The Most Terrifying Wrong Positive Feedback

The financial market is very similar to Texas Hold'em; it often gives some random-walking fools positive feedback, leading them to mistakenly believe that the money earned through luck is due to their own skill.

There is an interesting phenomenon at the Texas Hold'em cash tables: when ten people sit at a table, there is a basic consensus that none of them thinks they are the fish. In fact, if you sit at the table for half an hour and don't notice the fish, you are the fish.

This game easily gives players misleading positive feedback. From what I've seen, many players in the cryptocurrency space who play high-stakes cash games often end up winning or losing tens of millions in a single session, but the norm is that many who aren't worth tens of millions dare to play at higher stakes, after all, people always care about face.

The most important thing for someone trying to get by is to know their own worth. Those who get a little praise from others and genuinely think they are capable are likely to fall into a big pit.

Over time, the win rate situation is about the same as in the stock market: one-third win, one-third break even, and seven-thirds lose. Because cash tables usually have insurance and tips, the dealer is consistently profitable in the long run, and the actual players only win about 5-10% of the time. In other words, if you can't be among the top players in a circle, it’s generally hard to win.

The most important thing I learned in Texas Hold'em is to focus on the decision-making process rather than the outcome; we can only continuously improve our decision quality. The most dangerous aspect of this game is playing at higher levels. For example, after a few times of experiencing positive feedback at higher stakes, one might never want to play at lower stakes again, and perhaps this is the beginning of a deep pit.