What Poker can teach us about life!!

The Biggest Bluff, authored by psychologist and journalist Maria Konnikova, is a rendition of her experiences around studying the world of high-stakes poker. It’s a classic study of human decision-making in an environment where every player has very little control, more drawn from Game Theory.

In Chess, it’s a game of perfect information. All the pieces are there. The board is there. You can make a right decision.

The game of Poker begins with each player putting down money allocated for betting. During each round of play, players are dealt cards from a standard 52-card deck, and the goal of each player is to have the best 5-card hand at the table. Players keep their cards hidden, and each player makes bets on the strength of his or her cards. When the round is over, the cards are revealed, and the player with the best hand wins the round and the money that was bet during that round.

It’s a lot of information asymmetry. There are things I know that you don’t know. There are things you know that I don’t know. What do you think I know about what you know? What do I think you know about what I know? And we do those iterations over and over and over.

It’s a game of deception. It’s a game of reading people. It’s a game of information. How can I gain the informational advantage here?

So in a TED talk, Poker champion Liv Boeree spoke about 3 lessons

a) Luck —

Often in life, luck plays an important role. You can be very health conscious and still be very unlucky with say, cancer. We must split success into the part that’s attributable to our decision making and that which is due to good fortune. If you have won big, but misinterpret that victory as being underpinned by your skill , then you might become complacent/lazy going forward but also take more risk (since you are convinced that you are very skilful). This combination is likely to result in your career graph sliding.

b) Quantification —

In the standard game of poker, each player gets 5 cards and places a bet, hoping his cards are “better” than the other players’ hands. Each poker deck has fifty-two cards, each designated by one of four suits (clubs, diamonds, hearts and spades) and one of thirteen ranks (the numbers two through ten, Jack, Queen, King, and Ace).

The number of combinations that can be made are the number of ways that 5 cards can be selected from 52 cards

It’s a game of probabilities and you have to train yourself to think in numbers. It always helps to rationalize in numbers as everything that happens around can be represented in probability. Instead of saying probably or sometimes it’s very helpful to spread that in numbers. Imagine looking into weather forecast that says it probably might not rain today vs there is 55% chance of rain today.

c) Intuition

You can take decisions based on intuition when Gut based decisions are best suited for things where you are a veteran or have a rich bank of data points. So relevant when we do the same thing thousands of time and hence the probabilities and risk-reward payoffs become second nature to us. But decisions like investment or who you marry or you career, deciding on a vendor are not appropriate for gut feeling. Your competition here is using careful, precise research and quantification. Your gut is your friend but there is a cost-benefit analysis here