Alec Torelli: The Risk Trader

martin tobias (00:01.277) Hi, and welcome to the first episode of the first bet. Every successful person has been interviewed about how they got successful, but nobody drags it back, people back to the initial idea, when they took that first step, that first risk that ended up turning into something successful. And that's what I want to talk about here on this podcast.

And I think it's appropriate that we have as our first guest, Alec Torelli, who's a professional poker player. And he said something on one of his streams in Instagram last week that sparked me to want to talk to him and actually catalyze getting this podcast going. And he said, he says, I'm not a risk taker, I'm a risk trader. And I got really interested in that idea. So I wanted to welcome Alec. He's a pro poker player, turned pro as a teenager.

won a bunch of online tournaments, has finished eleventh out of ten thousand in the main event, played with Doyle Brunson. And now he talks about how he uses some of his risk taking risk trading frameworks for investing. And I wanted to welcome you, Alec, to talking to me about this today.

Alec Torelli (01:18.37) Thanks, Martin. I appreciate that. And I'm honored to be the first guest. It's cool we've done this. We've had a lot of talks in the past. It's cool to explore new ideas together.

martin tobias (01:26.257) Yeah, thanks. And we did a a webinar before. We did a VC and a poker pro walk in a into a bar a couple years ago, and that was funny. So I asked you in preparation to this, come with one of those first step, take the first risk things and tell me about you know one of those times where you made a first bet into uncertainty. Maybe it's the when you left SMU, the initial thought of leaving college to be a pro poker player, but tell me about a time in your life where you were faced with a

big decision and uncertainty and how you thought about it and and let's start from there.

Alec Torelli (02:01.548) Yeah, you nailed it. I was 18 years old. I had been playing poker for two years. It was my first semester at SMU. It was about October. And it's funny because my economics class was like early on Monday morning, but I would stay up very late on Sunday nights, which was the best day to play online tournaments. So I would miss this class all the time. And I was basically at a crossroads where I realized I'm a month and a half or so into school and I'm at a pivotal juncture. I either have to quit poker and focus entirely on school.

martin tobias (02:20.594) Okay.

Alec Torelli (02:31.632) Or I have to drop out of school and play poker professionally. But I basically hit a plateau in poker. I couldn't go any further in where I was, and I was reaching this tipping point where I was soon going to be dropped from my classes. So I basically had to, you know, go all in in one decision or the other. And I remember exactly where I was, and I remember what I was thinking at the time. And it's something I talk about in this risk trading framework. It's like it seems like the crazy idea is to drop out of school and play poker, right? Like everyone I asked around me.

My friends at the time, my college counselor, anyone I could ask. I was too scared to tell my parents at the time. Of course, I knew what you know, I didn't want to ask them at the time. So everyone I asked was all always telling me, like it was just so obvious, it was so stupid. It was like, you know, what are you even thinking? This is like, you they didn't even consider the list of pros and cons. I couldn't even get past stage one. So I was kind of left on my own to make this decision, and I didn't really have a framework for doing it. I'd never made a huge life decision before. I was 18 years old. So I thought about how to think about it. Like, what is the framework?

martin tobias (03:03.932) Sure.

Alec Torelli (03:32.363) I actually need to make to decide. Cause like you said, you have imperfect information. My life could go, you know, one of two paths. I have no idea where either path is gonna take me, so how do I decide? Well, I thought about what do I do in pretty much every hand of poker I play? I get two cards, I don't know what the next five are, and I don't know what my opponent has. So every single hand of poker, you're making this like risk reward calculus. You're thinking about, okay, is this hand worth playing? Which is another way of saying, is this risk worth taking? And so when people think about risk, they always think about taking the risk.

martin tobias (03:59.624) Kicking.

Alec Torelli (04:02.266) Right, which is a has a loaded term, it's a negative connotation. It's like, what could go wrong? Well, sure, you have to think about what could go wrong, right? That's the first part of risk, is you understand what the downside is, but you also have to contrast the risk with the reward. And the reward is as important as the risk, frankly, it could be more important than the risk, but a lot of people don't go there because they're so paralyzed by the risk that they stop at the risk, but they don't dream or think about the reward. So I thought about this in the context of my decision to drop out of SMU or not to drop SMU SMU, and I thought about okay, what is everything

martin tobias (04:26.748) Right.

