Poker Decision Making, Cost Basis Choices, FI Service Corps plus Community Wins | FI Weekly

Poker Decision Making: Part 1

My secret wish for you, in listening to ChooseFI, has always been that beyond reaching Financial Independence, you’d also improve your life in many ways, not least of which is the ability to think more clearly.

I’m on the same journey myself. Right now, I’m re-reading Annie Duke’s Thinking in Bets—a book I consider essential for upgrading your life and decision-making.

It reminded me of two newsletter segments I wrote years ago, which I’m sharing here as Parts 1 and 2:

“Decisions are made with imperfect information and by definition are made without the benefit of hindsight. You know what you know at the time, and you try to make the best decision possible.

But you can’t know everything, and information is constantly being updated when we learn new things!

Annie Duke’s concept of “resulting” is the best way to look at this: It’s so easy to look at the result, after the fact, and try to determine if it was a good or bad decision merely from the nature of the outcome (good or bad).

That is a fundamentally incorrect way of approaching life. You need to look at the quality of your decision and seek out sources of information that will help with that process.

Poker is a great illustration of this: You can have the best hand, play it perfectly and still lose. Does that mean you made a bad decision(s)? Or was it just a bad outcome due to chance, but the decision-making process was one you’d repeat?

The worst-case scenario of all is making up your mind and refusing to change regardless of what new information comes in. “Flip flopper” is one of those terms that makes my blood boil, because it’s viewed as a negative, whereas we should all aspire to change our minds when we evaluate new information and understand the world a little better.

I’m reading the book “Think Again” by Professor Adam Grant, and an interaction he had with Nobel Prize-winning Psychologist Daniel Kahneman was particularly illustrative:

“Later, I sat down with Danny for lunch and asked him about his reaction. It looked a lot to me like the joy of being wrong – his eyes twinkled as if he was having fun. He said that in his eighty-five years, no one had pointed that out before, but yes, he genuinely enjoys discovering that he was wrong, because it means he is now less wrong than before.”

Kahneman went on to say, “being wrong is the only way I feel sure I’ve learned anything. I change my mind at a speed that drives my collaborators crazy. My attachment to my ideas is provisional. There’s no unconditional love for them.”

Another way I’ve heard this put is “strong convictions, loosely held.”

Be open-minded, try to learn new things and continue updating your understanding of the world.“

Poker Decision Making: Part 2

I’m reading the book ‘DUCY? Exploits, Advice, and Ideas of the Renowned Strategist’ by poker player David Sklansky and he does a great job explaining a critical concept in decision making that you need to add to your list of mental models: Expected Value (EV)

“Expected value arises most frequently when you must make financial decisions about uncertain outcomes. However, it’s also useful for other types of decisions if you can convert the alternatives to numerical values.

If you don’t convert, you may be unable to compare two or more uncertain possibilities. But when you see EV, you convert your decision into a comparison between specific numbers, and then usually, but not always, select the alternative with the highest EV.

…Suppose I tell you, “I will give you $120 if you take this die and roll a three.” That’s nice of me, but exactly how nice is it? Hopefully you will see that I am as nice as a person who hands you a $20 bill.

That’s the EV of my offer. If I let you roll six times, you would have gotten (on average) my gift of $120 the one time that you rolled the three. Since it takes (on average) six times to get $120, each roll was worth an average of $20 to you.”

I highly recommend reading the article ‘EV: Millionaire’s Math’ by Billy Murphy of ForeverJobless.com. I learned about Billy 7 years ago on the Mad Fientist’s podcast and his article is one of the best in-depth explanations of the EV concept.

I believe understanding EV can make your decision-making capabilities significantly better. In short, this is worth your time to understand!

Vanguard Automated Cost Basis Email

Many of us received an email from Vanguard recently that ominously starts, “Action needed: Choose an automated cost basis method.”

But which one to choose?

The White Coat Investor published an in-depth analysis of your options at Vanguard (plus Fidelity and Schwab) and I think this is really important reading.

I can’t possibly do it justice here other than to say you really need to read this article, but here’s the final conclusion from the WCI:

“When selling or giving shares from your taxable account, specifically identify those shares. If Vanguard is forcing you to choose a “default cost basis method,” choose MinTax.”

FI Service Corps: New Volunteer Opportunity

I had Ryan Brennan on the show on Episode 548 to talk about his FI Service Corps volunteer events. This really struck a chord with our community and I wanted to pass along that the next volunteer event is:

November 5th-9th in New Orleans

This event is nearly sold out already after just a few days (wow!), but you can get on the mailing list to get notified the minute the next event goes live.

