The uncertainty in poker teaches us a lot about making decisions with the cards we’ve been dealt, both on and off the table.
That’s my grandmother, Baba Anya. I’ve come to Boston for a family visit, almost giddy with excitement about my new project, and she’s not impressed. To say she was lukewarm would be an understatement. She makes her jaw jut out as if it’s about to slice through the stone. A conquering hero’s chiseled expression atop a pedestaled horse. A conquering hero—or a furious general. I can feel the weight of grandmotherly disappointment weighing heavily on my shoulders. After over a decade of my persistent explanations, she has almost (but not quite) come to forgive me for not wanting children, but this—this is a new low.
Think again if you think you know what a five-foot-something-odd 92-year-old is capable of. She was a schoolteacher from the Soviet era. She’s had more practice than a drill sergeant in the army.
She sighs and shakes her head.
“Masha,” she calls me by my Russian nickname. “Masha.” The word carries so much sadness, so much regret for the life I’m about to end. She has managed to convey in a single word that I am on the verge of ruin, about to make a disastrous decision that is beyond comprehension. A Harvard education and this is what I want to do?
“Masha,” she says again. “Are you going to gamble?”
My grandmother’s reaction may be extreme—after all, nothing is more personal than your grandchildren going out to ruin on your watch; you have to throw your body in the breach—but it is far from unusual. In the coming months, I’ll be accused of causing a societal “sin slide” by advocating for poker as a teaching tool. Strangers will refer to me as a moral degenerate.
A group of highly intelligent people at a retreat will tell me that playing poker is fine, but how do I feel about encouraging people, even children, to lie?
Misconceptions Abound in the Poker World
The first is the one I’m seeing from a distressed Baba Anya: equating poker with gambling. The journey, in my opinion, was well-motivated: of course, people would recognize that poker was an important way to learn about decision-making. Think about John von Neumann!
One of the twentieth century’s great polymaths, he was the father of the computer, one of the inventors of the hydrogen bomb, and the creator of game theory. And he’s a poker player! Not just a poker player, but someone for whom poker inspired brilliant insights into human decision-making, someone who saw poker as the ultimate game for emulating life’s strategic challenges. Let’s get to the food!
Looking at Baba Anya, however, I realize that the battle for support and the justification for poker is more than just a learning tool but one of the best tools for making decisions that have nothing to do with the game itself—it will require a bit more fighting. I will have to explain this several times, so I might as well get it right the first time.
To the Untrained Eye, Poker is Simple
Everyone who meets me seems to have “a book in them,” which they’ll write as soon as they get the chance, and everyone who meets my coach, Erik Seidel—one of the world’s most legendary poker players—thinks they’re just a step away from becoming a poker pro or, at the very least, a badass poker bro. Most of us underestimate the level of skill required. It appears to be so simple: get good cards and make money. Or bluff everyone blind and make some more money. You’re raking it in either way.
To be sure, there is an element of chance in poker—but what doesn’t? Are poker professionals “gamblers” any more than the man signing a professional football contract, who may or may not be injured the next week, or who may or may not be dropped from the team in a year because he failed to live up to his promise? We judge the poker player for gambling, but we admire the stockbroker for doing the same with far less information. Poker players, in some ways, gamble less than the general public.
After all, they can still play even if they lose an arm.
However, the widespread misconception exists for one simple reason. Poker, unlike Go or chess, involves betting. And betting costs money. And once that is factored in, you might as well be playing craps or baccarat—games that are truly gambling.
So I tell my grandmother the words I’ve come to repeat so often that they’ve become my own private mantra: You can win with the worst hand and lose with the best hand in poker. To win in any other casino game—and in games of perfect information like chess and Go—you simply must have the best of it. There is no other option.
In a nutshell, this is why poker is a skill-based game rather than a gambling one.
Consider Two People at a Table
The cards have been dealt. Each player must examine their cards and determine whether or not the cards are good enough to bet on. If she wants to play, she must at least “call” the big blind—putting as much money into the pot as the highest existing bet. She can also fold (throw out her cards and sit this hand out) or raise (bet more than the big blind). But who knows what factors she considers when making her decision?
Maybe she has a good hand. Perhaps she has a mediocre hand but believes she can outplay her opponent and thus chooses to play anyway. Maybe she’s noticed that the other player perceives her as conservative because she doesn’t play many hands, and she’s exploiting that image by opening with worse cards than usual. Or perhaps she’s simply bored out of her mind. Her reasoning, like her playing cards, is only known to her.
