Lucky Maverick: The Art and Science of Betting on Yourself

The Eight Most Impactful Concepts That Changed My Life (And 30 Other Important Ideas)

About Lucky Maverick [https://luckymaverick.substack.com/about] About Jonathan Bales [http://www.jonathanbales.com/] At one point in my life, I thought that in Pizza Hut’s “Makin’ it great” ad campaign, they were actually saying “Brickin’ a brick.” I mean I was a toddler, but still. Brickin’ a brick. I believed this for years, even when I was old enough to logically understand “brickin’ a brick” doesn’t make any f*****g sense. I always thought it would be funny if a big company ran a huge ad campaign with a slogan that was totally meaningless just to see how it would perform. That’s what I’d do if I were in charge. “McDonald’s: Ready for the lightning?” Then we’d spend millions of dollars on it, maybe changing the classic ‘M’ logo to add in lightning bolts, and then I’d get fired. It didn’t matter that I believed Pizza Hut’s slogan was “Brickin’ a brick.” I got by. Even if I believed it today, it probably wouldn’t change much for me. It’s okay to have beliefs that are wrong. Most thoughts—and even actions—don’t matter [https://luckymaverick.substack.com/p/how-to-improve-your-decisions-immediately]. The majority of what you think you know is probably wrong, and most of what’s right doesn’t mean s**t anyway. Sometimes, though, you come across an idea that’s truly impactful to your life. It might still be wrong, but at least it’s useful for you, which is better than being wrong and useless I suppose. I think the value of knowledge probably grows exponentially such that most of it is basically worthless but a small percentage is overwhelmingly valuable. This has been my experience, anyway, as a few basic ideas capable of shifting my worldview have been more valuable than everything else I know combined, so I’ve tried to prioritize finding this rare knowledge that actually makes a difference, blocking out almost everything in search of the truly scarce stuff. With that said, I thought it might be cool to talk about the most impactful ideas that have changed my life thus far. The main criteria I used for selecting these is that each idea is something with which I at some point either disagreed or didn’t even really comprehend. It’s really important to get adequate sleep, but everyone knows that. These are all ideas that at some point I didn’t grasp, but ones that made profound impacts to my life once I did. The Big Concepts Convexity Errors, randomness, and “the unexpected” should help you, not harm you. If you’ve read my articles for more than 10 minutes, you probably know I’ve learned so much from Nassim Nicholas Taleb. From black swans to antifragility to being a giant dick to anyone who disagrees with you on Twitter, I’d say I owe more of my success to Taleb than anyone else I’ve read, even if he’s a total dick on Twitter. The main idea that’s changed my worldview is convexity, and specifically the concept of acquiring more benefits than harm from chaotic events. Whereas most people focus on improving prediction accuracy—and sometimes in areas in which that’s nearly impossible—few properly focus on the payoffs, which are more easily controllable and offer a larger usable edge in terms of competition. I applied this to DFS by focusing on ownership and lineup composition instead of projection accuracy. That is, maybe this player or team that everyone thinks will do well actually will, but maybe they won’t, and if they don’t, how can I benefit to the greatest degree? One way to apply convexity to your life is to mimic evolution [https://luckymaverick.substack.com/p/evolution]: * Don’t suppress chaos. Natural selection is what Taleb would term “antifragile”—the opposite of fragile—because not only is it not harmed by chaos, it benefits from it. A species can change for the better fairly quickly in evolutionary terms from a single random genetic mutation. Even natural disasters are positives for most species as a whole, assuming they’re not entirely killed off, because they end up coming back stronger and more prepared than before. Humans, too, are hopefully more prepared for the next pandemic; COVID has been devastatingly brutal, but “good” and “bad” are designations that often change based on your time horizon. What’s bad in a static environment can often be one of the most beneficial things when viewed long-term. “Failure saves lives. In the airline industry, every time a plane crashes the probability of the next crash is lowered by that. So these people died, but we have effectively improved the safety of the system, and nothing failed in vain.” By embracing chaos in all aspects of life, you’re set up for more sustainable long-term success. That’s one reason I tweeted this: Not all jobs are the same and every person is different; there’s no one-size-fits-all plan for everyone. In fact, most people are probably best off in the employee role. Generally speaking, though, one of the biggest misconceptions about being a salaried employee is that it’s safer than something like an independent contractor. Being a contractor isn’t always a great solution—it’s not feasible in some areas and takes a long time to build a customer base—but who do you think is more susceptible to a sharp change in income: someone making $70,000 a year from one employer or someone earning the same amount from eight clients in two different niches? The latter is more volatile, but the former is riskier. Evolution embraces chaos, and in exchange eventually delivers the best results. Without that volatility, there could be no progress. “Nature builds things that are antifragile. In the case of evolution, nature uses disorder to grow stronger. Occasional starvation or going to the gym also makes you stronger, because you subject your body to stressors and gain from them.” Don’t deprive yourself of life’s shocks; they’re what allow for your personal evolution. * Think long. Evolution needs time to operate. This is a characteristic of things that like chaos; they love time. The more time, the better, which runs in opposition to most things, which eventually break down over time. Many people are doing things—whether professionally or personally—that, unbeknownst to them, will not survive over time; they’re eventually going to go busto, as we say in the gambling world. If we’re being honest, most people can’t even calculate expected value in static environments. A much smaller percentage know how to do it over time, choosing what’s optimal in arenas in which the first order of business should be eliminating risk of ruin, i.e. “not dying.” Natural selection does this better than any business in the world; it’s built into the system. Species maximize their chances of survival as a whole above all else. Survive, then optimize. Build systems that embrace volatility and are meant to survive and improve with time. Via negativa Addition by subtraction This is a simple concept, which is that to improve basically anything in life, first look at what you can take away before adding anything. Unhealthy? What are some things you can remove from your diet or lifestyle before adding something like supplements? Unhappy? What can you remove from your life before taking antidepressants? The ‘via negativa’ concept is related to an approach I’ve discussed when it comes to winning games, which is to reverse-engineer a strategy [https://luckymaverick.substack.com/p/how-to-win-games-find-the-hidden] by starting with what success looks like, then working backwards by removing the paths that don’t lead to winning. Think of how a sculptor creates a statue from a slab of concrete; the “truth” of the statue is already there, hidden and waiting to be realized, but only after removing that which isn’t necessary. Leverage Big wins require big leverage. I used to make the majority of my money as a freelance writer. I liked it and hated it at the same time. I liked that I was in control of how much money I made (sort of), and I disliked that I was broke and forced to write all day long to get by. Still, I can write pretty quickly, so once I got rolling and had some companies paying me, it was a decent income. But in terms of making short-term money, I had no ability to apply leverage. What I mean by that was I got paid for what I produced, and that’s it. I was paid for my time, which can become quite tempting if you can quickly create things of value. However, I almost always tried to write evergreen articles I thought could live for a long time. I wasn’t sure why I wanted to do that; it just felt right for some reason. It was one of the best decisions I made because writing in that way was a form of leverage. That’s actually the idea behind what I’m doing right now with this newsletter—building up long-term equity (in the form of trust) that can be cashed in at a later date. I’m not charging for it and I don’t have immediate plans to do so, but my guess is that writing things that (hopefully) help people will always be a valuable use of my time. Traders are of course familiar with leverage, which can make smart men very rich and dumb ones very poor. The same is true outside of markets. I recently wrote about leverage in Sam Hinkie, Leverage & Dynamic Decision-Making [https://luckymaverick.substack.com/p/leverage]. The key to finding real success is to figure out what works and apply leverage. Fundamental to this idea is understanding and accepting today’s wealth is not created by how hard someone works. You’ll have a difficult time becoming wealthy by getting paid for your time. You have to get paid for the value you provide others through your unique knowledge, multiplied by the leverage you place