Heuristics And Biases

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It’s the title of Part II of Dr. Kahneman’s Thinking Fast and Slow. He won the Nobel Prize in Economics, and his book can greatly improve your poker and thinking.

It convincingly argues that most people – including you and me – don’t think nearly as well as we think we do. It provides solid evidence that shows how, when, and why we think badly. If you understand the reasons for your mistakes, you’ll make better decisions and win more money.

Many people – including some excellent poker players – won’t analyze their thinking. To protect their egos, they reject evidence that conflicts with their inflated self-images. They either won’t read this book, or they’ll insist that its research doesn’t apply to them. I hope you’re more open-minded.

Biases

“Systematic errors are biases, and they recur predictably in particular circumstances.” (p. 4) Everybody has biases, even the best-trained scientists. Because they accept that reality, scientists have developed methods that reduce the effects of their own and other people’s own biases.

If you read this book with an open mind, you’ll certainly recognize some of your biases. You’ll also realize when and where these biases are most destructive and make much better decisions.

For example, a previous column said this book taught me why Jim Brier and I – despite studying hard – disliked no-limit hold’em (NLH) and didn’t play it well. Since we were unlikely to overcome this bias, we made the only intelligent decision: We rarely play NLH.

Many people can’t accept their limitations. They may deny their biases or insist they can overcome them. Occasionally, they succeed, but they usually fail. For example, many people think like Jim and me, but continue to play NLH, even though they would do better in other games.

The Law Of Small Numbers

You probably know the law of large numbers: “Large samples are more precise than small samples.” But you may not have thought seriously about the opposite law: “Small samples yield extreme results more often than large samples do.” (p. 111)
The cause is obvious: Random variations are much more likely to occur in small samples than large ones. If you flip an honest coin four times, you’re much more likely to get all heads than if you flip it ten times. If you flip it 1,000 times, you have essentially no chance of getting all heads.

This law has caused countless mistakes because our brains are hard-wired to reject randomness. We see patterns and believe they are caused by some external factor when the apparent pattern’s only cause is a small sample.

Kahneman cites a common bias of many basketball players and coaches: The myth of the hot hand.

“After making four or five shots in a row, the coach and the other players will pass the ball to him, and the opposing players may double team him.

“Analysis of thousands of sequences of shots led to a disappointing conclusion: there is no such thing as a hot hand in professional basketball, either in shooting from the field or scoring from the foul line. Of course, some players are more accurate than others, but the sequence of successes and missed shots satisfies all tests of randomness. The hot hand is entirely in the eye of the beholders, who are consistently too quick to perceive order and causality in randomness. The hot hand is a massive and widespread cognitive illusion.

“The finding was picked up by the press because of its surprising conclusion, and the general response was disbelief… Red Auerbach, the coach of the Boston Celtics, said, ‘Who is this guy? So he makes a study. I couldn’t care less.’ The tendency to see patterns in randomness is overwhelming— certainly more impressive than a guy making a study.” (p. 117)

Gaming Implications

Casinos exploit this cognitive illusion: Roulette wheels show the results of the last ten or twenty spins. Casinos give baccarat players cards to record the most recent hands. Casino managers know that people will bet more if they think they see a pattern that can predict the future. Since nobody beats these games, increasing their bets obviously increases their losses.

Poker players are less gullible. Only the weakest players believe that “hearts are hot” or “nines are running.” But far too many players believe in rushes, even if they won’t openly admit it. When they think they’re hot, they play more hands. When they think other players are hot, they avoid them.

Intuitive Versus Logical Thinkers

Because logical thinkers are much more rigorous than intuitive ones, they have this cognitive illusion less often. A previous column said that Kahneman used the term, “System 1,” for intuitive thinking.

“System 1 is not prone to doubt. It suppresses ambiguity and spontaneously constructs stories that are as coherent as possible… System 1 runs ahead of the facts in constructing a rich image on the basis of scraps of evidence.” (P. 114)

In simple English, intuitive thinkers often see patterns when the evidence wouldn’t convince a more logical thinker. They may not explicitly admit it, but they take a tiny bit of unreliable evidence, build a story around it, and then deny or disparage any evidence that disagrees with that story.

Kahneman’s General Conclusions

“The law of small numbers is part of two larger stories about the workings of the mind. The exaggerated faith in small samples is only one example of a more general illusion— we pay more attention to the content of messages than to information about their reliability, and as a result end up with a view of the world around us that is simpler and more coherent than the data justify.

“Jumping to conclusions is a safer sport in the world of our imagination than it is in reality. Statistics produce many observations that appear to beg for causal explanations, but do not lend themselves to such explanations. Many facts of the world are due to chance, including acidents of sampling. Causal explanations of chance events are inevitably wrong. (p. 118)

Recommendations

Read this book, and repeatedly ask yourself, “Do I have that cognitive bias?” Then do whatever you can to correct it, and avoid situations that cause it.

Accept that randomness is everywhere, and the law of small samples can make you see patterns that don’t exist.

Don’t believe anything that’s based on a small sample. For example, accept that apparent rushes have no predictive value. Neither does the fact that you have missed eight flushes in a row. The odds never change.

Tune into other people’s cognitive biases. Learn how they think, not how they should think or you would think in their situation. Then exploit their illusions. For example, if they think they’re hot, they will overplay their cards, and you should play more aggressively. If they think you’re hot, bluff more often.

In other words, understand, accept, and adjust to your own and other people’s biases. ♠

After publishing five expensive poker books, Dr. Al, [email protected], now writes inexpensive eBooks. How to Beat Small Poker Games, Stay Young; Play Poker, How to Beat Killed Hold’em Games, and Competitive Edge Strategies For Poker And Business Winners cost only $2.99 at Amazon.com.