Alec Torelli (04:32.176) Everything that could go wrong. What is the risk? If I play this hand, let's say I'm going all in, right? I have my two cards, I go all in. What is everything that could go wrong? And let me get comfortable with that downside because it real is possible. I could lose all my chips. So I had 20 or 30,000 saved, which frankly was more than any other 18-year-old, right? Where I was supposed to have no money. And if I drop out of school and I give myself a year to play poker professionally, the worst case scenario is I lose all of my money and I waste a year of my life, right? Like I get an experience, but I come back to square one, I round track.

martin tobias (04:48.655) Absolutely.

Alec Torelli (05:02.176) The whole thing, and I'm back at SMU a year later. I'm 19 years old. I'm one year behind everyone else on this trajectory toward wherever that path was going to take me. Business school or you know, starting a business or working for a company or working for a Fortune 500, whatever. So I'm one year behind. That's my worst case scenario. Okay, can I accept that risk? Maybe, but I can only accept that risk if I understand what my upside is. I can't just stop at my risk and what everyone's gonna tell me and the shame I'm gonna feel if I come back a year later, and what my college counselor is gonna say, and all the students are gonna laugh at me that I'm a year older than them, and all my peers have moved.

martin tobias (05:17.116) Worst case mm.

Alec Torelli (05:32.029) On and I'm stuck in it as a freshman. Okay, that is the risk, but what is my upside? And this is where what empowered me to kind of make the decision is I thought about okay, what is everything that could go right? Well, everything that could go right is I could make it, I could like live my dream of traveling the world to play poker professionally. I could go to all these countries, I could meet all these people, I could have a life where I control everything on my own time, I could play a game I love, and you know, that's the upside. So that that was the framework I used.

martin tobias (05:59.687) Did you also consider the potential financial upside? Your downside was capped at thirty thousand dollars for that year, but did you try to risk adjust some potential upside? Like it could be zero, it could be a hundred thousand, could be two hundred thousand, or did or did you just say the the the benefits of doing something I love are is are gonna be enough even if the financials are sort of a wash.

Alec Torelli (06:24.426) That's a good question. I mean, I didn't have a good barometer for what the upside could be, because remember, there was no

martin tobias (06:29.232) You you were playing small stakes games and you might be playing bigger stakes games and you're gonna change a little bit, yeah.

Alec Torelli (06:34.616) But there were also were no models for people that have done what I did. It wasn't like

martin tobias (06:37.756) That's true.

Alec Torelli (06:38.402) Hey, I could look up to a generation of expert traders that had made this much money if they make it. There were no generation of people that played online poker. Online poker was brand new. It literally just came out. So there was no model for what the world could the future world could look like. There were no people that were traveling the world playing online poker. I mean, my generation, I was like, I'm the oldest one that did it. So I didn't think about the financial upside, but I did think about like what it could my lifestyle look like. And I honestly thought, like, if I could travel the world for a year or two and break even.

martin tobias (06:41.158) At the time.

martin tobias (06:49.553) Yeah, yeah.

That's true.

martin tobias (06:57.338) The first. Yeah.

Alec Torelli (07:08.556) And have poker pay for me to see 10 or 20 countries and go play poker around the world and go play with my heroes and go have these experiences. Like that to me was the dream upside. Like that that was enough. Obviously, I did a lot better than that. I wasn't expecting that at the time.

martin tobias (07:18.658) That was enough of the dream upside in. Exactly. And when you steel man that against the quit poker stay in school, you said, I'm gonna just be you know, around the people that I know in school. the result at the end of a year of school is gonna be, you know, limited. How how did you steel man the other side of that?

Alec Torelli (07:43.906) D you mean the downside?

martin tobias (07:45.255) That well the doubt well like if I take the other path, because you go the the the positive you know I'm my risk is capped at thirty thousand here and I have all these potential upsides. But then if I'd make the take the other road, what what what how how did you steal man that you probably got you know less interesting people, but you know, you probably ended up with the thirty thousand at the end if you just didn't spend it, if you stopped playing poker and didn't risk it, right?

Alec Torelli (07:56.33) I see.