The other player observes the action and responds appropriately: If she bets big, she might have a good hand—or she might be bluffing with a bad one.
Is it because her hand is mediocre, she’s a generally passive player, or she wants to do what’s known as “slow playing”—masking an excellent hand by playing it slowly, as Johnny Chan did in that 1988 World Series Of Poker matchup with Erik Seidel?
Each decision sends out signals, which a good player must learn to read. It’s a constant interpretive dance: how should I react to you? What is your reaction to me? Most of the time, the best hand does not win. Instead, he is the most talented player. This nuance, this back-and-forth, is why von Neumann saw military strategy as having an answer. Not because everyone gambles, but because being a winning player requires superior skill in a very human sense.
Indeed, when economist Ingo Fiedler examined hundreds of thousands of hands played on various online poker sites over six months, he discovered that the actual best hand won only 12% of the time. Less than a third of hands went to showdown (meaning that players were skillful enough to persuade others to let go of their cards before the end of the hand).
There were some consistent winners in mid-stakes games with blinds of 1/ 2 and 5/10—that is, where the blind bets two players are forced to pay each round to start the action are $1 and $2, or $5 and $10, respectively—and as stakes increased to nosebleed, 50/100 and up, the variability in skill decreased significantly.
That is, the more money people play for, the greater their actual skill advantage.
When Chicago economists Steven Levitt and Thomas Miles examined live play and compared the ROI, or return on investment, for two groups of players at the 2010 World Series of Poker, they discovered that recreational players lost more than 15% of their buy-ins (roughly $400), while professionals won more than 30% (roughly $1,200). “The observed differences in ROIs are highly statistically significant and far larger in magnitude than those observed in financial markets where fees charged by the most talented money managers can run as high as 3% of assets under management and 30% of annual returns,” they write.
In other words, success in poker requires far more skill than success in the far more respectable profession of investing.
The Reasoning is Much Deeper
Betting, which appears to be a stumbling block for even rational minds when attempting to explain the skilled nature of poker, is actually at the heart of what makes it superior to almost any other game of skill: One of the best ways to understand uncertainty is to bet on it.
And it is one of the most effective methods for overcoming the pitfalls of our decision-making processes in almost any endeavor. It doesn’t take a gambler to figure out why. Immanuel Kant, the German philosopher, proposes betting as an antidote to one of society’s great ills: false confidence bred from ignorance of the probabilistic nature of the world, from a desire to see black and white where we should see gray.
Because of our misplaced faith in certainty, we believe that 99 percent, even 90 percent, means 100 percent—even though it doesn’t, not really. Kant uses the example of a doctor being tasked with making a diagnosis. To the best of his ability, the doctor renders a diagnosis of the patient’s illness—but that conclusion isn’t always correct. But what if he had to place a wager on it? With something real at stake, he must reconsider how certain of a certainty his opinion truly is.
This certainty gauge is built into the game of poker. How confident are you that you have the best hand? How confident are you that your opponent will fold the best hand if you bluff? When money is on the line, an argument like “I think she’s bluffing,” “I think I’m good here,” or “I think he’s weak” doesn’t cut it. Your reasoning must be far more compelling. You start with the fundamentals: pot odds. How much money do I have to put in to win the pot? Is that sum justified based on the cards I have and the cards on the table?
Before my first poker day, when I had only a hazy idea of what the game entailed, I had a peculiar misconception: I thought a deck held 54 cards. I proudly told Erik as much during our first meeting, only to be met with such disbelief that I realized I’d gone too far. This isn’t just a humorous anecdote (though it is).
You cannot calculate your correct strategy if you do not know the number of cards. How do you know how many outs you have—that is, how many cards can conspire to give you the best of the best even if you currently have the worst of the worst? And if you don’t know that, how can you tell if the price you’re paying is reasonable?
This one simple element gives rise to a plethora of ideas. What is the shortest amount of time you have to call in order to avoid being taken advantage of (the minimum defense frequency), given the size of your opponent’s bet? If you fold too frequently, your opponent can bluff with impunity. You will go bankrupt if you call too frequently.
