On Risk-Taking

risk of repatriation

There’s no doubt that uprooting your family to move back to your home country is a big risk, especially if, like many repats, you are unable to secure a job first. Understanding risk itself, however, can give us some clues about following through with what we know to be correct decisions. And who better to teach us about risk than professional gamblers?

The film Rounders captured the imagination of a generation of young adults, myself included, and pulled them into the world of poker. I saw the film while an undergrad and immediately bought stacks of books about the game and it’s intricacies. That catch was that I couldn’t get any of my friends interested until after I graduated and moved back to my hometown and re-connected with my circle of friends from High School.

We started a poker night that was more akin to a study group. The limits were very low (the maximum buy-in was ten bucks), but we took the game very seriously. Before, during, and after the games we talked strategy and compared notes on the various books we were reading.I have a lot of fond memories of those nights. There must have been many people like me because right about that same time poker exploded onto the cultural scene. It was covered by the sports networks, poker-themed reality tv shows like Celebrity Poker took off, and at least one famous movie star gave up the glamorous Hollywood life to pursue it full time (while others dabbled–I remember seeing Tobey Maguire hiding behind dark sunglasses and a baseball cap in the card room of the Bellagio myself).

I have a lot of fond memories of those nights, and they were enormously influential in all of our lives. Sometimes we still talk about those nights and one of the members of the group went on to become a professional poker player. I considered the career myself but I was acutely aware of my biggest weakness at the poker table: I am, by nature, extremely risk-averse.

Interesting, no? The biggest hurdle that I faced in making real money playing cards was that I was not willing to gamble.

I stopped playing cards many years ago, but I’ve carried two important lessons with me from those days.

  1. The ‘right’ decision is defined by mathematical probabilities, not by consequences.
  2. Knowing the right decision is the easy part; following through with it is hard.

How a Poker Pro Calculates the Right Decision

repatriation risk management

I can illustrate both of these points in the scenario of a poker player with what we call a “draw” hand. A draw hand means that you almost have a good hand, but if the game ended right now, you don’t have anything. It means having four cards all of one suit (a flush draw) or in sequence (a straight draw). You want to see the next card that comes out, but there is a mathematical calculation (pot odds) that you have to do if you want to know the ‘correct’ course of action.

Without getting into the math, I can explain it this way: It depends on how much money is (or will be in the very near future) in the pot, compared to how much you have to pay. If it is early in the hand, and there is only one other player involved, and they put all their money in, you should probably fold. However, if there are several people involved and you only have to pay a small amount (compared to what you could win), then yes, you should ‘call,’ or even ‘raise’ to see the next card.

In other words, a straightforward calculation will let you know what the correct decision is. But that does NOT mean you are guaranteed to win that particular pot. It only means that if you make the ‘correct’ decision 10 times, then three of those times you are going to ‘win,’ and there should be enough money in those three pots to make a living as a professional poker player.

This proves my first point, that there is a provable ‘correct’ decision and that just because you make one correct decision does not mean you are guaranteed or entitled to a particular result from said decision. If that was all there was to poker, though, it would be a very boring game played between mathematicians. Luckily, there’s another element: Human emotion.

It’s one thing to know for a fact that the math dictates that you are supposed to call an all-in bet with every chip in front of you. It’s quite another to actually do it when you are playing with rent money. Or tuition money. Or child support.

I was never playing with rent money or anything like that, but I was, by nature, extremely risk averse. When I was in a situation where I needed one particular card to ‘save’ my hand, I either buckled under pressure, or I was uncontrollably nervous and gave away my hand with a ‘tell.’

In other words, I had no future as a professional poker player because I was always looking for an ‘out.’

Now here’s where I put you on the spot:

Are you doing the same thing by hedging your bets with a “plan b,” “backup plan,” or “Fallback”?

Real talk: Are you sure your fallback plan isn’t planned failure?

What Science Says About Your Plan B

plan b repat

Insurance, especially on consumer products, is a scam. Intuitively we all know that. In order for it to pay off, something has to go catastrophically wrong with your new smartphone. What are the chances of that happening, maybe 1 in 50? Are you willing to pay an extra ten bucks per month to cover possible damages? Probably only in special circumstances (like when you have two young kids at home that like to throw smartphones around) or when the item is something you can’t live without and the cost of replacing it would be a nearly catastrophic burden (like a family member coming down with a serious illness).

And yet there is no shortage of insurance policies available for us to spend our money on. Cashiers are trained to try and up-sell extended warranty plans on every little electronic device we purchase. Here in Korea, there are condition-specific insurance plans for just about every chronic illness.

It’s human nature to hedge our bets and try to insure ourselves, and if you’re anything like me your repatriation plans are no different. Recent research in organizational behavior, however, may give you pause.

