 We're here today to talk about how not to get fooled, but I actually want to start somewhere a little bit counterintuitive, which is the importance of trust. Trust is one of the fundamental forces of good in the world. It's the basis of globalism. It's the reason that we're able to believe that the person sitting next to us isn't going to betray us. Ultimately, trust is one of the things that keeps society together. Trust is the belief that even though things might appear to be zero-sum, they could actually be positive sum in the long term. So here's what we know about trust from the research side. Societies with higher levels of trust tend to do better. They have stronger institutions. They do better economically. So over time, across the world, across societies, it seems that cooperation actually ends up winning out over antagonism. On a personal side, we know that higher levels of generalized trust that is trust in your fellow human beings, that people sitting in this room, are also correlated with all sorts of good things. People who have higher levels of generalized trust tend to do better academically. They're happier. They're healthier. They take more risks. They start more businesses. They seem to be smarter. In one study from Oxford University, higher levels of generalized trust were associated with a 34% increase in verbal IQ scores. So trust is good, and it seems that trust is natural, that this is actually our default state, and that it's distrust that is learned. Let me give you an example. In one study at Stanford University, the psychologist, Roderick Kramer, had two groups of people play a game of trust. One group wasn't told anything. They just said, play the game to the best of your ability. The other group was told, keep an eye out on your fellow participants. Be a little wary of them. Who knows what tricks they might be up to? What Kramer ended up finding was that the first group inherently trusted their fellow participants and did much better, had much better results in this study, whereas the second group spent all of their time being suspicious of each other and ended up not doing well at all. So not only is trust the default, but trust leads to good things. Right now, though, we're living in a very peculiar moment in time. We're living in a moment in time where generalized trust is actually on the decline, even in societies where traditionally it's been highest. So we're living in a world where we have this rise of populism, this distrust of facts. People are undermining the media, journalism. Expertise is no longer valued the way that it has been in the past. People, when I write something, distrust my job and say fake news, hashtag fake news. So what do we do? How do we recapture trust but do so in a way so that we're trusting in the right people and the right things, and not the wrong people and the wrong things? So I have a slightly nontraditional background. I'd like to call it one of the more creative uses of a psychology PhD in recent memory. So first, I spent a long time studying how people make decisions in the lab. Then I wrote about it. Then I spent a few years with con artists, figuring out how hope, how trust, how deception, how all of these things we're talking about today play out in the real world. And then I became a professional poker player. So I like to call it one of the best uses of a Harvard degree of all time. And it's actually arguably in that transition to the world of games that I've learned more about strategic decision making, about the nature of trust and distrust than I have in years of research in a psychology lab. Poker is a really interesting game. If you trust too much, you are going to go broke so quickly, it's not even funny. People try to bluff you all the time. They try to bully you. At the poker table, everyone is always telling you stories about how strong they are, what an advantage they have over you. And guess what happens if you believe them every single time? You end up folding your best hand and you end up losing. You can't sit around waiting for pocket aces because if you do that, you'll be broke long before they come your way. And then when they do come your way, you're not going to be able to play them correctly. So this is definitely one situation where honesty is not the best policy. But the opposite end of the spectrum is just as bad if you distrust all the time. These are the players who think that everyone's out to get them, that everyone is bluffing, and that this time they're going to catch you. And so they keep on calling and calling when they should be folding. And they end up just as broke as their overly trusting counterparts. The key to success is balance. It's being willing to observe and to adjust and to change your strategy according to who you're playing and how they're playing against you. John von Neumann, one of the greatest minds of the 20th century, the inventor of the computer, one of the consultants on the hydrogen bomb, you name it, he was there. He was an avid poker player. In fact, he's the reason I got into poker to begin with. Game theory was born out of his notion, his basically belief that if you could solve poker, you would solve the world. You would solve the most complex human strategic decision making that exists. Here's what he has to say about that. Real life consists of bluffing, of little tactics of deception, of figuring out what that man thinks I mean to do, and that is what games are about in my theory. So if we think of life as one big game, our question becomes, how do we play it optimally? So now I have a question for all of you. How many of you are better than average at what you do? How many of you are exceptional? We're at Davos. Of course, you're all exceptional. Everyone in this room is. But the thing is you might not actually be exceptional in every single way that you think. There's something that's known as the better than average effect, which means that on almost all positive traits, you