Business Is a Poker Game

Parts One and Two said that poker is an excellent teacher for business people because many poker skills and concepts directly relate to business. They applied poker principles to three important business issues:

1. Choosing games that fit your strengths, weaknesses, and situation.
2. Accepting that business is complicated.
3. Using feedback loops to adjust your analyses and decisions.

These principles directly apply to negotiations, a critically important business skill. Business people don’t negotiate only when they buy and sell. Whenever they have conflicting interests, they should negotiate.

If you can’t negotiate well, you can’t succeed in many jobs. Some poker principles will improve your negotiating skills and some negotiating principles will improve your poker.

My negotiations research and teaching greatly influenced my poker writing. My dissertation was about collective bargaining negotiations. I’ve taught negotiating skills in over twenty countries. And my poker publications borrow from my book, Negotiate to Win: Gaining the Psychological Edge.

Both Poker and Negotiating Are Mixed Games.

Mixed games have both conflicting and common interests, which means they have zero-sum and variable-sum elements. In zero-sum games one party’s loss exactly matches the other party’s gain. In variable-sum games some deals are better than others for both parties.
Part Two quoted from an idiotic negotiating book, Getting to Yes. It claimed its “all-purpose strategy” worked in every situation. No good poker player would accept such simplistic nonsense. We know that the correct strategy always depends upon the situation.

Most of casino poker is a negative-sum game. Every dollar you win comes from the other players, and everybody pays casino fees. The total amount won is always less, sometimes much less, than the amount lost.

However, we also have some variable-sum games with common interests. We all want games to start on time and move quickly and smoothly. We also want to minimize arguments over rules and to maximize promotions and bonuses.

There are two types of negotiations, Pure Bargaining and Joint Problem Solving. Pure Bargaining is a competitive process; Joint Problem Solving is a cooperative one. Bargain when your interests clearly conflict and you don’t care much about your long-term relationship such as selling your car to a stranger. If you get a dollar more, he has a dollar less. Since your gain exactly equals his loss, the sum is zero.

Problem-solve cooperatively when you have strong common interests or the long-term relationship is important, such as negotiating working schedules. You, your boss, and your coworkers want the best schedules for yourselves, but you all want the work to get done properly and on time, and you don’t want anyone to feel badly about the agreement or the way it was negotiated.

There is actually a range of approaches. Pure Bargaining is at one end, and Joint Problem Solving is at the other. When your interests are completely opposed and you don’t care about the relationship, bargain as hard as possible. When your common interests or the relationship are important, emphasize Joint Problem Solving. Usually, you’ll be someplace in the middle of the range, bargaining hard on this issue, problem- solving on that one. In poker and negotiations analyzing the situation and selecting the correct approach is critically important.

Since your interests usually conflict when playing poker, the rest of this column focuses on bargaining strategies.

Both Games Require Skillful Information Management.

Poker and negotiations are incomplete information games. In poker you don’t know your opponents’ hole cards. In negotiations you don’t know their entire situation, objectives, and priorities.

When your interests directly conflict, your critical tasks are learning as much as possible about your opponents’ situations while manipulating their perception of your situation. When playing a hand, you want to learn your opponents’ hole cards and plans while deceiving them about yours.

David Sklansky wrote, “If all cards were exposed at all times, there wouldn’t be a game of poker. The art of poker is filling the gaps in the incomplete information provided by your opponents’ betting and exposed cards in open-handed games, and at the same time preventing them from knowing any more than what you want them to know about your hand.” (The Theory of Poker, p. 17)

When playing hands, you should communicate as if you were bargaining: Give as little and get as much information as possible.

When you’re bargaining, your critical task is learning your opponent’s MSP and priorities while deceiving them about your own MSP and priorities. The MSP is the Minimum or Maximum Settlement Point. If you’re selling, it’s the lowest price you’ll accept. If you’re buying, it’s the highest price you’ll pay.

Both Bargaining and Poker Have Similar Goals.

In most games you just want to win, and the margin of victory is almost irrelevant. For example, if you’re playing basketball, it doesn’t really matter whether you win by one point or twenty-five. A win is a win.

When you’re bargaining or playing in cash games, the margin of victory is extremely important. Achieving your MSP is a win, but you should usually try for much more.

“Many people confuse their MSP and their goal, but they are actually the opposite ends of the bargaining range (the distance between both parties’ MSP’s). Your MSP is the worst deal you will accept. You goal should usually be the best deal you can get… the other party’s MSP. … your MSP is your limit, while their MSP is your goal.” Negotiate to Win, p.30)

In poker your goal should not be to win this pot or to end the night as a small winner. It’s to maximize your long-term profits. If you’ve got the winning hand, you want to win the biggest possible pot. If you’ve got the loser, you want to reduce your losses or bluff successfully. If the game is good, you want to win as much as possible. If it’s bad, you should quit ASAP.

Good bargainers push for every dollar, so do good poker players. Weak players do the opposite: They want the most wins, not the most dollars. If they have the winning hand, they don’t try to get every possible dollar. If they’re ahead in a good game, they quit to protect their win. If they’re behind in a bad game, they stay too long and may gamble foolishly, hoping to get even.

Conclusion

This column contains another example of poker’s most important business lesson: Since the best decision ALWAYS depends upon the situation, constantly analyze and adjust to the situation.

That principle applies to choosing your poker and business games, accepting that business is complicated, using feedback loops to adjust your strategy, deciding when to communicate openly or deceptively, and choosing when to push or quit. Because most of us like simplicity and dislike analysis, it’s hard to accept its critical importance, but – if you don’t analyze thoroughly and adjust to situations – you can’t succeed in business or poker. ♠

After publishing five long, expensive poker books, Dr. Al, [email protected], has switched to writing short, inexpensive, eBooks. At Amazon.com Stay Young; Play Poker costs $4.99, and How to Beat Small Poker Games costs $2.99.