Alec Torelli (08:10.638) Sure. Yeah, you save it and you could start your first business or

martin tobias (08:12.742) So so maybe you have a little more savings. You your thirty thousand's still there at the end of the year, but but y you thought that the quality of the people you would meet and the experiences you would have during that year would be so much less. Is that how you thought about it?

Alec Torelli (08:17.666) Yeah.

Alec Torelli (08:29.058) Yeah, I did I mean I thought about more like what what my spirit was looking for. And I thought like, okay, if I do this path, it feels really like a compromise. It feels a little bit like I'm staying on the normal path, but it's not what I really would want to do. I'm doing it because that

martin tobias (08:33.606) Well I

Alec Torelli (08:47.074) Because I'm unsure about what would happen. If I was sure I was gonna make it in this poker path, there's no question I would do it. So I thought about like what am I more likely to regret? And like there's only I I thought to myself, like, even if I play poker and I make it, I could still come back in two, three years and go do a business and go the normal path. But I only have this one chance to play poker. So it's kind of binary. Like, I'm either gonna write off playing poker and I'm never gonna do it, or I'm gonna do it right now. And so, like, to me, the

The more important decision is the one that is has like expiry. Like if you're buying an option, it's much more important that the option performs well than if you're buying a spot on a stock, because the spot you could hold forever. The option has to perform now. So it was kind of like I have an expiration on my ability to even take my shot, and this is it. So it's sort of binary.

martin tobias (09:27.63) Exactly.

martin tobias (09:35.279) Absolutely. And and you were maybe unconsciously using Jeff Bezos' regret minimization framework before he even talked about it. Cause you said, Hey, now's my chance. how much did you think that that was something

Alec Torelli (09:44.108) Yeah, we didn't know about it at the time.

martin tobias (09:53.459) y y you know that's a little easier to do at when you're eighteen when there are lots of you know second doors. I mean the other thing you're talking about is it's it's it's potentially a two way door, right? You're not doing something that you can't turn back from. You could always come back to school. is one thing that you thought about there

Alec Torelli (10:13.548) Yeah, I d I do feel that way, but I feel like I mean, I feel like most decisions that people think are permanent are actually not permanent. I mean, what I mean, you can always undo I mean, maybe can't undo having a having a kid, but like, I mean, you could undo a tattoo. I you could undo most things you do in life, or you could get back to baseline or relatively similar. Of course, there's consequences. I would have lost all my money and been a year behind. So there's like I'm not exactly back at zero. It's not a complete free roll. There is risk, right? There is risk. But I look at the asymmetry, right? Like, what is the risk multiple relative to the reward? So like the downside.

martin tobias (10:38.631) Right, right.

Alec Torelli (10:43.532) Let's say is you know 30,000 in a year. Let's call that one, right? You lose everything that's one. But what is the upside relative to the downside? Not just in terms of how much money I can make. Of course, I can make many multiples of 30,000, but like what is the satisfaction or the joy or the or the or the personal upside of dropping out and making it? And so, like, how many multiples of that is that of the downside? And that's kind of like how I think about a poker hand. It's like if I have a pocket pair, like two sevens, I'm probably gonna lose the hand. I don't really I don't have a great hand, but if I hit a third.

Seven, I'm gonna win all of my opponent's money. So I could lose one bet pre-flop or I could win a hundred bets post-flop. So I have a hundred to one asymmetry. It's not that simple, but just to simp to simplify it, I have this 100 to 1 odds on my risk. And so I yes, I'm gonna lose the hand most of the time, but if people stop there and they don't think about what they're gonna win if they do hit, that's like that's the the miscalculation I feel like a lot of people make with and that's why I said I'm a risk trader. I'm not a risk taker. I'm actually really conservative. Like people come to me like, I can never gamble. Like, I don't gamble, like I am very

martin tobias (11:42.833) Yeah, yeah, yeah.

Alec Torelli (11:43.345) like cautious of the risk reward calculus of every time I risk money. And so I'm I would say I'm like pretty conservative in a lot of ways. Just because I only look to risk money when I feel like I have an edge. So it depends on how you think about risk.

martin tobias (11:51.77) Yeah. All right.

martin tobias (11:57.375) That that's another good important thing is that you look for to risking money where you believe you have an edge. And I love the small pocket pair thing. Just an aside, I was playing poker at the all in conference in Napa for the last two weeks and I played a bunch of small pairs and I I probably won eighty percent of my money on small pairs for the things because it's a sneaky thing that nobody expects you to have.