think that you're better than the average person. And on all bad traits, you actually don't have those traits nearly as much as the average person. So if I were actually to hand out a survey right now, had you guys fill it out, and then give it to someone who's close to you, who knows you really well, and who likes you, your best friend, your spouse, someone who knows you well, I would get two different sets of responses to judgments of character traits. One would be much more positive than the other. It's not yours. I mean, it's not that you're friends. It's going to be yours. You are going to be much more positive about yourself. And this can actually be a wonderful thing. It's very psychologically adaptive. In fact, the only people who do not exhibit this optimism bias, the better than average effect, are the clinically depressed. They see the world as it actually is. And man, that is not a pretty sight. So not only, though, is this psychologically adaptive, but it's one of the reasons that you're where you are. Because that hopeful optimism makes gatherings like Davos possible, because if you're not hopeful that tomorrow's going to be better than yesterday and that today, then what are you doing here? But the key is a little bit of self-delusion goes a long, long way, a little. So back before my poker days, back when I was still in the psychology lab, I studied overconfidence in decision-making. What do very smart people who normally make very good decisions, how do they act when you place them in a stochastic environment, an environment that's uncertain, that's ambiguous, where you're not really sure what's going to happen, that's unpredictable? I had people play a stock market game where they picked different bonds and stocks and were rewarded depending on how their choices performed over time. And here's where I found. People who were the smartest, who were the most financially sophisticated, who were the most educated and tended to make the best decisions in the real world ended up doing the worst when the task switched, when the decision parameters changed. They kept doing the same thing they'd always done. They didn't adjust their strategy because they were so confident that their strategy couldn't possibly be wrong. So they didn't listen to negative feedback. When the old way of things no longer worked, they still kept doing it because, hey, they're very smart people. So that's when self-delusion is not that hopeful. And what I would say to those people is you need to take a step back. You need to understand what great leaders understand, which is that what worked before might not work now. What worked in a world where generalized trust was high might not work in a world where generalized trust has eroded. And if leaders don't understand that, then there are leaders who will. And these are the populist leaders. These are the leaders who use the tools of con artists in order to create the reality that we want to believe in. Because contrary to what you might think, the con is not about greed. It's not about deception as such. It's about confidence or trust. And the con artist thrives where trust and self-deception meet in that intersection. So one of the things that the con artist loves to do is feed on hope, feed on trust, feed on our optimistic belief that we can be the best version of ourselves that we're living in the best of possible worlds. So something that they love to use is a technique called the foot in the door effect. And the foot in the door effect is actually something that's based on very positive things. It's the fact that we like to see ourselves as good people. So one of my favorite examples of the foot in the door took place in the early 1900s, where ads began appearing all over the newspapers, all over the United States. There was a young Nigerian prince whose name was Bill Morrison. And he was very lonely. He didn't have any friends. He lived in splendid isolation because he was a prince. Princes don't have friends. And all he wanted was an American pen pal. And this ad was so sweet, so just delightful, that the newspapers ran it for free. Newspapers have never been high profit businesses. This is the golden age of yellow journalism. And here they are running this ad. And the letters flooded in. Bill Morrison had more pen pals than he knew what to do with. And you know what, he answered every single one. He was the best pen pal anyone could hope for. And then he asked for a small favor. He said, hey, do you think that you could send me an old pair of pants that you no longer need? Oh, and $4. And in return, I'm going to send you jewels because I have no use for such bobbles. Well, pants and dollars started flooding the mail system. And the jewels, not so much. So then the mail system started investigating for mail fraud. And they did find that something was not as it appeared. So Bill Morrison was not Nigerian. He was not a prince. He was 14 years old. And he was an American boy. He couldn't be prosecuted because of his age. But he understood exactly how the foot in the door works. People want to be do-gooders. They want to help this poor lost prince. And so that's exactly what they do. This is a con artist technique. But it's something that we might do well to understand and to use in our everyday life. And before you say, oh, but I'm not a con artist. Why would I do that? Remember what one of the greatest scholars of the con? David Moore wrote back in 1940. If con artists operate outside the laws of society, we must remember that they are not much further outside it than pillars of society who go by names less sinister. For every Bill Morrison, you've got an Elizabeth Holmes right around the corner. So poker is, in some sense, the most zero-sum game that you can imagine. I win, you lose. You win. I lose. Simple, right? But if you actually look at it strategically, it becomes clear that poker, you can't look at it that way. It's a repeated interaction. It's an ecosystem. And