on it. The returns from this sort of work—amplified by the internet—are compounding. This increases the importance of logical decision-making. When the results of your decisions are non-linear, it amplifies their impact. If you consider yourself a sharp decision-maker and you have unique knowledge or skills, there’s never been a better time to get rich. The theoretical bounds of the value you can extract are nearly limitless. Acquire specific knowledge or develop a unique skill. This is a form of permissionless leverage—meaning no one can stop you from acquiring it—and it’s easy to unlock with the internet. You probably already have a lot of specific knowledge in areas of interest to you. The intersection of those areas is likely where you have the most unique knowledge. Apply leverage to your distinct knowledge through media or code, i.e. leverage your knowledge to create online content or software. You can use labor and money, too, but they’re no longer required. Focus on “evergreen” work; put time into things that have no theoretical limit for how much they can earn and require no additional work from you—things for which the cost of replication is zero or near-zero. And “earn” can mean money, but it can also mean trust or respect or some other output that can be monetized at a later date. I’m not currently making money from this newsletter, but it’s still providing leverage. In the age of near-infinite leverage, you don’t get rich based on how hard you work. You get rich by having specific knowledge, creating something of value to others, and applying leverage to it. This is a great synopsis of the age of infinite leverage [https://www.value.app/feed/the-age-of-infinite-leverage]. Expected Value (EV) How to calculate the value of a decision over time I talk a lot about Expected Value, which is Probability multiplied by Payoffs. It’s a fairly straightforward concept with a wide array of uses, yet I don’t regularly see non-gamblers making decisions in terms of EV. You don’t need to make perfect EV calculations to get use out of this way of thinking. Here’s the key to letting EV thinking change your life: measure decisions based on the amount of EV you can generate and not the outcome of the decision. Your job is done at the moment of the choice; what happens after that is effectively irrelevant. From the About [https://luckymaverick.substack.com/about] section of Lucky Maverick: Payoffs change the name of the game. If I bet on the roll of a die and get paid only when a ‘six’ comes up, it might be an awful gamble if I’m betting straight up or the bet of a lifetime if I’m getting paid, say, 10-to-1 (meaning for every $1 I bet, I get $10 when a ‘six’ is rolled). The EV in the latter scenario is 16.7% x $10) + (83.3% x -$1) = 0.837, meaning if I were to make this bet 1 million times, I’d earn around 84 cents per roll for every $1 bet. The EV before and after the roll of the die is 84 cents. Most people think of the value of the roll after the fact as either +$10 or -$1. You have to avoid this trap. The value is 84 cents no matter what happens. The result doesn’t change the EV. It has zero impact on the quality of your decision to make that bet. This isn’t just academics. In reality, many situations—the most lucrative of life’s opportunities, in my opinion—possess way more luck than people realize, meaning they’re closer to a coin flip or roll of the dice than it naturally seems. As such, you see the equivalent of intense analysis of a coin’s properties and how weighted it is toward heads and what the air conditions are at the time of the flip—all in an effort to improve prediction accuracy of a coin toss to 50.1%—with little regard given to the payoffs. Utilizing EV as a tool to quickly calculate payoffs is also a great way to build convexity. And once you’re comfortable calculating EV, you can move to what I call “dynamic EV,” or decision-making over time. As Taleb has said, “Your grandmother viewed smoking as an activity, not an event.” Risk-taking is an activity completed repeatedly over time, not a singular event. When assessing risk and calculating dynamic EV, you should (usually) act as though you’d need to make the same decision repeatedly and let it play out millions of times. When you think in terms of EV, results don’t really matter (in the short-term), which can be sort of freeing in a way. Opportunity cost Think about something’s value not just in terms of what is gained, but also what is lost. I order delivery food all the time. I used to order almost every single meal through GrubHub. Now I’ve grown up, though. So I use DoorDash. When people have questioned me in the past, I just repeatedly mentioned ‘opportunity cost’ until they left me alone. Basically, this was me… The most important things to understand about opportunity cost are that 1) discussing it while referencing the value of your time is a surefire way to get people to leave you alone, and 2) it’s an awesome way to justify laziness. “Oh yeah, no, I didn’t complete even the most basic of life tasks today because of opportunity cost, definitely not because I’m lazy as s**t.” The math on getting delivery, for me, includes what I give up: the need to cook. A lot of people love to cook. I kind of wish I did because it seems like an awesome lifelong hobby, but I don’t. I hate to cook and I hate to clean up. Ordering delivery can be expensive, but I don’t need to pay for groceries (with a hidden spoilage cost that many underestimate), nor do I waste time cooking/cleaning. The delivery life ain’t for everyone, but for me, it’s very clearly +EV. I don’t need to use my extra time to make money to justify the cost; just being able to have more free time to do something I enjoy is worth it long-term. I did this when I was broke, too; there are plenty of good lunch deals out there and you can just stock up at those times. Every decision you make to do one thing means not doing many other things, and you should have at least a surface level idea of what you’re giving up with each choice. Usually, what you give up is time. To determine if something is worth your time, ask yourself what you’d need to be paid per hour to complete a task you don’t enjoy. It should really be an aspirational rate—where you want to be financially rather than where you are—but let’s say it’s $100. Now let’s say you see an item at a supermarket that costs $25 that you know is $15 at another place across town. Should you go get the cheaper one? Well, not unless you can do it in six minutes or less (assuming you don’t need to go there anyway). As much as you possibly can, you should pay to get your time back; even if it’s small to start and you can’t always afford to put time ahead of money, this general mindset will unlock max long-term freedom. They say you always need to do things you don’t want to do. Maybe, but I’d at least prefer to be able to choose my points of pain rather than having them forced upon me. Pareto principle 80% of results come from 20% of causes. The Pareto principle [https://en.wikipedia.org/wiki/Pareto_principle] (or 80-20 rule) is seen throughout the world in both natural and man-made systems; the top quintile of causes produce four-fifths of the effects. As a thought experiment, applying the Pareto principle to itself leads to this sort of Russian doll situation in which, to generate the greatest rewards, you should work in the tails. I wrote about this concept in How to Get Better at Anything ASAP [https://luckymaverick.substack.com/p/how-to-get-better-at-anything-asap] in relation to how to learn things as quickly as possible: But why would we stop at 80/20? Why not apply the 80/20 rule to the top 20%? That’s 64% of effects from just 4% of causes. And how about again? 51.2% of effects from just 0.8% of causes. And again, again, and again? Just over one-quarter of effects from over 1-in-15,000 causes. Okay, you get the idea. Regardless of the exact numbers, if most of the benefits of something come from a much smaller percentage of your efforts, as long as you can properly identify which efforts are “working,” you can acquire incredible leverage by continuing to apply the 80/20 rule—by taking your beliefs and hypotheses to their logical end, then working back from there. Basically, it’s much simpler and more effective to start at logical extremes and work inward than to be general and move toward the tails. This applies to everything from starting a business to learning a new subject to finding a romantic partner. Truth filters There are various lenses through which to view the world—and find truth—and we should use as many as possible to assess reality. Author Scott Adams is an awesome example, for me, of why it’s important not to dismiss information simply because of the source. I believe Adams is wrong about a whole lot—and he’s borderline insane—but there are some insights in his book How to Fail at Almost Anything and Still Win Big [https://www.amazon.com/How-Fail-Almost-Everything-Still-ebook/dp/B00COOFBA4] that I think are outstanding. Side note: when reading, it doesn’t matter how much an author is “right.” I’ve read lots of books that are probably highly accurate but don’t really provide me with anything uniquely valuable to live my life. When reading, I’m searching for rare bits of knowledge that can help shift my worldview. In that way, the frequency of informative nuggets is far less important than the profundity of the few truly useful parts. I don’t really care to acquire knowledge for the sake of it; I’m seeking scarce wisdom, in which case you have to read people who go out on a limb to be both right and non-consensus. In his book, Adams lays out six filters for truth, or how we typically go about