Mohit Satyanand, ace investor, joins former poker pro Amit Varma to discuss how poker and stock markets reveal the flawed machinery of the human brain. They explore decision-making, the sunk cost fallacy, the Dunning-Kruger effect, survivorship bias, and the importance of self-reflection and hard work in these domains.
Both poker and stock investing involve making decisions based on probabilities and assessing the odds.
Loss aversion in the stock market leads to risk aversion and missed opportunities for wealth creation; investors should focus on long-term objectives and overcome loss aversion.
Deep dives
The Similarities Between Poker and Stock Investing
The podcast episode explores the similarities between poker and stock investing. The host, Amit Vadha, a former professional poker player, discusses with his guest, Mohit Satyanand, an experienced investor, the parallels between the two and the lessons they hold for life. They agree that both poker and stocks involve making decisions based on probabilities and assessing the odds. They emphasize the importance of not being results-oriented but rather focusing on making the right decisions based on available information. They discuss concepts like being process-oriented, avoiding the sunk cost fallacy, and managing bankroll effectively. They also touch upon other behavioral biases such as the endowment effect, the availability heuristic, recency phenomenon, gamblers fallacy, and loss aversion.
Loss Aversion and the Stock Market
One interesting aspect discussed in the podcast is loss aversion in the stock market. They highlight how people tend to avoid losses more than they value equivalent gains. They note that this can lead to risk aversion and missed opportunities for wealth creation. They suggest that investors should take a long-term perspective, analyzing long-term data objectively, and preparing for downturns in the market. By recognizing that losses are a part of the investing journey, they can overcome loss aversion and focus on creating wealth over the long run.
Recency Phenomenon and Investing
The podcast also delves into the recency phenomenon in investing. They discuss how people tend to believe that recent events will continue to occur in the future. They mention that this can lead to market bubbles and panics, as investors chase trends without considering the underlying fundamentals. They emphasize the importance of analyzing long-term trends, rather than getting swayed by short-term fluctuations. They suggest that investors should focus on their own investment strategies and objectives, rather than being influenced solely by recent market movements.
Overcoming Behavioral Biases in Investing
Throughout the podcast, the hosts emphasize the need to overcome common behavioral biases in investing. They discuss cognitive biases such as the sunk cost fallacy, the endowment effect, the availability heuristic, and the gamblers fallacy. They stress the importance of being self-reflective, critically analyzing one's own decision-making, and relying on long-term data and objective analysis. By recognizing and overcoming these biases, investors can improve their decision-making and increase their chances of long-term success in the stock market.
Poker and stock markets are very similar -- and both holds lessons for life. Ace investor Mohit Satyanand joins former poker pro Amit Varma in episode 47 of The Seen and the Unseen to discuss how both disciplines reveal the flawed machinery of the human brain.