over the long term, it's not about any given hand or even any given game. It's about the health of the ecosystem. It's about keeping players happy and keeping them coming back. Otherwise, you're not going to have anyone to play with. So when I play poker, I don't subscribe to the whole hoodie, dark sunglasses glaring at you. I hate you mentality. Instead, I like to talk to people, engage with them, be interested in them. Not only does that make the 12 hours or so I spend a day at the poker table much more pleasant, but there's a pretty good strategic consideration, which is that I've taken the time to be nice. And poker is a game of small edges, of decisions in each hand where you can play the hand in any number of ways, some much more aggressive than others. And if someone decides a few percent less often to take an aggressive line against me or to target my opponent instead, then I win. Even if it's not everyone, even if it's not all the time, that small percentage advantage makes me more money, because they're not actually being as aggressive against me because they think I'm a nice person. And everyone has a better time. I make more money. We're all happy. And a zero-sum game becomes a positive sum game. As one of the stalwarts of poker back when Texas Holden was really played in Texas, Amarillo Slim put it, you can shear a sheep 100 times, but you can only skin him once. I know that sounds very harsh, but understanding that insight strategically doesn't necessarily make you a horrible person right away. And you can understand that con artists will use these time techniques against you. And they will do it very frequently. So ultimately, they're not taking advantage of our greed. They're taking advantage of our hope and our trust and our humanity. So how do we square that circle? How do we create trust but keep ourselves safe, trust in the right people and the right things? So I say your first rule is actually the journalist's best friend, trust but verify. So I'm not saying that you need to start digging into everything you come across. So when you come to a party tonight, it's perfectly fine. If you say, oh, that's really impressive. It's really nice to meet you, rather than taking out your cell phone and saying, can you hold on a second? How do you spell your name again? Let me Google that. Although you can try that and let me know how it goes. We'll see. But the truth is you need to figure out when to dig deep, when to ask questions. You've all heard the saying, if something seems too good to be true, it is, right? And you all believe that. The problem is nothing's too good for you. It's too good for that guy. That guy doesn't deserve it, but I'm the best. I'm better than average. And so when the good things happen to me, I deserve them. We're not objective about ourselves. We're not objective about our own decisions. And instead we just say, oh, this is wonderful. This is exactly how the world should be. Everything is fine. We only ask questions when things are going poorly. So what I recommend we do is something called the Bob Next Door Test. If this were to happen to Bob Next Door, what would you tell him? Would you tell him that there are red flags? What would you advise him to do? And if you told Bob Next Door that this might not be a great idea, maybe it's not a great idea for you either. Of course this is much easier said than done because Bob Next Door is not nearly as great as you are. In poker, I see this all the time. People become total geniuses when they're analyzing how someone else should have played a hand after the fact. Say, oh, how could he have done that? He should have done that. And with hindsight bias, which is using the current outcome to evaluate past decisions, they say, oh, well, this is clearly how you should have played it. But when it comes to yourself, all of a sudden, much more nuanced, you have all these excuses. Well, this affected me, you didn't think of that. I made the right decision, I just got unlucky. Poor me. If you wanna be a good poker player, if you wanna be a good strategic decision maker, poor you has to go out the window. Poor you cannot be in your vocabulary because there's only room for an objective analysis of your decision-making process and not poor, poor you. The second thing that I would recommend is something very simple, self-knowledge. How many of you have actually taken the time to sit down with yourself and ask, what do I believe? Why do I believe it? What do I want to believe? Who do I trust? What makes me tick? We are not very good at asking ourselves those questions, but you know, who is con artists? They ask those questions about us so that they know what our buttons are, they know what our beliefs are, they know exactly how to sell what they want to sell to us. And so it never hurts to take a moment, take an hour or take a day and actually practice that sort of mindful technique. In poker, it can be the difference between winning and losing, figuring out what your triggers are, what tilts you, what makes you emotional, how do you respond to different things? When you know yourself, you make much better decisions. It's the greatest game theorist of all time, Sun Tzu said, know your enemy and know yourself and you not need fear the result of a thousand battles. So take that time and actually get to know what you hope, what you want to hope in, what you want to believe. And I think you'll be surprised to see that the trust that you thought you lost is being reborn in a sense. Ricky Jay, the great magician and also a student of the con, once gave an interview to the New York Times where he said that he wouldn't actually want to be the type of person who couldn't be conned. I would not want to live in a world where we can't be conned, he said, because that would be a world where we couldn't trust in anyone or anything. And that doesn't really seem like a world worth living in. So let's bond together and try to build one that is. Thank you.