Alec Torelli (12:14.264) Amazing.

Alec Torelli (12:21.527) Yeah.

martin tobias (12:27.043) I I I love those. and I think that's something that a lot of people who aren't used to making these low information decisions don't get right is what

in poker you call the pot odds. you know, the the odds of a return on your multiple. If the pot odds are right, even if you have a low probability situation, if you have a thirty percent chance to win and you're getting ten to one on your money, you should put your money in every day.

Alec Torelli (12:58.392) Yeah.

And I think a lot of people don't see the d the the that side of the equation. They just think, okay, it's it's binary. Like if I'm unlikely to win, I don't risk. But if you're unlikely to win, but when you do win, you make a 10 or X or a hundred X, it's actually good to lose money in those spots in the sense that if you if you spread your risk out and you diversify and you make twenty of those bets, one of them or two of them are gonna return the whole portfolio. And that's sort of the way poker works as well. You lose a lot of hands, but the hands you win, you win more than you lose.

martin tobias (13:07.398) Right. Right.

martin tobias (13:16.242) Exactly.

Alec Torelli (13:29.008) That's that's just the way it works. Right.

martin tobias (13:29.402) You win one that is yeah. Let let's go back just a little bit more to to the beginning. I wanna talk a little bit more about the case against you making the thing and and and see if

Week 'cause I think everybody, you know, I forget the guy who calls it the resistance. Anytime you're doing something, there's the resistance telling you you shouldn't do it. can you categorize where the resistance came from? I'm sure some of it was your own fears of failure. some of it was your friends. You already mentioned one major resistance, your parents, you didn't tell them anything because you knew there would be lots of that. Where do you think people find resistance?

Alec Torelli (13:51.714) Yeah.

martin tobias (14:13.46) resistance to t taking th these kind of a a asymmetric bets and how how how would you categorize them and how did you get over each category of resistance?

Alec Torelli (14:24.536) Yeah, it's a great question. I think the macro is that I what I find in observing other people I talk to about these sorts of things, because I think it's common that people share ideas with close friends, like everyone has sort of a dream or let's say everyone has music inside them and they're they're afraid to play. It doesn't have to be music, it could be art, it could be a book, it could be a you know, it could be a painting, it could be a passion project. Everyone has not ever everyone, but a lot of people have that thing inside and then why don't they do that thing? there's a great book called The War of Art by Stephen Pressfield. it's it's an amazing, amazing book.

martin tobias (14:35.1) Sure.

martin tobias (14:50.17) He's the one who talks about the resistance, Pressfield.

Alec Torelli (14:52.106) Yeah, it's not the art of war, it's the war of art. Obviously, it's a pun on that sort of thing. But that book is incredible for anyone that has music inside them and struggles with expressing it and letting it out. I do think that the biggest thing I notice is that people's opinion of other people and what other people think is more important than what they think of themselves. They might not actually consciously think that, but if you look at their behavior of why they don't do things, a lot of it is that fear of the judgment of other people around them and then and and that social circle around them if the thing doesn't go right. Of course, if the thing doesn't

martin tobias (14:54.918) More about, yeah.

Alec Torelli (15:22.0) Goes right, everyone's gonna you know praise you, tell you you're great. Some people are gonna be jealous and they're gonna, you know, whatever. But like there's also the fear of success in some ways because if you change your situation dramatically, you might not be close to the tribe that you started out with. So there's like, there's it's it's kind of like a thermometer. There's a thermostat, like there's a comfort level that that people generally are in within a certain range of temperature. If it gets too hot or too cold, you know, you go up too high or down too high. that there's gonna be some challenges around people's.

social circle. So like people are very concerned, I find, about the perception that they ha that other people have of them. And that sort of supersedes their own perhaps internal desire to do the thing that they want to do. Because like that that is higher. So like I I tried to think that, and some of this is luck. Like I think my my

Mom in particular instilled a lot of self confidence in me. she had me read this little like poem every day before bed. She put this like little thing next to my bed and it like this little sort of like phrase mantra like, I'm the only unique me that'll ever be. I have a power to make a difference in the world. I

martin tobias (16:24.2) awesome.