figuring out what’s fact and what’s fiction—personal experience, experiences of people you know, experts, scientific studies, common sense, and pattern recognition. I’d add two more filters for truth to the list: logic/math and “what works.” No matter the exact filters proposed, the idea is there are various ways to go about determining what is true. As an example, let’s broadly apply these filters to betting a sporting event. How do you know which side of game to bet? Well, you could build a model (science). You could poll smart people and take the average (wisdom of crowd, or experience of people you know). You could get information from pros (experts). You could search for historical trends that might be of use (pattern recognition). You could trust your gut (personal experience). You get the idea. There are many ways to go about searching for what is true. We should be open to using any and all of them at any given time. If my model is the only thing pointing toward playing a particular guy in DFS, my assessment of reality is probably not as likely to be accurate as if he’s high in the model and other pros in my circle like the same guy and there are historical predictors of his success and my gut is telling me he’s a smart high-leverage play. One of the strongest skills you can develop is this ability to cultivate different lenses and utilize specific ones as needed. Sometimes you should trust in data, but sometimes your gut and natural pattern recognition will lead to better results. Most people view the world in one or two very specific ways and can’t really move outside of that way of thinking. At the very least, you should be open to the idea that other people see a fundamentally different world than you, and their experience is real and shouldn’t be dismissed. Developing a cold rationality is vital to this, as it will always feel as though what you believe is right; logically, though, you should accept that not only do people see the world differently from you, but many times, their view will be more accurate (or more useful) than yours. The easiest way to come to grips with your fallibility is to look back on what you used to believe to be true that you no longer do, which I presume is a whole lot. If our past selves have been so consistently wrong, why would we think our present selves are anything more than slightly better? In previously newsletters, I’ve mentioned the book The 5 Love Languages [https://www.amazon.com/Love-Languages-Secret-that-Lasts-ebook/dp/B00OICLVBI]. The main thesis is that there are various ways in which partners give and receive love: words of affirmation, physical touch, quality time, gifts, and acts of service. When I realized the power of recognizing my own and others’ love languages (and not just in romantic relationships) as fundamentally different lenses to view the world, it was life-changing. The more lenses you can develop, the better you’ll be at both assessing reality (and thus making quality decisions) and seeing others’ viewpoints. Hidden rules The game within the game If you haven’t yet read it, check out my first Lucky Maverick post How to Win Games: Find the Hidden Rules [https://luckymaverick.substack.com/p/how-to-win-games-find-the-hidden]. Basically, you’ll start to find success when you approach life as a game and find the “hidden” edges others are overlooking—when you begin playing a different sort of game than what your competitors realize you’re playing. When you become a true long-term winner, you’ll know exactly which hidden rules you’re exploiting and you’ll see others overlooking the real game you’re playing. More Important Ideas I’d Tell My Younger Self * Downside works to motivate more than upside. If you want to improve in a certain area, create a situation in which failure leads to negative consequences. * You won’t know what people really think until they bet on it. You won’t know what you really think until you bet on it. * First find specific and unique knowledge. Then become indispensable. Then apply leverage. Once you have leverage, the most important skill to possess is good judgement. * Accuracy matters the same as payoffs in theory, but much less in practice because the former is what everyone else focuses on and the latter is easier to directionally predict. * You have to be okay being wrong and being thought a moron. If you’re not okay with people thinking you’re an idiot—sometimes because you make giant mistakes and sometimes because they’re the morons not seeing what’s obvious to you—you can’t achieve unconventional success. * Your starting point matters, but making quick choices and continually iterating matters more. Work to speed up your trial-and-error cycle. * Be early. If you’re first, you don’t need to be that good. The easiest way to win is to limit competition, and the easiest way to limit competition is to be first. * Good negotiations don’t meet in the middle. Obtain things “outside” the negotiation that are more important to you than to the other party. * When a measure becomes a target, it loses its quality of being a good measure (Goodhart’s Law). If you want to lose 10 pounds in an effort to become healthier, focus on what leads to good health rather than setting a goal weight. * Process > results short-term, results > process long-term. If after a little while you still suck at something, it’s you, not variance. * Almost everyone else is faking it. Overconfidence wins and wins and wins…until it doesn’t. It’s a house of cards. Put yourself in position to benefit when the cards topple. * When you don’t know something, say “I don’t know.” Pretty simple, but you’ll end up doing it a lot. Few actually admit when they don’t know something, and it erodes others’ trust in them when they feign knowledge. You can’t possibly know a lot about more than a few topics, so don’t pretend. * Making firm decisions is important. Maintaining optionality is important. Doing both at the same time is an incredibly rare skill you should cultivate. Make decisions with conviction but be willing to change your stance at any point that it’s warranted. * Don’t let your high-energy self write checks your low-energy self needs to cash, i.e. don’t let your best self create future obligations you won’t live up to. * Being data-driven is incredibly important, but most high-consequence decisions are a combination of art and science. Let data inform your gut. * Turn anything you want to learn into a game and solve it the same way you’d go about winning Checkers or Monopoly or poker. * The most stable possible life will stem from being able to withstand and even root for chaos. Accept worst-case scenarios to become free. * It’s better to be sometimes wrong on your own than right with everyone else because occasionally you’ll be right on your own, which is the most rewarding (and fun). * The best leaders lead without anyone knowing it. * Set up meritocracies. Don’t submit to hierarchies and avoid interacting with people worried about status or power. * Avoid ruin first, then worry about EV. * Use emotions as a trigger for logic. You’ll always be emotional, but recognize when and why it’s happening, then jump right into rational thinking. * Work for free. * Short-term balance is overrated. * Don’t plan much and change course often. * Traveling is the most effective way to foster creativity. * Great writing is the most obvious sign of a clear mind. Writing isn’t solely a way to communicate what you think; it’s also a way to figure out and crystalize what you think. * Other people see the world in a fundamentally different way than you do. Their experience is just as authentic as yours, even when it seems like you’re right. * What people say is irrelevant. The only thing that matters is what they do. * Many of life’s truths seem paradoxical, or at least counterintuitive. Tao Te Ching is one of my favorite books and it simultaneously says nothing and everything at once. When you take core truths to their logical end, even concepts like time or the ‘self’ become paradoxical. Never stop searching for life’s paradoxes. * Luck isn’t real. But some people keep getting luckier than others. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit luckymaverick.substack.com [https://luckymaverick.substack.com?utm_medium=podcast&utm_campaign=CTA_1]

The Time I Sold Furbies for Money (Audio)

This is the audio version of my article The Time I Sold Furbies for Money [https://luckymaverick.substack.com/p/probability]. *Note: You can now listen to all future Lucky Maverick posts on Spotify [https://open.spotify.com/show/6mZ4gAHK19YiGwSaIyATdU] and iTunes [https://podcasts.apple.com/us/podcast/lucky-maverick-the-art-and-science-of-betting-on-yourself/id1544015581], read in the sweet, soothing, almost tranquilizing voice of Jake. If you like what you hear, feel free to leave a review. If you don’t like what you hear, chances are your volume is too low. Turn it up, then leave a review. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit luckymaverick.substack.com [https://luckymaverick.substack.com?utm_medium=podcast&utm_campaign=CTA_1]

The Key to Being Contrarian: Think Like a Kid

