Betting against coronavirus: A poker champion on how to win with an uncertain hand

Key Points
  • Annie Duke won over $4 million playing professional poker.
  • Uncertainty is an environment professional gamblers operate in at all times.
  • She says the coronavirus may be extreme uncertainty, but rules already exist for beating it.
Multi-million dollar poker champ Annie Duke on the biggest decision-making mistakes
Multi-million dollar poker champ Annie Duke on the biggest decision-making mistakes

Annie Duke has outlasted many uncertain situations. She won millions of dollars playing high stakes professional poker against genius opponents holding their cards close to the vest, and she stared down an unpredictable boss, named Donald Trump, on "Celebrity Apprentice" (Duke finished only behind a formidable foe in the boardroom: Joan Rivers). 

Now Duke is applying her decision-making strategy to the broader world of strategy during the coronavirus pandemic. She says uncertainty is involved in every decision we face, whether business leaders or individuals, and Covid-19 is just an extreme example. There are a few rules to follow to win, and avoid the potential for big mistakes.

"We think right now the environment related to uncertainty is really drastically different than it was prior to the pandemic, and while it turned it up to an 11 now, it's not that drastically different," Duke said at a recent CNBC @Work virtual event.

Her point: the same biases that get in way of decision-making, like status quo bias — or thinking things yesterday will be the same tomorrow — generally reveal that humans think there is more certainty than there is. "Now we can embrace uncertainty in an environment where it's amplified and can make better decisions after the pandemic goes away," she said.

Here are a few of the poker champion's rules for making smart decisions. 

1. Don't be afraid of guessing

Duke says knowing that there are always different ways the future can turn out, people should not be afraid of guessing because "there is very little you can guess about that is truly, literally guessing."

"Usually, you have more than one idea and the more you can narrow down possibilities about the future, the better off you are," Duke said. "The No. 1 thing is to recognize you won't get a right answer or wrong answer and you have to be OK in between."

2. Decision making should be a testing environment

Duke uses poker as an example of how to turn decision-making into a testing environment that teaches a lesson about how to gain information, while limiting risk.

In poker, you are trying to figure out what an opponent is holding and your chances of winning, and you are dealing with very little information. What you can do is make small bets that won't have a big impact on outcomes to get information from opponents, and take that information into your decision-making environment.

At a time when many companies and individuals may be concerned about making big decisions and investments, Duke says, "Prioritize decision that are easy to reverse and turn back the clock, and get to other options. You want to do a lot of small tests, like A/B testing, so if it doesn't work out, it's not a big deal to the bottom line but you have gathered lots of information for big decisions down the road."

Annie Duke at the 2004 World Poker Finals
J. Rogash | Getty Images
Trying to find out what information other people have has become paramount, and we're not very good at extracting that information from people around us, and on a team, to improve the decision process.

3. Using your intuition is fine, when used correctly

We use intuition in decision-making more often than we realize, but intuition requires a decision-making process. Using "your gut" and relying on intuition are not equivalent, says Duke.

Making decisions quickly and being willing to do that even when you don't have lots of information is using intuition. But, "even moving fast, you need to think about what ways things could turn out, recording thoughts as much as you can. You can check in on decision-making and ultimately get speeder decisions, and more accurate."

But Duke cautioned that it is important to make sure your intuition is performing, that good decisions are the result of the process. If not, bad decisions will be the result.

Here are a few reasons why.

4. Our own beliefs are too contagious

Checking in our our intuitions is key because humans trend to "infect other people with our own beliefs" too often, says Duke.

This is particularly true of workplace settings, and meetings in particular, especially for leaders.

"In a team setting, the team will bend to your opinion," Duke said.

The Covid-19 pandemic increases this risk because we are making decisions with even more-incomplete information than is typical.

"Trying to find out what information other people have has become paramount, and we're not very good at extracting that information from people around us, and on a team, to improve the decision process," Duke said.

5. Most meetings begin with the wrong goal

A "huge" mistake in the business world is that most people think the purpose of a meeting is for everyone to agree.

"The purpose of a meeting is to expose places where people have different opinions ....  to inform decisions," Duke said.

She used one example from corporate history to make the point that even companies "dealt" a good hand can mess it up when they aren't thinking of competitors in this way: people with different opinions that need to be exposed.

"Think about the [good] hand that IBM had in the early 80s and look at what happened with Apple and Microsoft," Duke said.

6. A good hand is not enough: Know your opponent's view of the world

The computer industry is a big-business battle example, but it can be broken down to the importance of the interpersonal communications in all decisions.

"You can start off with a great hand, but how you play is more important, to maximize ability to make a profit or figuring out more quickly than others when to fold," Duke said.

For leaders, it's essential to get into the shoes of other team members or the teams that you are in competition with, either internally or externally in the form of rival companies, and try to figure out how they view the world.

And you do that "so you can get a better model of their strategies and goals," Duke said. "Because you have to adjust the way you think about the world according to the competition. There is nothing such as an absolute position," the poker champion said. "It's relative to the way other people are thinking about problems."

7. Why wearing masks is strategic 

Framing decisions in a way that allows us to reach the best possible answer is not always the way we think. Wearing masks — or not wearing them during the pandemic — is a good example.

Duke said the reason for reluctance to wear masks that she hears from people, based on not knowing enough about how well the facial covers work against the coronavirus spread, is a flawed model of decision strategy.

Not knowing how well the masks work is "kind of true of every decision," Duke said. "We don't know how well it works but what we should really care about is how much it can hurt. Doctors having been wearing for surgeries for a long time, so we know there's no harm, so not knowing about the upside doesn't matter. And the upside could be big."

She described the decision to wear a mask as a "free roll."

"Nothing bad comes from it, but a lot of good can come from it," the poker champion said.

For more on tech, transformation and the future of work, join the most influential voices disrupting the next decade of work at the next CNBC @Work Summit this October.

Strategy Session: What are the Odds? - CNBC @Work Spotlight
Strategy Session: What are the Odds? - CNBC @Work Spotlight