What poker plays can teach us about decision-making : The Indicator from Planet Money How a psychologist who learned how to play high stakes poker as a way to study human behavior learned a lot about risk management, mendacity and the markets.
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Poker, Markets And Life

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Poker, Markets And Life

Poker, Markets And Life

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UNIDENTIFIED PERSON, BYLINE: NPR.

(SOUNDBITE OF DROP ELECTRIC SONG, "WAKING UP TO THE FIRE")

CARDIFF GARCIA, HOST:

Hey everyone. It's Cardiff. This is THE INDICATOR FROM PLANET MONEY. Things here at THE INDICATOR have been pretty heavy for the last few months, so just for today, something a little different. Maria Konnikova is a psychologist and journalist, and she's the author of the new book, "The Biggest Bluff," in which she writes about all the ways that playing poker is a lot like real life.

MARIA KONNIKOVA: Real life, like poker, is a game of incomplete information. So there's stuff that I know. There's stuff that you know. There's stuff that we both know. And then there's what I can glean from looking at you. You know, what can I tell? What are you giving off? What do I think you know? What do I think you think I know? And you can go on back and forth, back and forth in this constant iterative process of trying to figure out OK, well, how do I get the most information? How do I get the information advantage, and how do I make the best decision I possibly can knowing that I won't know everything?

GARCIA: A few years ago, Maria wanted to see if she could go from poker novice to poker pro in a year and then write a book about it. So she found a mentor, a legendary poker player named Erik Seidel, and she started feverishly playing online and in tournaments. And she was constantly getting feedback, learning to read her opponents, learning to control her emotions so that she herself could not be read. And she ended up going from poker novice to poker champion, winning tournaments and a lot of money. And along the way, she picked up insights about how to make better decisions, why poker is harder than investing in the stock market, what poker teaches us about the gender gap in the workplace and even some insights into how to read people at the poker table and in life. So after the break, a chat with Maria Konnikova about "The Biggest Bluff."

Maria Konnikova, welcome to the podcast.

KONNIKOVA: Thanks so much for having me, Cardiff. It's such a pleasure to speak to you again.

GARCIA: There is a great story about midway through the book where you played what you thought was an incredibly strong hand. And it was a strong hand, but this time, it was just bad luck that one of the other players had a much stronger hand, and you lost everything. And you went to go talk to your coach, Erik Seidel, and he said stop. I don't want to hear it. I just want to hear how you thought about the hand you played. I don't care that you won or lost.

KONNIKOVA: That was one of those heartbreaking moments when I realized that my mentor, this person who I've come to view, you know, with such admiration, that he doesn't care about my feelings (laughter) in a certain respect. He doesn't want me to b**** and moan to him. What he was trying to teach me was, don't pay attention to the outcome. He said, let's make a deal. I never care about how the hand ended, especially if it's a bad beat. And a bad beat is when you get your money in as a favorite and when you have the best hand, and then someone else somehow outdraws you and ends up winning the hand because then you're focusing on the wrong thing. You're letting this outcome weigh you down and affect how you're thinking about the hand. Did you make the right decision? When you decided, when you got your money in, was it right? Were you looking at the right factors? Were you a favorite? If so, it doesn't matter that you lost.

And if you let go of the bad outcomes, you become much more positive. You become much more emotionally resilient. The bad beats don't weigh on you. Instead, you have this mental framework that will allow you to learn from your mistakes even if those mistakes sometimes led you to win and to let go of those moments where, you know, things just didn't go your way.

GARCIA: One of the themes running throughout the book is about the gender imbalance in poker. There are very few women playing poker relative to the number of men playing it. And that creates this kind of fascinating laboratory for the way that people, like, sometimes default to their stereotypical views of other people and specifically to see the ways that men would play poker against you, whether online or at the table.

KONNIKOVA: Absolutely. So for people who think that you're exaggerating when you say gender imbalance, in the world of professional poker to this day, it's about 97% male and 3% female. And so the first thing people notice about me is that I'm female. And it activates, whether they know it or not - I mean, whenever we see anyone, whenever we meet anyone new, whenever we're introduced to anyone, we make judgments about them right away. It's subconscious. We don't realize we're doing it, but we're activating all sorts of stereotypes, past experiences, you know, things that give us an impression of this person that have no basis in reality because we're just meeting them. We don't actually know them. But we're taking these external cues.

And once I figure that out, I can figure out, how do they see women? If I can figure out how they see women since they're seeing me as a woman, I can often figure out how to exploit them, how to play against them. Sometimes they're the type of people who think that I should not be anywhere near the poker table. You know, I should be having babies and washing dishes and doing all of that. And they're going to try to bully me and, you know, push me around because they want me out of there. And so for them, you know, I'll just wait until I have a good hand, and I'll call, and I'll call, and I'll call. And sometimes...

GARCIA: Because they're going to try to play even bad hands and just bet to hope...

KONNIKOVA: Exactly.

GARCIA: ...That you fold because they don't - they think you're going to fold no matter what...

KONNIKOVA: Exactly. They think I'm a passive girl. And they - usually there's a flip side to that in that they will never fold to me because they would rather die than admit they were bluffed by a female. And so I never bluff them. I actually only bet my value hands, but I bet them hard because I know they're going to call me because they're going to think, well, maybe she's bluffing. I can't fold. And so I can get their money.

GARCIA: Here's something I learned about the book that surprised me and that I had no idea of, which was that poker actually requires a lot more skill than investing in the stock market.

KONNIKOVA: Yes. I learned that from Danny Kahneman. So he actually did the analysis, and it ended up that stock market traders, operators actually more resembled gamblers, like people who were playing at a craps table or at roulette than poker players. Poker players' outcomes were much more skill dependent. And that to me was also shocking because you think of - you know, well, you know, they're a trader. They're an investor. They must be - you know, it's a very highly skilled profession. And then you realize, oh, wow. Poker is actually the game of skill. And this is actually much more of the risky endeavor.

GARCIA: I was intrigued also to learn that reading faces isn't really a thing. Like, people talk about the poker face. But actually, we should be reading other people's bodies and their movements and the confidence and fluidity with which they make those movements. And that's what will give away what's going on.

KONNIKOVA: That was totally fascinating to me as well. I mean, I wasn't expecting the face to give away that much because my last book was about con artists. And I learned that we're really bad at spotting when people are lying because good liars are good at controlling their faces. They do it all the time. And even bad liars are pretty good at it. I mean, you and I have to control our faces in any normal interaction. Like, if you meet someone who you really don't like, are you really going to let your face express your distaste for this person? Or are you going to smile? You know, you have to kind of learn to control how your face reacts so that you don't offend people so that you keep the social flow going.

And so we're pretty good about that, and we're aware of it because everyone's always looking at other people's faces. But your hands are a part of your body that you're not normally aware of. We're not good at controlling our hands. They're actually much more subconscious because you see the pulse, and there's blood flow, and there's sweat, and there's all of this stuff that's telling you a lot about, you know, what's going on internally. And we don't normally - no one's looking at our hands normally. And so we don't really guard that part of our body or our arms. And so what a lot of research has shown is that if you actually pay attention to that, you can start seeing deception. You can start seeing when someone is telling the truth, when they're strong and when they're not.

GARCIA: Maria's book, "The Biggest Bluff," is out tomorrow. This episode of THE INDICATOR was produced by Camille Petersen and fact-checked by Brittany Cronin. THE INDICATOR is edited by Paddy Hirsch, and it is a production of NPR.

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