About Lucky Maverick [https://luckymaverick.substack.com/about] About Jonathan Bales [http://www.jonathanbales.com/] If you want to break the rules of grammar, first learn the rules of grammar. - Kurt Vonnegut I used to play this iPhone game called “Fun Run.” It’s sort of like Mario Kart in that you race and there are question mark things you can get that have weapons to kill your opponents (lightning, a bear trap thing, a sword, etc). When I first started playing, I tried to move as fast as possible and finish the race with the quickest time I could. Seems logical…faster is better in any race, right? Maybe, maybe not. You need to perform well to win a race, but the goal isn’t to have the fastest time you can; it’s to have a faster time than everyone else. Those are similar ideas, but not exactly the same. Once I started playing Fun Run more and more, I did the most psychopathic s**t you can imagine and began charting all of the details of the game in Excel—my time, the course, kills, deaths, etc. I was doing this to see which courses were my best because players got to vote on one of two before the race, so I thought that optimal selection would slightly improve my win rate and also I wasn’t a virgin at this time if you can believe that. As I tracked the data, I noticed that while my win probability improved, my times barely got better. Why? It was due to the recognition that, while fast times and wins are correlated, the former is really just an effect of the latter, not always a cause of it. There are many times it benefited me to reduce my expected time to increase the odds of winning, such as going out of my way to obtain an additional question mark, using a super low-variance strategy late in the race if I’m winning, taking more risks when I’m losing, and so on. In all games, you work within the confines of the rules to find edges and increase your chances of winning. Sometimes, though, specifically as you become well-versed in a game and begin competing at the highest level, you realize world-class performance requires a completely different way of thinking. Why is it that in so many areas—from poker to business to video games to chess—the greats seem to be playing a fundamentally different game than their opponents? The path to greatness starts with learning the rules of the game and figuring out how to play within the rules to win. But it eventually transforms into breaking all those rules, approaching problems from a distinct viewpoint to play a game—one I’ll call the “hidden” game—that’s fundamentally different from others. Speedrunning This article was inspired by an email I received about something called “speedrunning.” Hi Bales, When reading Lucky Maverick articles, I find one area that continuously applies these concepts: speedrunning. If you're unfamiliar with speedrunning, it is a community of gamers that attempt to beat video games as fast as possible. For example, the current world record to beat Super Mario Bros on the NES is 4:55.314. Speedrunners are fighting over frames and fractions of seconds to secure world records, which is why they have to apply some of the tenets of the Lucky Maverick posts. The two main strategies that are applicable in speedrunning are taking ideas to their logical extreme and playing the game by different, hidden rules. A great example of this is in the speedrun for Wii Sports Resort Golf. The main strategy that runners realized after thousands of attempts was that they were able to manipulate both wind and cup position by intentionally failing the first hole. This is counterintuitive to conventional thinking of “the fastest way to play Wii Golf is to just get the ball in the cup as quickly as possible.” By finding these hidden mechanics of the game, and taking them to their absolute extreme, these runners were able to take the world record down multiple minutes from the early days of running. I really enjoy your newsletter and would be happy to discuss speedrunning further if you'd like. Feel free to reach out/or use this as a topic if you are interested. Best, Chris A few notes: * I love when you guys send me emails with awesome stuff you’re reading, watching, or otherwise learning about. I can’t always give super-long responses—and sometimes the emails suck ass, no offense—but for the most part, they’re really great. I imagine the average Lucky Maverick reader is either a super-sharp worldly scholar or a degenerate gambler who responds to his grandmother’s innocent claim that it takes less than 10 minutes to drive into town with “Oh yeah, how much would you bet? I’ll give you 2-to-1.” Anyway, keep sending me sweet content that you’re enjoying. * In this particular case, I’ve gotten deep into the lab on speedrunning. Even if you’re not that into video games, the way in which the top players go about solving each game is this absolutely beautiful combination of efficiency and innovation—shaving fractions of a second off of their times with small optimizations while also making giant leaps through completely outside-the-box tactics. * I’d say I’ve played an average amount of video games in my life—maybe a bit less—but like everything I’ve done, rather than a healthy and balanced approach, I’ve become completely obsessed with just a handful of games. As an example, I was the No.2-ranked player in NCAA Football on Xbox for a two-year period in high school. I played all day long, every day, and I’d have my little brother put on the headset and talk smack to my opponents so they’d tilt their faces off thinking they’re getting whooped by a six-year old. I played like 15 hours a day, which tells you that no matter what you do in life, there’s always someone out there, somewhere, who is a bigger loser than you. This article is going to be about how to truly think differently, using speedrunning as a foundation for the main points. It’s not required, but I’d check out this video and others from the same name—Summoning Salt—on YouTube. Let your curiosity—and not the need to win—guide you. Not all who wander are lost. – J.R.R. Tolkien I’ve been playing racquetball with my friend Adam Levitan for a few years. I sucked when we started. I never played a racquet sport and my cardio was total s**t, whereas Levitan was in decent shape and had played tennis for years. My only hope was to hit the ball up into the ceiling so it would bounce high off the front wall and slowly drop in the back, hopefully bouncing weirdly in the corner. I wasn’t good enough with my racquet to consistently hit winners and if the game became too fast-paced, I basically looked like a fish out of water, flopping around, completely unable to breathe. But I became curious about racquetball and began watching pros on YouTube. It turns out that Kane Waselenchuk and Rocky Carson and all our heroes on the court didn’t play like me, if you can believe it. Sometimes they hit flop shots, but I realized that it would be impossible to win long-term against a great player without hitting very low, accurate winners into the corners. Another thing I noticed my friends Kane and Rocky didn’t do was continually smash their racquet into the court when they lost. I watched hours of play, and they literally never repeatedly banged their racquet into the ground until it was demolished, then immediately order a new one on Amazon. Not once! I blame Amazon Prime and their uber-fast and reliable shipping. I’d have much better sportsmanship if it weren’t for that f*****g Bezos. Smashing my racquet into pieces was a reflection of my hatred of losing, but here’s what that racquetball experience taught me and what I believe is the most important trait in those who think differently to achieve greatness: your path toward perfection must be governed not by a need to win, but rather a natural curiosity and passion for what you’re doing. I really believe this is the primary key to being contrarian, non-consensus, non-conformist…whatever you want to call it. A pure, child-like curiosity will take you off the beaten path to identify the best long-term strategies, not because you’re trying to be different, but because children at play have no choice but to wander. Make no mistake about it: a will to win is absolutely vital. I’m as competitive as anyone I know, hence why my racquets have a shorter lifespan than a gastrotrich. It’s a marine microorganism that lives three days. Now you don’t have to look it up. However, in choosing to win at all costs, what you’re really doing is sacrificing the war to win a battle. If I never attempted to hit more winners in racquetball—which temporarily lowered my win rate—then I never would have improved enough to consistently win. So the need to win is still an essential trait, but it can’t be over a short time horizon. It’s sort of like Amazon continually delaying profits. They’re a company designed to make money, yet have chosen to push back short-term net income in favor of a long-term view. If you extend this idea to its logical extreme, the optimal time horizon for greatness is “forever,” meaning you should let your passions and curiosities dictate your direction. Doing so has compounding advantages over optimizing for the present moment, and those advantages can be “cashed in” for wins at a later date. Just as Amazon and other great companies invest in innovation, you can achieve long-term greatness by investing time in following your curiosities—by “wandering.” Don’t stop at local maxima. Wandering in business is not efficient…but it’s also not random. It’s guided…and powered by a deep conviction that the prize is big enough that it’s worth it to be a little messy and tangential to find your way there. Wandering is an essential counter-balance to efficiency. The outsized discoveries—the non-linear ones—are highly likely to require wandering.  - Jeff Bezos When you don’t let yourself wander, you’ll inevitably accept “good enough.” Say an alien is beamed down to our world and asked to find our tallest building. Let’s just forget for a minute how incredibly advanced this alien civilization would have to be just to get here, and let’s instead assume it’s just some regular old dumb alien with human-level intelligence. We’ll call him Joe. Joe is dropped onto Earth. He walks around a bit, learns how to hail a taxi, and starts exploring. Eventually, he spots a very tall building and finds his way to the top. He looks out in every direction as far as his single alien eye can see and nothing is taller. “I did it! I found the tallest building on this planet!” Joe exclaims, in English somehow. Happy with his accomplishment, Joe sends word back to his home planet. “I already found it, guys. Didn’t take long at all. If you need me, I’ll be here on top of the Radisson Hotel in Fargo. It’s over 200 feet high!” This is one of the dumbest analogies I think I’ve ever had. I mean this is really f*****g stupid, but I wrote too much and I’m not deleting it now. Moving on… Joe is at a local maximum—the highest point in a given range or a larger set. Just like Joe on top of the Radisson, when you’re at a local maximum, you usually can’t see that there are much higher points that can be reached. Joe might have taken the stairs and it might have been very difficult and he could have felt a great sense of achievement once he reached the top…but he’s still on top of a hotel in North Dakota. And the only way to improve is to explore, to wander, to seek out what might be uncomfortable out of pure curiosity. This means being below more recent highs almost all of the time. If your goal is to be good or even great, your quest for new maxima need not be strenuous. But if your aim is to be the best—if it’s the equivalent of Joe making his way to Dubai to find the Burj Khalifa—then you have no choice but to explore. That means passing on other local maxima—giving up future “wins”—by becoming a kid again. Long-term greatness requires exposing yourself to short-term hurdles; if you’re truly exploring, most of the time you’re not going to be at a peak, but rather at a much lower point looking for something better. Side note: I can’t find the article, but I saw a really cool breakdown with a formula of the “optimal” number of people you should date before getting married. If you consider the average amount of time it takes you to get to know someone, how quickly you can meet new potential partners, and when you’d like to get married/have children, there’s actually a formula you can employ to maximize your chances of finding the best possible person for you. The interesting thing is that, mathematically speaking, you should continue to meet, date, and then break up with people, no matter what, until a certain point. I remember putting in my numbers and the calculator said it would be suitable to date 17 people, leave all of them, and then continue to date people until I came across the first one who’s better than the best from that group of 17. This approach is forgoing local maxima in effort to optimize the odds of finding a true maximum given your time constraints. If you think about it, this happens naturally so much more than it used to. Whereas older generations would frequently date and marry people from their hometowns, the ease of travel and, specifically, the internet and dating apps has made it much, much easier to find suitable partners—to traverse the topological map of dating—to forgo the local maxima. At some point, though, you need to make a choice. If you settle too soon, you’re very likely to end up at a local maximum, but if you are always searching for something better, that doesn’t seem like a great recipe for happiness either. Maybe I’ll find it and write about it, I just thought the concept was really cool, and it can be applied to everything from job-seeking to esports to buying a house. Wander, then optimize. And for all the straight men out there, if there’s one thing I know about women, it’s that they get super wet when you treat them as a variable in a formula. Find the hidden rules. In gameplay, it’s what you know that others don’t that really matters. - Me, later in this section The first article of this newsletter was called How to Win Games: Find the Hidden Rules [https://luckymaverick.substack.com/p/how-to-win-games-find-the-hidden]. What I call “hidden rules” are basically the unstated mechanics of gameplay that dictate success. Sometimes, you can reverse-engineer these by thinking about what “winning” means, then working backwards from success to eliminate actions that don’t increase your win probability. A simple example is that underdogs should increase variance, while favorites should minimize it. An NFL team down 14 points with 10 minutes to play needs things to get chaotic, whereas the favorite wants no volatility. If you’re an underdog in a video game with an opponent, it might make sense to choose an unusual character with which your opponent isn’t familiar, even if you’re new to using that character. A big mistake I see is making assumptions about what increases win probability, then extending those throughout the entirety of the game. For example, winning a football game is almost always one of point-maximization, but not always; one of the weakest areas of in-game strategy right now is end-of-half clock management, with teams seemingly too focused on scoring points and not enough on point differential, i.e. don’t give your opponent another possession with meaningful time on the clock. In DFS, the big “hidden rule” I discovered was that the game actually isn’t about scoring as many points as possible, but rather winning with as few points as possible, i.e. where can I unlock points others aren’t and benefit when they’re doing poorly as a whole? In the game of Wii Sports Resort Golf, it’s easy to make the assumption that the fastest time always equates to the fewest strokes, but that’s not the case. As Chris mentioned in his email, players learned they could tank the first hole to gain a more favorable setup for subsequent holes, which more than made up for the initial time lost. On one of the later holes, there’s a lake right next to the tee box. One of the top players eventually figured out if you drive the ball straight into the lake and keep hitting it directly into the water, you’d hit the max strokes faster than if you just played the hole normally. In both cases, astute players found new solutions by asking “What are ways I can lower my time by actually taking more strokes?” The reason this works—the foundation for hidden rules—is that you’re not going to benefit from something if everyone else is doing it. Few players are specifically trying to search for areas in which more strokes is better, and so if you’re the first to uncover one of these hidden edges, the rewards are yours alone. Lots of times, this means identifying temporary “losses” that act as a slingshot to higher future win probability, like tanking the first hole, going out of the way in Fun Run, or trying for winners in racquetball when you’re not yet super-skilled. The key is to decipher what it is you’re actually optimizing for, then look for the few times that the conventional approach has faulty assumptions that makes it sub-optimal. In gameplay, it’s what you know that others don’t that really matters. Question everything. A contrarian isn’t one who always objects. That’s a conformist of a different sort. A contrarian reasons independently, from the ground up, and resists pressure to conform. – Naval One thing I find interesting in watching the speedrunning videos is that even though it seems like the new records are unbreakable, they continually get lower and lower over time. Even though the differences in time might seem small, the strategies used by the end are often fundamentally different than those in the beginning. Super Mario Bros. 2 is a good example of this progression. There’s one level in one of the games in which everyone previously used Luigi because there’s a crucial point at which you can save a lot of time by quickly jumping up. In an ideal world, the players would use Toad, who runs the fastest when he’s holding an item over his head. However, it was accepted that Toad was not useful in this level because he couldn’t jump high enough to save time over Luigi, until someone came along and figured out a unique way to bounce off of a goomba (edit: idk if it’s actually a goomba? someone told me it isn’t and they aren’t in mario bros 2, but google says they’re in level 4-1. you’d think i’d just change it rather than add this long explanation inside of parentheses. and why am i not capitalizing anything here?) and trick the game into thinking it was still on a flat service, allowing the user to jump again mid-air. This user went on to set a world record by thinking about the ideal scenario—that he could use Toad—and questioning if it were really true that Toad can’t jump as high as Luigi. Another example of this idea of questioning even basic beliefs comes in Mario Kart—a game with many glitches that allow players to skip large portions of the track. Two of those basic assumptions you might not ever think to question: you have to go forward to win the race and you should try to stay on the track. There are actually a bunch of situations in which you can go out of bounds strategically to have yourself set back in a more favorable location, and even some in which going backwards at the start of the race—or even at the end of laps—can give you huge edge via securing better items or even tricking the game into thinking you’ve completed a lap you haven’t. By the way, I’ve never tried any of these, but how sick would it be to sit down with your friends to play Mario Kart and win a race in like 30 seconds? One way to effectively question your most basic beliefs is to take them to their logical end. I wrote about this in My Extreme Theory of Learning [https://luckymaverick.substack.com/p/how-to-get-better-at-anything-asap]. Be an outsider. Whenever possible, I think crosspollinating ideas