Alec Torelli (16:24.502) Whatever. And I still remember it. I still have the thing in my in my closet at my at my parents' house. So like it I guess I was sort of dealt a good hand. I think a lot about context of luck and like what things you can control versus what things were given to you. I was dealt a a a solid hand in this respect where like I had a lot of internal self-confidence and I was largely given that, like I said, by my parents, to be able to make this decision and be comfortable with

martin tobias (16:43.516) Right.

Alec Torelli (16:47.946) accepting that other people would would judge me or not, you know, would think that I was stupid. Or if I failed that they would all ta say I told you so. And I was like, fine. I can live with that. Like I I I fall a lot in in public. I mean frankly I have, you know, I play poker on TV and people could see my cards and they could see every single mistake I make. I also make videos about

my hands and you know I've been sharing my hands on on YouTube for twelve years and I make videos about my mistakes and again again they're on TV, it's not like I could hide these things. But so yeah, like you get comfortable with that sort of playing poker. I wasn't comfortable with that at the time. So going back to the the first bet, obviously wasn't I didn't have this level like of comfort playing poker on TV at the time. But

martin tobias (17:06.929) Yep.

Alec Torelli (17:22.102) Yeah yeah, I did so I think that's the biggest thing that that people need like that that this the biggest challenge to overcome is just like being more sure about your own opinion for about yourself and what you're doing and trusting your own internal spirit more than you outsource that to trust the opinions of other people around you and that's hard to do. and it's it's also hard to dance the line between like delusion and ego and and truth because like sometimes you could be delusional about your own ability or whatever and sometimes the other people around you actually have the reason. And so it's it's really hard to like to

martin tobias (17:33.466) Okay.

martin tobias (17:50.916) Absolutely.

Alec Torelli (17:51.969) To know that internal, internal line. That's why I said I listened to my spirit, because I was like, in my heart of hearts, I know this is right. And I know that the reason I wouldn't do this would be because of that fear that I just described. And that's how I knew it was the right thing.

martin tobias (18:03.906) Okay. Yeah, that's a good framework. I I am always interested in how people get over that because you always have your own self doubt, you have your societal pressures to not do something stupid. And it it sounds like you were dealt a good hand in the self confidence category. But yeah, I I keep coming back to the the phrase that you heard a lot, you know,

Journey of a thousand miles starts with a single step. I just encourage people to take the step. And even if they're scared, even if their friends say that that it's stupid, it's you you you just need to do the small first thing. and you know thing thing things will come after that. But many times these decisions that are life-changing, you know, or life-committing decisions can feel like one-way doors. And you said a couple things I think that are helpful to people.

Alec Torelli (18:34.21) Yeah.

martin tobias (19:01.3) First frame or A frame that you talked about is not everything that sounds like a one-way door is a one-way door. Most things are two-way doors or swinging doors, more than you think. and I think that that is helpful to people.

Because I I think a lot of people get themselves stuck in yes, no, no third option type things, or this is a one-way door, or they ratchet the consequences up. I actually wrote a blog post one time about all these weasel words and that I try to get out of my system. So for example, if you say something like, I can't do something, the minute you tell yourself you can't

Alec Torelli (19:39.415) Yeah.

martin tobias (19:41.905) That is a hard blocker, your limbic system is saying it's existential, I can't do it. and it's like like like I'm gonna die if I do it. The reality is most things you can do, you just don't want to. And y you know, changing your y are are there any tricks you use like that to change? I really like this idea of changing the word from risk taker to risk trader. Are are there any other ideas?

Alec Torelli (19:52.056) Yeah.