Researchers conducted a series of three related studies. The first went as so:

Our research assistants approached people who were waiting for trains. We asked them to write about a goal they were pursuing and how much effort they were putting forth towards achieving their goal. Then, participants were asked if they had made a backup plan for their goal. Analyzing the data, we found that the people who had made a backup plan were putting forth less effort towards achieving their goals.

Interesting, but far from a lock. They designed further studies that pressed the question further:

In one experiment, we brought undergraduates into a room and gave them the task of unscrambling scrambled words into sentences. We promised them an energy bar as a reward for high performance.  We randomly assigned a prompt to half of these people that encouraged them to think through a backup plan to put in place in case they failed to get a free snack: we asked them to think of other ways they could find free food on campus in case they didn’t earn the free snack in our study. Sure enough, we found those who made backup plans before starting the task didn’t perform as well in the task. In subsequent experiments, we replicated our findings in other contexts with different rewards (e.g., money, saved time) and confirmed that this effect was not driven by mundane factors like being tired out from generating backup plans, or viewing the reward as less valuable.

This part reminded me of a section of the book Ego is the Enemy that talks about when Upton Sinclair ran for office. Partway through the campaign he sat down and wrote a fictional book from the perspective of himself after finishing his term. He went into great detail on his accomplishments and reforms he brought to government. He probably expected that the public imagining him in the role would ultimately help him, but by the time he was finished with the book he seemed to have lost all passion for the campaign and ended up losing. Holiday, the author of Ego is the Enemy, suggested that going through the process of writing the book made him live it all out in his head, so that coming back to face the campaign was like having a dream where you are at work all day, and then you wake up in time to go to work.

The researchers’ final study hinted at this effect as well:

In our final study, we dug into this question and found that people who thought through backup plans before working towards the goal in our study wanted the proffered rewards less intensely than others. So this suggests that thinking through a backup plan actually makes you want to achieve your primary goal less, which then hurts your effort, performance, and ultimately, your chances of successfully achieving your goal.

There you have it, folks. Thinking through your Plan B gives you less driven and passionate about Plan A.

Knowing when to Hold ’em and when to Fold ’em

career change

I am as guilty of this as anyone. I have my “Plan A” that is a slightly tangential career move that requires me to be busy sending out lots of applications and making network connections, and a “Plan B” more extreme career change for which I need to be doing intensive study in order to properly prepare.

The reality is I don’t have the proper time or energy to devote to either of these plans fully. I am starting to realize that I am seriously damaging the chances of the ultimate success of my repatriation/career change plans, and science supports this conclusion.

Just like in poker, if we are going to be successful in this ‘gamble’ that not only involves our own lives, but the lives of everyone that depends on us, we have to approach it from a coldly scientific perspective, and the research seems pretty clear. Following through on it is the hard part, just like pushing all your chips in on a draw because the pot odds dictate it.

The good news is that this does not mean you are not allowed to EVER change course and adjust your goals. In fact, if you find yourself continuing to invest time and effort into a plan only because you have already invested so much into it already, that may be a good time to bail. It is what is called the sunk cost fallacy and something you should avoid.

I wouldn’t even necessarily call this a ‘failure’ though because that original goal will have hopefully given you some positive momentum and increased your knowledge of a broad area. That is still moving forward in the right direction even if your exact course eventually goes off in an unexpected direction.

Maybe you’ve set your sights on a second career in nursing but weren’t able to get accepted into an accelerated RN program. However, you’ve done all the prerequisites and find it an easy move into a physical therapy career (a career with a very bright future, I might add). Or maybe you’re set on becoming a software engineer but couldn’t keep up with the 20-somethings in the coding boot camp you started, but a connection you made in the program gets you a foot in the door as a community manager for a popular online game’s social media campaign.

Conclusion & tl;dr

return to usa

We’re at nearly 2,000 words of text, but I think we can extract a couple general rules for putting all of this heady stuff into action:

  • Pursue one plan at a time.
  • Beware the sunk cost fallacy and adjust your plan accordingly.

Last winter I found myself at a card table in Vegas for the first time in about a decade. I had taken care of our kids in the hotel room so my wife could see one of the Cirque De Soleil shows, and now it was my turn to take a couple hours to explore on my own. I didn’t stray far though, as I walked by the poker room in our hotel and saw that a 3/5 Hold ’em game was going and had a few empty seats, so I sat down.

Well aware of my own ‘ring rust,’ I played very conservatively. Yet I quickly noticed that my internal state was different. Part of it was that comfortable feeling you get seeing an old friend after many years apart, but part of it was that I had grown and matured. I was less attached to the specific money on the table. It had less control over me. I was relaxed and chatty with the other people at the table (I was never a chatty player before). I had the confidence to know that if I lost every dime of that money I could just make more when I got back to Korea. The discipline and the balanced confidence gave me freedom by detaching me from a particular outcome on any given hand.

repatriate.me career change

Am I stretching this metaphor to its breaking point by extending this to my job search as well?

We shall see.