from other contexts is far, far better than attempting to solve our problems as if no one has ever faced anything similar. – Sam Hinkie I’m currently reading a book about psychology and self-image called Psycho-Cybernetics. What’s interesting is that this widely renowned work was written by a plastic surgeon—not a psychologist—after he noticed how patients’ self-respect changed after cosmetic surgeries. It seems many discoveries, inventions, and insights come from “outsiders,” but why? I think there are two primary reasons. First, “outsiders” don’t have tunnel-vision about the way things “should be.” Everyone views the world through various lenses, and when you get deeply involved in something, it’s very difficult to step back and think about things from a fresh perspective. You inevitably forget the original questions you asked and can have laser-focus that’s perhaps great for small improvements but misses out on the advantages of a beginner’s mindset. The second reason outsiders can find unique success is that some of the greatest ideas come at the intersection of two seemingly different concepts—what some call “cross-pollination.” I studied philosophy in college, concentrating on Taoism, and was amazed at how many parallels there seemed to be between Eastern philosophy and another passion of mine: theoretical physics. I truly believe an understanding of physics made my reading of Taoism much richer, and vice versa. This isn’t a new concept; if you’re one of the maybe two people reading this sitting at the Eastern philosophy and theoretical physics intersection of interests, check out The Tao of Physics [https://www.amazon.com/Tao-Physics-Exploration-Parallels-Mysticism/dp/1590308352]. To attain a fresh perspective into something familiar, use cross-pollination. Take something else you know or like—anything—and combine it with something else. I used to basically eat, sleep, and breathe DFS, and anything I learned—even if it had nothing to do with sports—I translated into DFS terms. Reading Taleb and applying antifragility to tournaments was the greatest leap of my career. Whether it was playing chess or reading a book about markets or thinking back to psychology classes, I tried to apply lessons I learned or lenses through which one might view the world to something totally unrelated in an effort to generate unique insights. Even when watching speedrunning videos, I find myself taking certain principles or ideas and trying to apply them to my world. When you’re cross-pollinating ideas—especially those on opposite sides of the brain, like math and art—you’re connecting parts of your mind that normally don’t interact. There’s a lot of really interesting research right now on something that enhances that process—psychedelic drugs—but that’s for another post. Don’t try to be contrarian. The most contrarian thing of all is not to oppose the crowd, but to think for yourself. – Peter Thiel If there’s one thing to take from this article, it’s that you shouldn’t be afraid to play. Be a kid again. The more unique insights don’t come from following the rules; they come from trying new s**t because trying new s**t is fun. When you’re truly child-like in spirit, doing things for the sake of satisfying your curiosities and for no other reason, you’ll naturally find your own way. You’ll be contrarian in the best way possible, rejecting certain widely held beliefs not because they’re widely held, but because they’re false. Being contrarian shouldn’t be the aim; it should be a byproduct of thinking independently. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit luckymaverick.substack.com [https://luckymaverick.substack.com?utm_medium=podcast&utm_campaign=CTA_1]

You've Been Kidnapped

About Lucky Maverick [https://luckymaverick.substack.com/about] About Jonathan Bales [http://www.jonathanbales.com/] You’ve been kidnapped. That’s probably not the start to the day you were looking for. It was already going to be a long day, what with accounting all over your ass about those expense reports—Suzie needs to just lay off if you ask me—and now you have to deal with this s**t? Your kidnapper is a little different than most; he loves statistics and game theory and randomness, and he’s going to let you play a little game to determine if he’ll hold you hostage. No, the kidnapper is not me, although if I were a kidnapper, I’d let anyone free who could beat me in a best-of-101 rock-paper-scissors contest. Meaning I’d never let anyone free. Sentence fragment for dramatic effect. And another. Something you shouldn’t try unless experienced. We’re not playing rock-paper-scissors though. The kidnapper puts three cards on a table, two of which say “MINE” and one of which says “FREE.” He knows which are which, and he tells you that you can leave if you choose the card with “FREE” on it. Damn, a 33% chance of freedom. And even worse, a 2-in-3 chance Suzie’s week-end accounting is going to be askew. She’s already in Robert’s ear about your frequent tardiness. You stay late though, unless you have to pick up the kids, so she really just needs to back off. “Why are you telling me all this, and who tf is Suzie?” asks the kidnapper. “Just pick a f*****g card.” You pick the first. “Nice choice,” the kidnapper says with a laugh before turning over the middle card, which reads “MINE.” With the first card (yours) and the third card still face-down, the kidnapper asks, “Now, would you like to switch cards?” Think about it. Would it help to switch to the third card? You had a one-in-three chance from the start, so does it really matter which card you select or if you change your choice? Are your chances now 50% since there are just two cards remaining? What’s your pick? The Monty Hall Problem This is of course my version of a puzzle you might have heard of called the Monty Hall problem [https://en.wikipedia.org/wiki/Monty_Hall_problem], named after the host of a show called Let’s Make a Deal on which a version of the game was played. I presume some of you have heard of the brainteaser, so I’m going to focus mostly on the implications of the answer, but the gist of the solution is this… Your choice not only matters, but it matters a whole lot, doubling your chances of going free if you make the change. My initial reaction when I heard of this solution was sort of disbelief because it felt so counterintuitive, but it’s right. The key component of the decision that’s easy to overlook is that the kidnapper has knowledge of the cards and, when he makes the choice to show you one of the “MINE” cards, it’s a huge piece of new information. Let’s say the order of the cards is MINE, MINE, FREE… The scenarios can play out in this way: * If you select the first card, the kidnapper will show you the second. If you choose to stay with your choice, you’re his. If you switch, you’re free. * If you select the second card, the kidnapper will show you the first. If you choose to stay with your choice, you’re his. If you switch, you’re free. * If you select the third card, the kidnapper can show you any other card. If you choose to stay with your choice, you’re free. If you switch, you’re his. By changing your selection, your odds of freedom increase from 1-in-3 at the start of the game to 2-in-3. That’s due solely to the knowledge of the kidnapper and his decision to turn over one of the “MINE” cards. Some Takeaways I think the Monty Hall problem is a really interesting game theory and psychology puzzle that has far-reaching implications on the framework we use for certain decisions. * Difficult dilemmas often require counterintuitive solutions. When you first encounter the Monty Hall problem, it just seems sort of obvious it doesn’t matter what you do. The solution—that it’s right to make the switch—is extremely counterintuitive. This is the case with many psychological and game-theory-driven problems, especially. Humans are hardwired to see the world in certain ways, some of which are perhaps useful heuristics to maximize survival, but not as the most effective way to assess reality. Things become even more complex when others get involved, and this is the aspect of decision-making many overlook; the EV of most meaningful choices cannot be properly calculated without a consideration of what other people will think and do. And those problems like Monty Hall, whose solutions are so counterintuitive but also so obviously mathematically correct, are those worth analyzing. * You must consider what other people know that you don’t. The keystone to the Monty Hall solution that nearly everyone overlooks is that they’re acquiring new information once one of the options is removed. If the kidnapper were selecting a card at random and he just so happened to pick “MINE,” it wouldn’t matter if you decide to change or not. In reality, whether or not you chose “FREE” is either 0% or 100%, but our ability to predict whether or not you chose that single card changes over time. When you pick a random card, the odds are 33%. When the kidnapper removes one card and you stay, the odds are still 33%. When the kidnapper removes one card and you switch, the odds are 67%. And if the kidnapper were removing a card at random and it just so happened to be “MINE,” the odds are 50% and it wouldn’t matter if you switch cards or not. What’s interesting here is that in the last two scenarios, the mechanics are exactly the same: three cards dealt, you pick one, the kidnapper removes one “MINE.” What changes the percentages—what shifts our ability to predict the future and ultimately the optimal decision—is the knowledge and intentions of the kidnapper. What matters is what he knows that you don’t, and the same is true in a variety of real-life situations. Poker