times language is a limiter of thought. And by trying to put a label on something, we put blinders on.

• 1:18:20Anthony Pompliano?

  What one question do you have for me to finish up?

• 1:18:30Speaker 02

  I would love to know what new information would come into place where you no longer believed that Bitcoin was the future.

• 1:18:41Anthony Pompliano?

  There's a lot of things that could happen. So one of the things, the reason why I love the religious angle of the conversation is I think a lot of people perceive me to be religious about it.

• 1:18:54Anthony Pompliano?

  But I'm actually, I think, very non-religious about it.

• 1:19:00Anthony Pompliano?

  Things that could change are actually like pretty obvious. Like if there was a bug introduced from a technical standpoint, that would drastically change the way I thought about it. If the code did not execute what it was supposed to, it's kind of related to a bug, right? In terms of like the having just didn't happen or for some reason, that would make me question a lot of things. If there was external forces that acted on it in some way. So let's say, for example, there was a coordinated global effort by nation states to ban ownership or something, right? I think that would make me question it. If there was something that was created in which the market started to determine was more valuable than it,

• 1:19:43Anthony Pompliano?

  at some point I would change my mind, etc. So I don't think that it's so much the, like, what is the one thing that would change? Cause there's actually a whole bunch of things that could happen that could get me to change. To me, it's actually, what is the probability of any of that happening? And I don't think that there's the same probability of it all happening. Like it's actually kind of a descending probability to some degree. And what I normally describe is

• 1:20:10Anthony Pompliano?

  If you go to a spectrum of things, like the most technical things on the left and the most non-technical things on the right, I'm much more worried about the technical things than I am about the non-technical things. But the technical things aren't like the things you hear people on Twitter yelling and screaming about of like, "Oh, it's, you know, the block times or the speed," or like all that kind of stuff. It's not performance-related. It's all about the actual structure and the ability to prevent errors, right? So when somebody asks me like, "What do I think is the number one most likely thing to occur that will ruin Bitcoin?" It's what I call it the self-inflicted wound. It's some kind of code gets committed that ends up actually having a bug in it and that code ends up ruining the whole thing.

• 1:20:54Anthony Pompliano?

  And so the, like, the reason why I believe that is what is the thing that can act on Bitcoin that is most likely to have an effect? It's humans changing it in any form at all. I'm much more worried about that than I am like, you know, what a central bank does or whatever else. And so I think that's in the grand scheme, the thing's like a pretty small concern because the process is pretty well determined. It's, you know, we've got 11 years of kind of seeing how it plays out and they're pretty slow, methodical, intentional, et cetera. But I don't think a lot of people worry about that stuff, right? When I talk to people, they're usually worried about like all the other stuff, like, "Oh, what is gonna happen if, you know, X or Y or Z happens?"

• 1:21:38Speaker 02

  This is being overlooked.

• 1:21:39Anthony Pompliano?

  Yeah, and to me, it's like, I one time gave the example to somebody, the things I worry about Bitcoin are the things that are closest to Bitcoin, right? It's almost like if you think of a fort in medieval times, right? Very, very rarely was it some invading force just came and killed everybody, right? It was usually things like, "We accidentally poisoned ourselves," or "There was somebody inside who like, you know, was mad at the king, so he killed the king," right? Or "They allowed somebody to get into the fort because their brother was from another town," or...

• 1:22:17Speaker 02

  Human error.

• 1:22:18Anthony Pompliano?

  Yeah, like all that kind of stuff. And so I think... Same thing here. Hopefully, we've got all the fail self safes in place. You know, I'm obviously have very high conviction given the data we have today, but look, it can change, right? And so, I don't know. We'll see what happens, but it's one of those things also where like at some point you're just like, look, this is what I believe, right? If it changes, I'll let everyone know, but like reminding everybody every day that this is what I believe. People are just like, if you stop telling them, they're like, we do not believe that anymore. You're like, no, no, I'll let you know if I change my mind, but not, not yet.