Alec Torelli (19:57.197) Yeah, that's true. I think have and should are are also really

Alec Torelli (20:08.194) Yeah, it's important. I mean linguistics I so I s I've worked I mean I've worked with a lot of mental coaches in the in the past twenty years. so one was a well-trained well like well-known hypnotist that worked with elite mental performance athletes, golfers, race call drivers, etc. And so I learned the power of linguistics and like basically words are are programming and words shape how we see reality. So without getting too much into NLP and all this stuff, which I've since studied a lot,

When you say risk taking a risk, you're and this is a thing I put out on on Instagram, it's like you are looking at the downside of what could go wrong. So you're taking something in that you don't want. Nobody wants risk. If I could be sure I was gonna, you know, make a hundred million dollars with zero risk, that would be the best. But you're there's always a risk. So like when you say I'm taking a risk, what is your mind doing? Your subconscious mind is focusing on the risk that you're taking, it's not focusing on the reward that you're getting. So that's why in poker we have, you EV, which is expected value, because there is risk, but there is reward. So you think of things and

terms of what is the expectation of the decision I'm making. So the reason I kind of you know maybe made up this phrase or coined this phrase a risk trader is because I'm

Taking risk in exchange for reward. So when I when I change the linguistics and I change my programming about my relationship with risk and I say I'm a trading risk, I start to see risk in a different way. And when you see risk in a different way, you approach it differently. You mentioned words that are dangerous. I think should and have to are very dangerous words. When you say I should do something, I have to do something, or I am. So in English, you say I am, I am sick, I am tired. In Italian, which I've since become fluent instead, I a while ago moved to Italy.

martin tobias (21:29.957) Very dangerous.

Alec Torelli (21:41.481) And I married an Italian woman. you say there's like a transitive and an intransitive. So you say, 'I feel sick. You're not I am sick. Because when you are sick, your identity is sick. So you are a sick person, and then you're in a chronic state of sickness. And you know, it depends on what you believe about energy. You could be like shaping your nervous system to be a sick person. Whereas if you feel tired, you feel sick, you feel hungry. In English, you say I am hungry, in Italian you say I feel hungry. you say I have the hunger, but it's it's it's sort of like translates to I feel. Like it's very different. And so linguistic.

martin tobias (21:54.959) Exactly.

Alec Torelli (22:11.484) Are super important. and I think that's like a really important way to think about of think about things. And I think the last thing is like there's there's almost always a way to mitigate the downside. When you think about trading risk, you first want to think about your downside. So I always assume any poker game I go into, I could lose all the money I'm taking, I could lose all the money I'm sitting down with. Anytime I enter a tournament, I could lose all of that money.

martin tobias (22:18.46) Yeah.

Alec Torelli (22:31.498) but there's there's ways to mitigate risk even in poker. You can sell action to other people, right? So there's always things you could do that are creative and outside the box. And when people are looking at big life decisions, and I've I've made since a lot of these, I sold everything I owned when I was 24 and I moved to Italy. I there I met my wife. But there's like there's risk in that decision as well. But it's like, how do you look at the worst case scenario and then put planners in so that it's not a one one-way door? There's like a two-way door, there's a back door, and yeah, it's not gonna be a hundred percent of where you were, but if it's eighty percent of where you were.

And so you cap the downside and you still have most or all of the upside, that is a really powerful play to do it. So like hedging or mitigating the downside risk is another way to to take those decisions with little more comfortable comfort.

martin tobias (23:13.478) That that

That that is another good concept.

When you're faced with these decisions, find a way to hedge it, sell your action or you know, prepare a a a backdoor for you, limit your th your your things. You know, you you said this another time, I think you know, about tilt control and stuff like that. If you're going to a game and let's say it's a five thousand dollar buy-in, have in your mind before you start, I'm willing to invest three bullets in the buy-in or something like that. And if I go three bullets or or you know, when I'm up three X, I'm gonna leave. having

some guardrails around the session will prevent you from getting sucked into the constant rebuy or the you know I'm up so much so I'm gonna play too many hands. But but but framing before you go into these decisions some of those guardrails I think is a very good heuristic that you talked about before.

Alec Torelli (24:00.707) Yeah.

Alec Torelli (24:08.14) Yeah, for poker, I mean poker teaches you bankroll management is one of the key principles, which I've you know learned and invest like learned to apply to investing as well, because when you you know invest in options, like a lot of times they go to zero. Options are very much like a poker tournament, by

spot is much more like a cash game. And so it's like, it's fine if an option goes to zero because if it goes up 20x, it, you know, it only has to work one out of one out of 20 times. So it's like, it's, it's, it's sort of like thinking about those things in terms of risk reward and then being comfortable with the downside because, you know, you know that your bankroll is 100 and you only risked one or two on any one individual bet. So it's okay that that bet doesn't work out or it loses 50% because you have so many other bullets to achieve the long run expectation that you're going to achieve if you have enough at bats. It's the same reason why casinos don't let certain people

martin tobias (24:30.034) One out of twenty times.