pros know this well, continually making difficult decisions with new information. Baseline stats are a decent starting point, but your prior beliefs must be adjusted all the time. When someone plays tight and then check-raises out of position, the range of hands he might have needs to be narrowed, in the same way the kidnapper’s offer to remove a card gives information about where “FREE” might be located. Similarly, if you’re in a situation in which a deal looks too good to be true and you know the other side isn’t a dummy, your first thought should be what asymmetry in information might exist that would propel them to do this; what might they know that I do not? And again, the most interesting aspect to me that I want to hammer home is that what transpires can be exactly the same on the surface, and yet our ability to predict the card’s location changes based solely on someone else’s presumed knowledge. The right choice in rock-paper-scissors after both picking rock on the first throw could be paper against one opponent but scissors against an opponent who doesn’t properly understand randomness. (The latter trait leads to alternating as a substitute for “randomizing,” meaning they’re less likely to throw rock, meaning you’d want to throw what loses to rock to maximize your odds of a tie or win…not that I’ve had women lose interest in seeing me after I’ve smoked their ass in rock-paper-scissors on the first date and then explained later in a text why I think they have a big leak in their post-tie strategy or anything like that…no, definitely nothing like that.) * You have to be willing to change your mind. Often. I’ve played a version of the Monty Hall problem with friends, and almost all of them choose to stay with their original selection. You should try it with your friends; nothing brings people closer than a good old-fashioned brainteaser and the accompanying statistical explanation for why they’re an IDIOT. Why do people stay with their original choice? When I stumbled upon the puzzle for the first time, I chose to switch cards—not for any statistical reason or because I understood the underlying game theory, but simply because it seemed fishy to me. Actually, I was also employing game theory, just with different reasoning. My thinking was: * It seems like the “obvious” choice—or at least what most would do—is stay. * I don’t believe there’s a reduction in success rate if I switch. * Thus, if I don’t see downside to switching and it seems like staying is a trick, I’ll switch. Extending this reasoning to other situations, when you don’t see a clear difference in EV among two different options, choose the one that’s less popular. Contrarians know you can find all kinds of success when you stick by the crowd when they’re obviously right and fade them when they’re clearly wrong, but you should typically side with the less popular option when you’re unsure, too. Part of this is due to payoffs, but part is because people stick with losing beliefs for too long. It’s just the way we’re wired. I know I’ve done it in the past. Nah, that Odell guy who barely scored at LSU isn’t going to do well in his rookie season. Guys, it was just a lucky start. His quarterback is Eli Manning. Okay, he’s doing well so far, but it’s just variance. Eh, only seven touchdowns in four games. Yeah, okay, but will he even lead the league in yards per game? Oh s**t, I’m broke. We’re bombarded with so much new information all the time, and most decisions are pretty close calls from the start, that if you aren’t regularly changing your opinions—even contradicting your past self—then you’re being stubborn (and wrong). As an example, sports bettors are tasked with assessing a team’s chances of winning a game at any given point in time and comparing their prediction to the odds being offered. But our best guess of a team’s chances of winning should be changing all the time with new information, just as our best guess of our chances of going free or being kidnapped also change with new information. If you make a bet in the beginning of the day, you should at least be willing to bet against yourself later in the day if the odds warrant it; betting on both teams at, say, -105 locks in a loss (assuming the same bet size), but both could be smart bets if their “true odds” at the time of each were, say, -120. The point is that “flip-flopping” is bad if it results from indecisiveness, but not in regards to changing your mind when the evidence dictates it. Sometimes—many times—that will result in contradicting your prior self. And that’s okay! So much of investing, business, and life success is not about making huge gains, but removing big leaks that can lead to disastrous losses, and the most surefire path to the latter is being stubborn in your views. Changing your mind isn’t a sign of weakness. Actually, it’s quite the opposite, as the strongest, most confident people are able to admit fault, shift gears, and move forward with conviction no matter how others perceive it. * Take hypothetical scenarios to their logical extreme. In How to Learn Anything ASAP [https://luckymaverick.substack.com/p/how-to-get-better-at-anything-asap], I proposed that the most effective strategy for quick problem-solving is to take a problem to its logical extreme, then work backwards from there. My buddy Joe Ingram is a former poker pro. One of the tactics he employed while learning the game was to form hypotheses about what sorts of strategies he thought were underutilized—three-betting in certain spots, for example—and take them to their logical extreme by employing them 100% of the time. That might sound outrageous, but in doing that, he was able to quickly acquire really valuable information about which theories were astute, slowly adjusting the percentage downward—it was the only direction to go, after all—until he hit the GTO (game-theory optimal) position, a.k.a. the Nash equilibrium, at which earnings were maximized. In the case of the kidnapper, it’s easy to overlook the solution because the numbers are relatively small. But what if there were 100 cards on the table? You choose one, then the kidnapper removes 98 of the cards, leaving yours and one other. Do you want to switch now? You had a 1% chance of picking correctly when the game started, but now a 99% chance of winning if you switch. * Figure out what type of game you’re playing. The key to winning anything is figuring out what game is really being played—the hidden rules [https://luckymaverick.substack.com/p/how-to-win-games-find-the-hidden]. Are you playing a game with no opponents in which others’ beliefs and actions don’t affect yours, such as learning a new language? Are you playing a solved game in which there are clear optimal solutions, like Connect Four?  Are you playing a game with a strategy that changes dramatically based on how others act, like poker or participating in markets? There are many situations in which what’s “optimal” is only so before adjusting for others’ actions. In the case of the kidnapper, you can only choose the right strategy after realizing the game you’re playing is one of pure statistics/randomness at the start that transforms into one of game theory. More often than not, the “game” you’re playing—even if it’s finding the most efficient route home—is one of game theory more than people understand. An easy way to determine the extent of this is to ask yourself, if everyone believed something to be true except me, and I were right, would I benefit more from being on an island? When it comes to deciding between two different roads home, for example, you’d clearly benefit if everyone else took the opposite route. In such situations, think about value in terms of what you believe it to be in a vacuum minus what others think. Finding an edge in this battle of wits is of course tied to your ability to predict what others will do, which is why I believe it’s so vital to understand public psychology—the cognitive biases from which you and others inevitably suffer and the ways in which our minds naturally lead us astray. But that’s for another day. Right now, I have to go play a best-of-101 rock-paper-scissors match. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit luckymaverick.substack.com [https://luckymaverick.substack.com?utm_medium=podcast&utm_campaign=CTA_1]

If You Ain't First, You're Last