As a reminder, Ryan created this to “empower the Financial Independence community to give back by organizing experiential group volunteer trips and events.”

And the 4 Core elements of a FI Service Corps trip:

· Impactful volunteer work

· Connection amongst participants through teamwork at the volunteer site as well as during our downtime through shared meals, activities, and games

· Engagement with the local ChooseFI community through an organized meetup/happy hour

· Support of the local community - we patronize locally owned restaurants and organize group activities that support locally owned businesses

ChooseFI Community Taking Action This Week

My mother-in-law was turning 60 and I have been hoarding points and miles for a long time to get my in-laws to Hawaii for all they have done for us. We ended up with 7 of us with my wife, two kids, in-laws and my mom. I got the 7 of us to Maui all on points. We used credit card points and transferred to British Airways. 7 plane tickets for about 75$ in taxes only. We used our more credit card points to book Hyatt Regency Maui two hotel rooms for 10 nights. Hyatt Regency Maui was great! We got a Guest of Honor award on both rooms. That came with free parking, breakfast, snacks at lunch, apps around dinner time. Absolutely incredible vacation! 10/10. Everyone was talking about how we can get back. It was really cool seeing my 3 y/o daughter run around and say how much she loved it there.

• Clay

This year I turned 70 1/2 years old. I was able to contribute traditional IRA money tax-free directly to a charity with a QCD, Qualified Charitable Distribution. In other words, I put in the money and received a tax deduction, it grew tax-free for 30+ years, and I gave the money tax-free to a charity of my choice. Also when I turn 73 and have to take out RMDs, I can use the QCD instead of the RMD. Win, win, win, win. Only for the those inclined to give to charity. Talk to a tax professional before doing this.

• Brian

Two months before my lease ended, I already knew I would renew my lease to stay in the same place because moving elsewhere would be way more expensive. There was a promotion for 8 weeks of free rent for new residents, which I wouldn't be eligible for. I emailed the leasing agent anyway and politely asked if I could have the 8 weeks free applied to my lease renewal. As expected, they said no because it's only for new residents. I thanked them and went through the process to renew my lease. Lo and behold...in the lease renewal contract, they had given me ONE MONTH FREE, which I gladly accepted. Less than 60 seconds spent typing a simple email with a simple request literally saved me thousands of dollars on rent.

• K

This summer my husband was unexpectedly laid off (along with more than a third of his company). My side hustle/passion project (a private specialty therapy practice) has grown enough to support our family of 6 with a bit of extra conscientiousness and frugality. Last time this happened, I had to work per diem at a local nursing home, which is very stressful and mentally and physically exhausting. This time I’ve been able to lean into my own business and work more part time hours for less stress but enough pay while still spending lots of time with our young kids. We were also able to apply for and receive some school scholarships for our kids’ private catholic school tuition for this fall, we have money set aside in 529 plans that we can use for tuition, we had already paid in full in advance for their extracurricular summer activities, and we had already set aside money for our planned activities for when family came into town, as well as for our upcoming mini vacation to the beach. This is in large part thanks to YNAB, which we’ve used for budgeting over the last 12 years and has saved us many times during difficult times. Not only that, but last week when I received the bill for my daughter’s fall/spring ballet studio tuition, I was able to move things around in the budget to pre-pay tuition for the whole upcoming school year for an 8% discount! Budgeting and intentional lifestyle planning FTW!

• Natalie

Over the course of the summer/fall I made a few decisions to be more mindful of my lifestyle and where I am spending my money. In July, I decided to join a local farm share/CSA which has had a great effect on my lifestyle. Not only do I feel good about supporting local (immigrant/first generation American) farmers and eating fresher food that travelled a shorter distance from farm to plate, but it also meant less time spent on trips to the grocery store. By loading up on produce once a week, I found myself restocking kitchen staples in smaller and less frequent grocery trips so I had more time to do other things I enjoy. I enjoy cooking, and it was also really enjoyable to work with different types of produce than I typically wouldn't have bought. Suddenly, meal planning and prep was exciting rather than getting stuck in a rut. Around the same time, I also decided to set up a weekly $10 donation to 2 local charities/organizations in my community that I wanted to support. I realized that over the past few years I hadn't been spending as much time volunteering with these organizations and wanted to ensure that I contribute. This is a way to automate "values based spending" in my life.

• Lori

This week I switched my brokerage from Robinhood to Fidelity. This small change makes me less tempted to mess with my investment strategy as Robinhood tends to highlight the daily swings. Sometimes having the less pretty UI is better for less reactivity.

• Collin

Click HERE and let me know what you did to make your life 1% better this week!