Alec Torelli (24:52.13) bet more than a certain amount because they need volume of hands in order to manifest their edge. Their edge is only one or two percent. They live off that edge. Poker players' edges are is much greater than than one or two percent. I mean good players win 70% of their sessions. So as long as you can manage your risk accordingly to achieve that long-term outcome, I mean you're gonna be fine.

martin tobias (25:09.37) Okay, there there's one other concept that I I find causes people making these decisions to make bad decisions in the future is this thing called resulting or outcome-based things. It's like if something turns out well, you're like, it must have been a good decision, but you it could have been a bad decision that that went into it. How do you avoid

this the the trap of resulting like you know I invested in a stock and it made a bunch of money and I think then I'm a really good stock picker, but in fact I just got lucky. Like how do you think about splitting the the time the the the the the the thought process of and being honest to yourself about outcomes that were random versus outcomes that you know

Alec Torelli (25:41.229) Yeah.

martin tobias (25:58.523) were a result of the right decision in the beginning. It turned out for you, poker was the right risky decision to take. I think the outcomes have been good for you, but I don't think that the outcomes w were are necessarily the right way to judge a decision. The decision was right regardless of the outcome. How how how do you think about that?

Alec Torelli (26:17.709) For sure.

Yeah, the decision is Yeah, the decision, the EV of the decision is locked in when you make it given the information you had. So like my decision wasn't right because I made it. It was right because at the time, with the information I have, which is always limited, it was the right decision for me at that time. But it would have been right. The way the way you know that it was right is if the decision went the other way, would you still feel as good as you feel about it? So if I dropped out of school and I didn't make it, I'm now thirty-nine.

I'm sure like that I would be happy that I did it. Because I think about other things in my life that I didn't do that I wish I had done, and I feel like I wish I would have done them, and they were much less important to me than playing poker. They weren't even that big of a thing. They were like little things that, like, it would have been cool if I'd done that. And I regret the things I didn't do more than things I do do. So it's like, I'm sure that this would have been the right decision, even if I round-tripped it and went back to school. So the way you know is you look at the outcome that you didn't have, especially this is especially true when.

you win, let's call it winning, the decision goes your way, whatever it is in life or poker or business or investing. When you win, it's much more important to do this when you lose. When you lose, and you know, it's it's easy to look critically at the situation and say what went wrong and think that you actually did the wrong thing because you lost. So we're much more conditioned to look at things when we lose than when we win. But when you win, you have to say like if this went the other way, would I still feel that this is the right decision? And that's a good way to check yourself to know, you know, if you're if you're resulting or not.

martin tobias (27:46.373) Right. I I I I'm a big fan of that. it happens to me in poker all the time. I was I was in a hand last week and I have

Pocket queens have an overpair. I go all in, the guy calls me with pocket fours and he hits a four on the river. He had a you know five percent chance of winning, but I lost, but I didn't care about the loss because my decision at the time with the information that I had was the right decision, and the result went against me, but it doesn't matter. I'll keep playing that same decision a hundred times because over time the odds will go in your favor if you.

Alec Torelli (28:04.908) Right.

martin tobias (28:26.812) make the right decision at the time you have the information that you have.

Alec Torelli (28:30.382) It's great point. And poker teaches that so well because you're in s every single hand, you're forced to face, you know, the own your own decision-making process. And it's easy to just say, well, I lost the hand, I got unlucky, or I won the hand, I'm so good. But the reality is, any I mean, as Kenny Rogers says in The Gambler, every hand's a winner and every hand's a loser. So, like any two cards can win and any two cards could lose. So, your challenge and what poker teaches you is to look objectively at the quality of the decisions you're make making and not really worry about the outcome. And the way to do that is really to become obsessed with the process. So when I