About Lucky Maverick [https://luckymaverick.substack.com/about] About Jonathan Bales [http://www.jonathanbales.com/] “If you ain’t first, you’re last.” I don’t know if wiser words have ever been spoken. We should all try to think a bit more like the great Ricky Bobby. There are different ways one can aim to be first. In a car race—where everyone starts from roughly the same point—speed is what matters. Small differences in speed compound over great lengths; a little bit faster car will go a whole lot farther over hundreds of miles. It reminds me of this passage from James Clear’s Atomic Habits: Imagine you are flying from Los Angeles to New York City. If a pilot leaving from LAX adjusts the heading just 3.5 degrees south, you will land in Washington D.C., instead of New York. Such a small change is barely noticeable at takeoff—the nose of the airplane moves just a few feet—but when magnified across the entire United States, you end up hundreds of miles apart. Your starting point can have a profound impact on where you end up over long time horizons…if you can’t make adjustments. When you board an airplane and it takes off, though, it doesn’t really matter all that much if the pilot is off by a few degrees. I wrote about this idea in my article How to Improve Your Decisions Immediately [https://luckymaverick.substack.com/p/how-to-improve-your-decisions-immediately]: By focusing on choices as existing dynamically, it increases the value of trial-and-error. That is, when you can iterate to “change” the EV of a decision repeatedly over time, it decreases the importance of prior choices. This should be obvious in the airplane example: would you rather be on a cross-country flight with a pilot who spends countless hours attempting to calibrate the most precise takeoff angle but can’t make adjustments along the way, or one who just sort of takes off in the general direction of New York but can make unlimited adjustments? Uh, yeah, the second one. In my article The Secret to Success: Mimic Evolution [https://luckymaverick.substack.com/p/evolution], I added: The faster and more efficient you can make this trial-and-error cycle, whether it’s in your personal life or your business life, the quicker you will find success. Your starting point for truth is way less important than your process for refining and improving your beliefs, especially when you get away from a static worldview and begin to (appropriately) see it dynamically. Over time, differences in the speed at which you can process information and adapt become exponentially more important than where you begin. By speeding up your trial-and-error cycle, the returns compound over time; being twice as fast doesn’t make you just twice as better, but rather exponentially so. Recently, though, I realized that my claim that “your starting point doesn’t matter” is seemingly at odds with another Lucky Maverick principle I hold to be true: the easiest way to maximize payoffs is to limit competition, and perhaps the best way to limit competition is to be first (or early) to a particular niche. When I look back at my personal triumphs and failures, there’s indeed a trend of finding more success when I’m somewhat early in finding new trends, whether it’s business or crypto or, recently, Topshot (see why I spent $35,000 for a video you can find all over the internet [https://luckymaverick.substack.com/p/nft]). That’s not to say I’ve been “first” by any means, but simply that the degree to which I’ve benefited from getting involved in a new project is very much correlated to how “early” I found it. And, at the extremes, the benefits of timing are magnified and non-linear. Buying Bitcoin six months after its launch wasn’t four times more valuable than two years after; it was monumentally more valuable. Investing in Topshot moments one month after the site launched wasn’t four times more valuable than four months after; it was dramatically so. The timing of finding a potentially lucrative niche is a sort of “singularity” of value; the closer you get to the starting point, the more extreme the effects become. As you approach that singularity and the payoffs become intense, it just seems intuitively true that it must outweigh anything else. So what’s more important, being early or evolving quickly? Were my seemingly contradictory thoughts on speed vs. starting point truly at odds with one another? To sort out this MAYHEM, I did what any sane person would do and charted it in Excel. A Thought Experiment on Speed and Compound Returns Just as the benefits of +EV investing or exercising or honesty compound over time, so do that of speed. To demonstrate this, I made a graph of hypothetical growth of something that doubles in value every cycle versus every other cycle. Fairly quickly, the compounding advantages of fast iteration are apparent. Again, someone who works twice as fast with the same quality as someone else isn’t just twice as valuable; they’re exponentially more valuable. Having a head start matters, too. Assuming the same speed of evolution between each cycle, there’s a gigantic edge in being first. These effects, too, are exponential. “Move fast and break things” generally works as an approach to building, learning, and evolving because the positive effects of rapid iteration compound over time. Being early to a niche is also of incredible importance. Both speed and timing matter, and they matter a lot. But which is more important, being early or evolving rapidly? Take a look at value over time for someone who is early but slow (starts first cycle, doubles every other) versus late and fast (starts sixth cycle, doubles every one). “Late and fast” wins in a landslide. This seems to confirm the idea that iteration is more important than starting point, but then I had a realization: although both speed and starting point are important, speed matters more in non-zero-sum situations, while being early matters more in zero-sum games. When it comes to Topshot or other competitive games, for example, the results are zero-sum, or at least closer to zero-sum than represented above. Think of a sporting event; each percentage point one team increases in win probability means the other team decreases the same amount. This makes it of incredible importance to find winning strategies before others. When Billy Beane and the Oakland A’s employed “Moneyball,” using data to uncover undervalued players, the benefits of such an approach were theirs and theirs alone to enjoy. Nowadays, most or all teams have analytics departments that do far more than what the A’s were doing in the early-2000s, and so the advantages of weighing certain stats are dispersed throughout the league; in zero-sum games, it’s not what you know, it’s what you know that others don’t. I charted the same numbers as the graph above, but this time took out just 20% of the value generated by the “late and fast” participant. That is, they still start on the sixth cycle and still improve twice as fast as the “early and slow” participant, but this time we assume there’s only 80% of the value remaining at each cycle (the multiple changes from 2x to 1.6x). That small change produces this: This is pretty amazing to me. When “late and fast” can acquire all available value to truly double every cycle, it ends up generating 32x the value as “early and slow” after just 12 cycles. But by removing just 20% of the value “late and fast” can accrue, it generates roughly half the value as “early and slow”—64x less on just a 20% value reduction. The exact percentages here are irrelevant. What’s important is that very small changes to payoffs can dramatically affect long-term value. The more a game trends toward zero-sum, the more important it is to be early, as there are compounding rewards in the form of higher payoffs. This doesn’t mean the game itself needs to truly be zero-sum; investing in the stock market (or Topshot right now) is historically +EV, but you’re still competing with others, and the race to capture that EV is zero-sum, i.e. if the baseline return is +5%, then you’re losing if you return +4%. Now compare these games of competing minds to something like learning to play the piano. As you become better and better, you’re not stealing piano-playing ability from anyone else. Over a pretty short time horizon, your starting point for learning is less important than how quickly you can improve via trial-and-error. In the case of non-zero-sum games, speed matters more than starting point. Going back to the airplane example, the reason that the takeoff angle is of minimal importance is because the “game” of getting across the country is non-zero-sum. But what if pilots were in a competition to see who could reach the final destination as quickly as possible with as few “turns” as possible? Then the takeoff angle matters a whole lot more. When the dynamic transforms to zero-sum, there’s a shift in the relative importance of speed and starting point. Expected Value = Probability * Payoffs. When the payoffs of what you’re trying to accomplish are affected by others, timing matters. A lot. In zero-sum games, your biggest edge will come by getting in on the ground floor to limit competition. In non-zero-sum games, timing doesn’t matter as much. The payoffs of eating healthy or working out or learning a new language aren’t affected by anyone else, and so you’ll achieve the greatest compounding returns by speeding up your learning process via rapid trial-and-error. Are You Okay Looking Like a Fool? The benefits of being early and working quickly are obvious. Being early is a sort of overarching multiplier on the value of future work, while quick iteration allows for a lower multiplier that gets repeated over time. The earlier you are, the higher the initial multiplier, and the faster you can iterate, the greater the repeated multiplier. Both lead to compounding returns. So then why does everyone seem to shy away from things when they’re new and work so slowly even once they’re established? Because they’re scared. Fear is an incredibly powerful motivator. Isn’t it amazing how many people shy away from buying Bitcoin at X price, for example, but are all-in at 2X? It’s scary to be on an island, and when you’re wrong, everyone knows it. But you can’t really have extraordinary gains by doing things like others, so you have to get over the fear. The easiest way to do that is to provide yourself constant reminders that the payoffs are worth it. To get in early, you need to find things before they’re popular. To iterate as fast as possible, you need to be okay failing repeatedly. There’s no trial-and-error without error. We don’t need fancy graphs to tell us what to do. Well, I do, but you probably don’t. All you need is a little courage to do things a little differently. Once you accept failure as an inevitable outcome of pushing boundaries, you become free to do what you truly believe is best. We have two lives, and the second begins when we realize we have one. This is a public episode. 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