Otherwise whip smart people tend to be delusional about gambling. This applies also to the stock market.
Yes, in fact it happens that some of the same people I know claim to be able to beat the stock market too. I think your theory is probably true: both in gambling and on the stock market, people get deluded by occasional lucky windfalls and fail to keep track of the big picture. Yet few of them actually get deluded to the point where they'll go ahead and bankrupt themselves; the others remain rational at some level and refuse to actually put really significant sums where their mouth is, although they will brag around about their wins, possibly talking under honest delusions (but not actually acting on them, as with most beliefs that are held for signaling value).
Of course, as the EMH predicts, being smart and hard working people, if they really applied themselves to gambling systematically and full-time, they would probably be able to squeeze out something of roughly the same magnitude as what they earn in their existing day jobs. (But certainly nothing like these spectacular wins they're talking about.)
Related to: Problem of verifying rationality
We're excited to announce the (soft) launch of RationalPoker.com! It's a new guide developed by me, Zvi, Kevin, and patrissimo detailing how to use online poker as rationality training to conquer your cognitive biases. We want our community to go from knowing a lot about cognitive biases to actually having a training method that allows us to integrate that knowledge into our habits -- truly reducing biases instead of just leaving us perpetually lamenting our flawed brain-ware. In the coming weeks, we'll be making the case that online poker is a useful rationalist pursuit along with developing introductory "How To" material that allows those who join us to play profitably.
We want to make sure we aren’t wasting our time practicing an ungrounded art with methods that don’t work. Poker gives us an objective way to test x-rationality. The difference between winning and losing in poker once you know a small amount of domain-specific knowledge is due to differing levels of rationality. Our site will be presenting the case that a strong rationalist who can act on their knowledge of cognitive biases (a defining feature of x-rationality but not traditional rationality) should have a distinct advantage. We'll be offering the connecting material between the sequences and online poker to teach you how to apply knowledge of cognitive biases to poker in a way that verifies your current level of rationality and naturally teaches you to improve your rationality over time.
Incidentally, this also presents a solution for those of us looking to earn money from anywhere with a flexible schedule that leaves time for outside interests.
We’re just getting started so please be kind! Our site is definitely not a final product yet. If you're curious about where we're going with this though, add us to your RSS feeds or check the site every few days. We hope some of you who aren't convinced yet consider playing once you feel like we’ve finally given you enough information to understand why poker is a profitable rationalist pursuit.
Also, if you sign up for one of the online poker rooms like Full Tilt using our affiliate links, the residuals get donated to Less Wrong/Singularity Institute. That way, the more poker you play after you sign up, the more money you direct towards raising the sanity waterline and creating provably friendly artificial intelligence.
We’re not counting on it, but even a very small group of us could theoretically fund SIAI in a very real and meaningful way just as a side-effect of playing a lot of online poker. I know I'm partisan, but this seems like an unreasonably exciting opportunity! So if you support SIAI and you (or your friends) want to sign up to play online poker anyway, please sign-up using our links.
Anyway, we hope some of you want to get stronger by joining us in the Rationality Dojo of online poker. You can be part of our crew of aspiring rationalists who want to increase our rationality, earn money, and help save the world -- all by playing a fun computer game with no boss, no schedule, and the potential for lots of self-development and personal growth.
So check out our site and let us know if you're interested in joining.