Win, I put the same exact rigor into studying the session as when I lose, because I don't care that much about the results. I care about how I feel about how well I played and the quality of the inputs. And making money at poker is not really my job. Making money at poker is the result of me doing my job correctly, which is to make great decisions under pressure with imperfect information. And that's what I do, and I do that well. That's why I win at poker. So like I don't focus on the money, I don't focus on winning. I just focus on the quality of the decisions, and then I'm really ruthless about

my my play. So like I ask other people, I have a very strong circle around me of people that tell me, hey, you know, and tell honestly, and I coach poker too. I coach you know a lot of clients and I tell them honestly, like, look, this was a brutal mistake that cost you a lot of money. This was horrible. You should never do this again. Because like people need to hear the truth. They need to understand that like this was not a good decision. And this was a great decision. And so poker players have this like unspoken ethos that like if you ask someone that you respect about a hand, they're gonna just lay it on you. There's no sugarcoating in poker. You know, this is not

martin tobias (29:35.697) Right.

Alec Torelli (30:01.097) Like you know, get around in a circle and everybody consoles everyone for like their there's no pity party in poker. In fact, the the worst thing that could be in a poker group is someone complaining about a bad beat. Like that's not tolerated. And frankly, no high-stakes poker players talk about bad beats. They only talk about decisions that were close, regardless of whether they won or lost. So there's kind of this training that you go through in poker to to even move up in the ranks and get to an elite level, where like just consistently bombarded with like ruthless feedback from other people and

And you welcome that because you know that that's the way to get better. And then you're also just constantly thinking about like, what could I have differently? What could I have done differently? You have become obsessed with that process.

martin tobias (30:39.95) I I agree. I think in order to get good at making decisions you have to have a good feedback

loop and be honest about the quality of your decisions over and over. This is again why like for example in my pre-seed investing I saw 4,500 companies last year I wrote 11 checks. I have an AI thing that goes out and looks at what happened to the 43 489 companies that I said no to and honestly tells me did I miss fucking something? Did something become a unicorn that I said no to? And some people could think that's self-flagellation. I think it's better decision

Alec Torelli (31:05.454) That's amazing.

martin tobias (31:15.748) accountability. If I made a mistake in the beginning, I want to know about it. I want to know how to correct my algorithm to make a better decision in the future. I actually want that feedback that I made a mistake.

Alec Torelli (31:17.102) Absolutely.

Alec Torelli (31:28.418) Yeah, me too. I love I I don't love making mistakes. I hate making mistakes. That's why I said I'm obsessed with the process. But I love knowing that I made I love knowing in hindsight that I made a mistake, because then I could correct the mistake and not make it in the future. So it's painful, but there's nothing more painful than losing at poker. R losing really sucks. So I'd much rather go through the short term pain of knowing I made a mistake and that I'm human and I'm flawed and correct it than suffer the continual consequence of making the mistake over and over and keeping losing more money, and opportunity in poker. So

martin tobias (31:31.492) I don't love making mistakes either, but

martin tobias (31:55.247) Absolut. Absolutely. Well, thank you, Alec, for go going back in time and taking us to that the that big decision you made in your life with low information. if you had to summarize in one sentence advice for people that are faced with, you know, how to bet in when they don't know the cards in an uncertain environment, what what would that be?

Alec Torelli (31:59.725) Yeah.

Alec Torelli (32:26.008) There's gonna be a conflict between your head and your heart. And I find that most of the time when I override my intuition with logic, I pay the price and when I trust my spirit, it ends up being the right decision. That's what three million hands of over have have taught me.

martin tobias (32:42.062) Okay. That's what happened to you. I appreciate that. And just for the show notes too and for everyone else, where can people connect with you online or hear more if they like how you think about decisions?

Alec Torelli (32:55.887) Yeah, thanks. So I'm at Alec Torelli on all social media. And AlecTrelli.com has a free newsletter called Beyond the Felt, where I talk about lessons from poker that apply to decision making. and that goes out every you know every week. And I have a bunch of articles. And then consciouspoker.com is my training site. So if people want to actually learn poker training or get coaching or learn from some of our our our programs, that's that's where to do it. So follow me and connect. I'm very active on social media. I'd love to connect with some of guys. Thanks, guys. Thanks, Martin. Appreciate this.

martin tobias (33:20.72) All right. Well thank you very much.