What being a professional online poker player in my early twenties taught me about mental models.
It’s early morning; my first business class starts in 2 hours. I crawl out of my bed and tumble towards my small room's desk. There really is not much else in the room. A pale, white IKEA wardrobe and socks are lying on the floor. A wobbly, wooden bookshelf with some untouched microeconomics scripts on it. I sit down and turn on my two 22-inch monitors.
One is horizontal, while the one on the left is flipped vertically. They allow me to play on 24 poker tables simultaneously. This time, I opt to play a few tables only. No Limit Texas Holdem heads up. Heads up means you only play one opponent per table. It is the highest stakes I have ever played before. The blinds are $5/$10 with a buy-in of $1,000. My opponent is playing aggressively, raising a lot of hands, and trying to steal my blinds. I am inexperienced playing these high stakes and get pushed around a bit, waiting for good hands. I manage to get a couple of strong hands and big pots. My opponent's game is deteriorating, and I feel the momentum shifting. He makes some poor calls where he should have folded and folds to my bluffs in tight situations.
When playing head-up poker online, you develop a connection with your opponent. You get a sense of his mental state. Is he in control of his emotions? Does he still play his A-game? Have I gotten into his head, and can I predict if he will make a desperate decision on the next hand to try to turn everything around?
The same questions apply to me. How am I feeling? Am I honest about the quality of my game, or am I gaslighting myself into justifying my poor decision-making? After 1 hour, I am up $10,000. My opponent abruptly leaves all four tables.
I stroll through the apartment's corridor, say ”hi” to make my hungover flatmate tumbling out of his room, put on my shoes and head over to class. It’s accounting 101.
Poker & Mental Models
Online poker has helped finance my university degree and allowed me to travel while still attending uni. I quit playing poker after receiving my degree to work for a project management consultancy. However, I still apply the mental models that helped me become a winning poker player.
Decouple results from decisions
To be a successful poker player; you need to decouple the monetary reward from your decision-making. A good poker player will be content if he has committed his money as a favourite no matter how the cards will fall on turn and river. If you are a 90% favourite and your opponent hits a lucky card on the river, that is okay. An experienced poker might react with a brief smirk and congratulate on the well-played hand. He will not scream in despair, throw over his chair, and see himself as a victim of some larger plot and the most tragic, unfortunate creature on earth.
If you continue investing your money as an overwhelming favourite, you will turn a profit over time. On the flip side, if you win money even though you have committed to a hand as a big underdog, it’s not a reason to celebrate; rather, you should think about wearing a cone of shame during the next hand.
In “Thinking Fast and Slow, " Daniel Kahnemann calls the tendency to blame decision-makers for good decisions that worked out poorly “Outcome Bias”.
In her book, “The biggest bluff”, Maria Konnikova explains this tendency with the life experience of our primal selves who were “hard-wired by experience and hot emotion”. Our ancestors learned from immediate feedback responses. There was probably little acknowledgement of the long-term success of decision-making since the stakes were often life and death. In the modern world, the stakes are often lower, but we still mimic this decision-making process from the time before computers, factories and middle managers.
If the results are not as expected, the mob needs a scapegoat, and the decision-making process needs to be changed.
Long-term-thinking
Poker players think long-term. A winning poker player will see through a session's short-term wins and losses and zoom out into the big picture of his performance over a larger sample of hands played.
Think of it as the ups and downs of the stock market. Volatility will be high if you look at the daily performance, but over months and years, there will be a smooth line indicating an upward or downward trend. Ike Haxton, a professional poker player, estimates that stronger amateurs should expect to lose an average of about 15 per cent of the money they put in, while the best pros will earn a return of around 5 to 10 per cent over the long run.
However, our society is obsessed with short-term thinking. Football coaches, quarterly company financial statements, and online dating all obey the rules of short-term thinking. Suppose a team, company, or potential dating partner does not live up to its/his expectations. In that case, we will likely take this as an indication of a necessary strategy change and intervene; Replacing the CEO, football coach or looking for a new potential dating partner. Rarely will there be a detachment between results and decision-maker.
Are the poor quarterly financial statements the results of a bigger strategy which might pay off long term, is the football coach changing the teams’ core structure and setting it up for future success?
A poker player will hesitate to intervene after isolated incidents of negative results and rather question the decision-making process which led to the results. If the decision-making process holds up scrutiny in hindsight, he will repeat the same strategy - setting himself up for long-term success.
Game theory: Me, myself & I?
In the poker movie Rounders, Matt Damon famously said: “If you can't spot the sucker in your first half-hour at the table, then you are the sucker.”
An amateur player looks at his cards and will take them at absolute value, ignoring the possible strength of his opponent’s cards.
An experienced poker player will calculate the strength of his hand in relation to his opponent’s signalled hand strength. The main indicators of hand strength are:
The betting pattern throughout the hand. With every bet a player makes, he tells a story about which hands he represents. A raise is an indication of a strong hand, while a call indicates a weaker hand or a draw. If this story becomes inconsistent, a player represents only a narrow range of hands and therefore is more likely to bluff.
The position on the table. A player seated closer to the blinds is likely to play a wider range of hands to steal the blinds. A player seated after the blinds is the first to act. This seat is also called “under the gun” (UTG). If you are in this seat, you do not have any information about the future actions of your opponents. Will they raise, fold or re-raise? Since a poker player seated UTG will have less information about how the hand will play out, he will usually be more selective in the kind of hands he plays.
Changing perspective and assessing other people’s optimal moves is a classic element of game theory. For example, It forces managers to put themselves into their competitors' shoes rather than following a purely self-centred decision-making process.
It does not have to be poker.
Poker was my path to discovering new mental models to make better decisions. It can be anything: Cooking, picking up rock climbing or pokemon go. In a global world, most of us become increasingly specialised and view the world through the mental models essential for our careers. An engineer will think in systems, and a biologist will think in terms of evolution. But few will combine diverse mental models. A mind-opening strategy is to take the most valuable chunks from a selection of disciplines and knead them together, forming an all-encompassing latticework.
When we combine important mental models from eclectic schools of thought, we can avoid blind spots in our thinking. And blind spots can lose you a lot of money - at least in poker.