Coping with Complexity

For the past few years I’ve worried about the economy and my investments. The stock market’s crash and recovery, the even greater collapse in home prices, the severe recession and continuing high unemployment, the enormous and growing national debt, and so on have really scared me.

To ease my fears, I’ve spent more time studying economics and finance than at any other time. Unfortunately, the more I read, the more confused and frightened I became.

Expert A said that the stock or real estate market would go up. Expert B said it would go down. Expect C said we were heading for severe inflation. Expert D said deflation was imminent. Expert E said interest rates were going up. Expert F said interest rates would remain low. Expert G said, “Buy gold.” Expert H said, “Sell gold.” And they all made plausible arguments. At least, they sounded plausible to me.

Since I couldn’t decide which expert to believe, I had lunch with four friends who trade stocks, options, metals, and other “things,” Warren Biscoe, Earl Stallmann, Brian Mosbey, and Robyn Salisbury.

The discussion was informative, but confusing. No matter what one of them said, somebody else would object. “I think the market is overbought.” “Maybe it is, but…” “I’m going long on….” “I’m going short on it.” “The Fed is…” “Yes, but gold is…” Brian said that’s what usually happens when four traders get together.

They reminded me of Harry Truman’s famous complaint: “Give me a one-armed economist! All my economists say, ‘on the one hand, but on the other.’’” Despite hearing that quotation many times, I had never understood — at the gut level — what Truman felt. I suddenly felt the same frustration. My smart friends were trying to help me, but they weren’t giving me what I wanted, a simple answer to my simple question: “What should I do with my investments?”

Then it hit me: My own and other poker coaches’ clients must feel the same way. They want simple answers to questions such as: “How can I stop going on tilt?” “What should I do when an idiot gives me a bad beat?” “How should I play this hand?”

Instead of giving them simple answers, we coaches often asked questions and made a lot of “if… then” statements. We probably sound just like Truman’s economists. Some clients probably asked themselves, “Why am I paying this guy so much money when he won’t answer my questions?”

Intellectually, I understood their desire for simplicity. I knew that many players are frustrated by the experts’ standard answer to most poker questions: “It depends upon the situation.”

For example, they want to know how they should have played a certain hand, and they don’t want to answer questions such as, “How many players were in the pot?” “How do they play?” “What were their stack sizes?” “What’s your position?” “What’s your table image?” In fact, they often can’t answer those questions because they never even thought about those issues.

Matt Lessinger, my colleague at Card Player, often helps me with my writing and play. He made a subtle distinction that I had missed. Because their subject is so ambiguous, economists often refuse to make clear recommendations. Because poker players have a limited number of options, poker coaches may ask lots of questions, but usually end with a clear recommendation: “You should raise (or call or fold). That’s an important distinction, but it doesn’t affect the emotional reaction that I and many players have to complexity.

I had even written about the destructive effects of this reaction: “Resist your natural desire for comfortable simplicity and base your decisions on all the important factors. There are often more of them than you expect or want.” (“Winners Consider Complexity,” Card Player, January 23, 2009)

Yet there I was, essentially ignoring my own advice. Worse yet, I was doing it for critically important decisions about an immeasurably more complicated subject than poker. Why was I being so stupid?

Because I’m human, and we humans want things to be simple. It’s a natural desire, but a very destructive one. When he complained about economists, Truman probably knew that he was being a bit irrational. After years as a senator, vice-president, and president, he knew that simple answers are rare, especially for presidential-level decisions.

But knowing and feeling are quite independent. Even though he knew that there is nearly always an “on the other hand,” he became frustrated when his advisors told him so. He wanted what I wanted, a simple, unambiguous answer: “Do this.” “Don’t do that.”

So does at least some part of you. You may sincerely believe that the correct answer to almost any question about poker (or other complicated subjects) is, “It depends on the situation.” But part of you probably yearns for simplicity. So what should you do?
First, recognize that — no matter how well you understand that nearly everything is complicated — a part of you wants poker (and life) to be simpler and less confusing than it is. That desire is “hardwired” into all of us, and pretending that you don’t have it just increases its destructive effects.

Second, accept that, unless you work hard to resist it, your desire for simplicity will cause costly mistakes. It will make you ignore or minimize important information, and you will pay for it.

Third, understand, accept, and work within your information-processing limitations. You’re not a super-computer that can almost instantly recall and then process enormous amounts of data. You’re just a human being with a limited memory and a fairly slow “processor.”

In addition, your brain works well with some kinds of data, but poorly with other kinds. So pick situations that fit your strengths and weaknesses. For example, I’m good with psychological data, but weak at math. So I avoid mathematically complicated games like pot-limit Omaha and Omaha eight-or-better.

Fourth, constantly fight against your natural tendency to oversimplify. Force yourself to deal with poker and life in all their frustrating complexity. Don’t “go with your gut” because your gut response is primarily emotional, not rational, and your emotions are always simplistic.

Instead, slow down to give your logical brain time to recall and process the important data. Carefully review the action, and then ask yourself questions like these: What did each player do? How does he usually play? Is he playing differently today? What’s his range? What is he likely to do next? How can you learn more?

It isn’t easy for me to accept that there are no simple answers to my investment questions. It won’t be easy for you to resist your natural tendency to oversimplify poker. But we really have no choice. We must either cope effectively with complexity’s frustrations or lose our money. ♠

Do you often wonder, “Why are my results so disappointing?” Ask Dr. Al, [email protected]. He has published five books about poker psychology, five on other psychological subjects, and is David Sklansky’s co-author for DUCY?