Know the Competitor Better Than Yourself

You are playing seven-card stud, and all the cards are out. You are showing four aces. Everyone has folded except one opponent. Your first reaction might be to think: "Four aces is a great hand, so I'm going to bet." But then you look over at your opponent's hand and see 5, 6, 7, 8 – all hearts – and stop to think.

Your opponent is looking at your hand and sees four aces. If you bet and your opponent does have a straight flush, he is going to raise you, and unless you're a complete rock, you'll have to pay him off. And even if he has only a straight or a flush (or nothing), it doesn't beat the four aces he's looking at, so he is going to fold. So, here you are with four aces and there's no way you can make any money. It sucks, doesn't it?

Not necessarily. If your opponent is aggressive and is known to bluff, he might raise you even if he doesn't have you beat – hoping to make you think that he has a straight flush so you'll fold. If this happens, you'll make two extra bets.

You might also make some money if you check. This way, if he does have the straight flush, you are only forced to call his bet, instead of his raise. And if he doesn't have a straight flush, he might try to bluff, in which case you'll win a bet that you wouldn't have won had you bet in the first place. This technique is known as "inducing a bluff," and it's the only way you can make any money.

Forgetting the specifics of the hand, what's important is that your ability to profit has nothing to do with your own cards. It's strictly a function of knowing your opponent. You must see the hand from his perspective in order to manipulate him. Bad players play their own hands. Good ones play their opponents' hands. The best stud players don't even look at their cards when they are dealt; they study their opponents. The best hold'em players don't watch the flop; they too study their opponents and try to pick up tells.

If you're the boss of a business and a truckload of goods pulls up at your warehouse at 5 p.m., you roll up your sleeves and expect your employees to do the same. The problem is that you're thinking like the boss and not like the hourly employee. That hourly employee is thinking, "I know darn well he doesn't expect me to unload that truck when I'm off the clock."

If you can take the time to think like your employees, you are one step closer to solving this dilemma. Is your staff motivated more by food, money, or time off? If it's time off, you might go over to them and say, "Sorry about the bad timing of the delivery, but however much longer you stay after work today, leave that much earlier on Friday." If it's food, you might say, "The delivery truck's here. Dinner's on me." Most employees will appreciate that you took the time to at least walk in their shoes. It's the best way to show them that you care.

You also need to think about how your competition will react before making a strategic decision. If you know that your competitor has deep pockets and insists on having the lowest price, lowering your price would lead to a price war that would cut into your profits. Against this type of competitor, you'd be better off raising your price and differentiating your company based on its quality and service, not price. The likely scenario is that your competitor will raise his price to a level just below yours, and your profits will go up. Note that this is not collusion. It's illegal only if you talk to your competitor about doing it. But since you were able to anticipate your opponent's reaction, it seems like collusion. This allows you to get the desired effect of colluding (increasing your profits) without having to break the law.

American Airlines came up with the revolutionary idea of frequent-flyer miles. But, instead of American Airlines earning a leg up on its competitors, the other airlines followed suit and this ingenious marketing tool ended up making all of the airlines less profitable. Had they viewed the frequent-flyer program from their competitors' vantage point, they would have realized that there was no way to sustain an advantage that could so easily be copied, and the whole idea may never have been conceived. It's but another reason why the airline industry is always struggling to be profitable.

Business and poker are rarely about what you have. They're about knowing what others have, what others need, and how to take advantage of both.

Greg Dinkin is the author of The Poker Principle: How to Convert a Winning Hand in Poker to a Winning Hand in Business, which will be published by Crown in April 2002. He is also the co-founder of Venture Literary (www.ventureliterary.com), where he works with writers to find publishers for their books and producers for their screenplays.