Business Is a Poker Game Part II

Part One said that poker is more similar to business than sports, chess, and most other games. Many business books use those games as teaching tools, but hardly any of them use poker. It’s a shame because readers could learn more from poker. For example, the most important poker decision is the same as the most important business decision: You must pick the right game.

KISS=BS

Many people love the KISS principle (Keep It Simple, Stupid or Keep It Short and Simple). The business literature is full of books selling simplistic nonsense. Since I’m no longer a business school professor or management consultant, I don’t know the current favorites. When I was teaching and consulting, two best-sellers were The One Minute Manager and Getting to Yes.

The One Minute Manager concept is too silly to be taken seriously. You don’t have to study situations carefully or even work hard. If you’ve got the right general approach, you can solve all your problems in one minute. As one Amazon.com reviewer wrote, “Can anyone learn the complex art of management by reading fairy tales? Probably not, and certainly not from this book.”

Why did such an absurd book sell so well? Because many people desperately want to believe that life and business are simple. It’s the same sort of stupidity that makes gullible people buy simple programs for getting rich by flipping real estate or trading stocks. The con artists claim to have secret formulas that will let amateurs beat professionals.

Every good poker player knows that you can’t master our game in a minute, a year, or even a lifetime. It’s too complicated and changes too rapidly. Nobody completely masters poker, and people who think they have mastered it nearly always regret it. In fact, Doyle Brunson and other Hall of Famers have often said that they continuously work on their game. They know that – if they don’t – their opponents will pass them by.

P.T. Barnum has often been quoted as saying, “There’s a sucker born every minute.” Wikipedia reports that he probably didn’t say it, but it’s a brilliant insight. There are millions of suckers, and, unfortunately for our economy, some of them are running businesses, including large ones. They took this farcical book seriously, and some bought copies for their employees. So some important businesses are being run by people who think they can perform well without thinking deeply or working hard.

Getting to Yes was also a best-seller, and thousands of people took courses based on it, even though it’s dishonest nonsense. It actually made this absurd claim:

“Principled negotiation can be used whether there is one issue or several; two parties or many; whether there is a prescribed ritual… or an impromptu free-for-all, as in talking to hijackers. The method applies whether the other side is more experienced or less, a hard bargainer or a friendly one. Principled negotiation is an all-purpose strategy.”
That book claims to be based on research done at Harvard University, but deceitful or incompetent researchers have often twisted or even invented data to “prove” whatever they want. Several critics have stated that Getting to Yes is based on anecdotes, not solid research. For example, the authors certainly don’t have any scientifically acceptable evidence that their approach works with hijackers. They just claim that it does, and some naive people believe them.

No competent, honest researcher would ever claim to have discovered an all-purpose strategy for anything. Can you imagine a Harvard medical or economics researcher claiming that he had discovered an all-purpose strategy for curing all our health or economic problems?

Any good poker player knows how ridiculous it is to claim to have an “all-purpose strategy.” Only bad players think that way. For example, many weak players have asked experts, “How should I play pocket aces (or some other hand)?” They want a simple answer, but the experts nearly always reply, “It depends upon the situation.”

The experts then ask questions about the players’ skills, styles, and images, their stack sizes, and so on. The weak players can’t answer most questions. In fact, they haven’t even thought about some issues. They don’t want to analyze the situation, and they certainly don’t want to consider many variables. They just want the simple, all-purpose strategy, and – as every good poker player knows – there aren’t any simple, all-purpose strategies.

Using Feedback Loops

Using feedback loops is based on the same hard-nosed realism as rejecting simplistic nonsense. Poker writers rarely use the term, but frequently use the concept. Instead of jumping to conclusions, experts use feedback loops to acquire new information, analyze it, and make adjustments. Good players use them well; weak players use them poorly or not at all.

Feedback loops are critically important in poker, especially when you’re reading your opponents’ hands and adjusting your strategy. Bad players put opponents on a hand, decide what they will do, and then ignore or minimize additional information. Good players put opponents on a range of hands, work to get and use more information to narrow (or completely change) that range, and then adjust their own strategy to fit the situation.

Feedback loops are even more important in business. The executive who jumps to conclusions and then stops looking for new information, analyzing it, and adjusting to it will probably fail.

Alfred P. Sloan believed in feedback loops, but may not have used the term. He built General Motors into the world’s largest industrial corporation and wrote one of the most influential management books, My Years with General Motors.

The GM board of directors was once very positive about a huge project. After listening to all the reasons for approving it, Sloan asked whether anyone could think of a single reason for rejecting it. Nobody could think of anything. Sloan then said that there are always negatives for any huge commitment. Since they hadn’t discovered anything wrong, they obviously hadn’t investigated thoroughly.

He decided not to make the investment until his people had found and thoroughly examined the evidence against the project. A few weeks later, they had found enough negative information to cancel it.

Conclusions

Poker is a great teacher for business people because so many poker skills and concepts directly apply to business decisions. It’s not accidental that many highly successful business owners and executives love poker and play it very well. The first two columns have applied poker principles to three important business principles: (1) Choose a game that fits your strengths, weaknesses, and situation; (2) Accept that business is complicated; (3) Use feedback loops to adjust your analyses and strategies. Future columns will cover other business issues such as managing risks and negotiating deals. ♠

After publishing five long, expensive poker books, Dr. Al, [email protected], has switched to writing short, inexpensive, eBooks. You can buy Stay Young; Play Poker at amazon.com for $4.99.