• 1:22:53Speaker 02

  That's really fascinating, and it touches on this interesting idea of being able to change your mind and not getting entrenched in your current position. That if circumstances change and knowing what those circumstances are, that you're ready to change. Classically called, you know, strong beliefs, weakly held, where there are some people who do change their mind, but because they have this identity that's been built around this position, you know, they become full hedgehog. You know, how do you switch from a fox and, you know, not make those who are following you for this very specific opinion that validates all their own beliefs upset. It's, it's a challenging thing in this world that's hyperconnected, driven by social media, etc. And I think it'll be a continually interesting one.

• 1:23:34Speaker 02

  And those are changes of beliefs that I am particularly sensitive to and weigh very highly. If someone has been pounding the table for a decade with a certain position and all of a sudden they reverse, that's a really big signal to me.

• 1:23:48Anthony Pompliano?

  Yeah, it's, you see this in politics all the time, right? Which is basically like.

• 1:23:52Speaker 02

  Well, they don't actually hold positions.

• 1:23:54Anthony Pompliano?

  Well, here's, here's the two examples. So I'll go both sides of the aisle because we have examples right now of each. Mike Bloomberg was a Republican his entire life and ran as Democrat. Donald Trump was a Democrat his entire life and ran as Republican and.

• 1:24:10Speaker 02

  Political parties don't actually exist.

• 1:24:11Anthony Pompliano?

  Exactly. And so you almost get into this thing of like the quote unquote identity. Almost is my identity only matters because it's a self-serving identity, more so than it is actually what I believe. And I think that being able to separate when is identity like truly identity? Like, I actually believe this stuff. I'm identifying with it, etc. Versus, I want you to believe on this person because I identify this way.

• 1:24:35Speaker 02

  Cognitive dissonance is a hell of a drug, right? If it's changed my beliefs or changed my behavior. Woo, changing my behavior.

• 1:24:43Anthony Pompliano?

  All right, where can people go get the workbook, find you, etc.?

• 1:24:48Speaker 02

  This is so much fun. I feel like we should do this again sometime. So if what I said today resonated, you know, if I've gotten you so far, and perhaps I can get you to come along a little bit deeper, highly encourage you to check out the workbook. So my company is The Forcing Function, and that can be downloaded for free at theforcingfunction.com/workbook. Some of the books and articles that I mentioned today, we'll throw some links into the show notes as well. I think this concept of bottlenecks is really important because there's likely something that's holding you back that's invisible to you. And so in that realm, I've created a free quiz that you can take that's called the Performance Assessment. And so that's theforcingfunction.com/assessment.

• 1:25:31Speaker 02

  And the goal of taking that quiz is to eliminate what is most holding you back. I can be hit up on all the major social media, take your pick. My handle is always @SparksMarks.

• 1:25:45Anthony Pompliano?

  Go get the workbook. Very simple. I've had the chance to look through it. And when you hear workbook, by the way, some of you are going to be like, oh, what is it, like two, three pages, like a worksheet? This is like a legit book with like, all kinds of information, quotes, workspace, a lot of different, like I'll call them tasks almost, and things that you can go through. There's like a daily planning template, etc. So it's-

• 1:26:10Speaker 02

  It's 100 pages, and every word in those pages has been carefully chosen to keep it as short as possible.

• 1:26:16Anthony Pompliano?

  This is the page we're going to show people. There's literally all kinds of graphs and charts, etc. So go and get this. But thank you so much for coming, man. This is awesome. You got away with thinking about the world that I think more people could benefit from. So I appreciate you coming in and sharing that. And hopefully people stay safe out there because the markets are not going to be their friend for the next few days, I don't think.

• 1:26:39Speaker 02

  Absolute pleasure. Thank you for having me.

• 1:26:41Anthony Pompliano?

  Hey, everyone. Pop here. If you liked this episode of Off the Chain and want to help us take crypto to the top of the apple, Spotify, and other podcast charts, please do us a favor and rate, review, and subscribe. To review, simply go to the Off the Chain homepage, scroll down until you see the five blank stars. Taking 15 seconds to fill those stars in and leave a quick review goes a long way in helping us take the entire crypto ecosystem to the top of the charts. I appreciate you listening, and see you next time on Off the Chain.