On the other hand, how much—and how frequently—do you choose to bet? The more you bet, the more your opponent risks—but you also risk. Bet small, and you can bet more frequently; however, remember that your opponent needs to stick around more frequently to see the next card to avoid being exploited.
Take it a step further now. What kind of cards do you have? What effect do they have on the possible hands your opponent holds or does not hold? If I have a card, that means you don’t. And it means you most likely don’t have the card combinations that would include it. (This is known as the blocker effect.)
Another misconception I had to correct early in my poker career was that holding suited cards only gave you a 2% advantage over the same two cards but of the unsuited variety. And boy, was I pleased with myself. Two percent was insignificant! It didn’t make a difference. I was so wrong.
I quickly discovered what 2% feels like—and how powerful it is. Two percent is a lot of money. I’ll be overjoyed if I can gain a 2% advantage over you. There is a chasm of difference between each percentage point—and that chasm plays out in real-time, as you discover whether you are a bigger winner or loser depending on which end of the stick you hold.
Poker betting forces you to pay attention. It compels you to examine your thought process. If you want to stay solvent, you must recalibrate and rethink. You’re doomed if you continue to follow your hunches rather than the mathematics of the situation. Sure, you might get lucky once in a while. However, a variance will eventually catch up with you. If you keep calling when the odds are stacked against you or betting when the chances of a fold are slim, you will never get your money back.
Of course, there’s a big difference between betting on your own opinions and judging someone else’s. When we make mistakes, we are far more tolerant than when we believe someone else has gone astray. Consider the presidential election of 2016.
Every media outlet had polls showing Hillary Clinton winning—and every single media outlet was incorrect. Nate Silver was the person who took the brunt of the backlash. He had done such a good job forecasting previous elections that he was practically chastised for being so “wrong” this time. But, exactly, what did Silver say? On November 8, 2016, he gave Clinton a 71 percent chance of winning, while Trump had a 29 percent chance. The percentage is 29%. That’s a lot of percentages. That is nearly one-third.
Nonetheless, most people saw the 71 and interpreted it as certain. The complexity of the alternative is simply too taxing to consider every time we make a decision. To the vast majority of people, 71 equals 100. Clinton was on top.
But, given Silver’s estimates, what if you had to bet? Would you bet as much on a 71% certainty as you would on a 100% certainty? Or would you then realize there was a significant margin of error? Trump’s odds of winning are roughly the same as the odds of flopping a pair in hold’em—and you only need to play once or twice to realize that the odds of flopping a pair are far from zero.
Nate Silver enjoys playing poker. In fact, he used to make a good living playing online games. And poker has taught him something fundamental about the nature of the world that most of us don’t bother to understand. Poker is a powerful window into probabilistic thinking not because of the betting but because of it: Poker betting is not an afterthought. It is an essential part of the learning process.
When we have a real stake in our learning outcome, our minds learn. If I am mistaken but do not see an immediate, tangible result, I have no reason to doubt my experience. I might pause and reconsider if my errors add up to tens, hundreds, or thousands of dollars in my opponents’ pockets.
It’s why kids learn so much better—and remember so much more—when they know exactly how or when they’ll apply what they’ve learned. This is the companion component to learning probabilities through experience: We not only understand what 29 percent feels like, but we also retain that knowledge because of failing to learn. If we keep betting the wrong amount, we will be punished. We’ll lose all our money if we keep saying, “I think I’m good here,” without quantifying how often we are.
But in real life, we usually do it without even thinking about it. Why did I purchase that stock? Another investor mentioned that it was good for lunch. What made me sell it? So he shortened that one, and that makes sense to me.
We react emotionally rather than rationally: traders sell winning stocks to lock in profits—it feels good, even though the numbers show that winners will continue to rise in the short term; they hold losers to avoid locking in losses—it feels bad, even though the numbers show that you should cut and run.
Numerous studies show that professional investors have a remarkable ability to disregard statistical information in favor of their own gut and intuition—and that; as a result, they’d often be better off not trading at all.
Outside of the poker table, it’s a difficult lesson to internalize. Even people who appear to suffer consequences, such as stock traders, are often unwilling to admit their certainty was incorrect. Because the world is far more chaotic than the poker table, it is far easier to place blame elsewhere. It’s easy to have the illusion of skill when you don’t get called out on it right away. Poker breaks the habit in a way that nothing else can, and in doing so, it improves decisions that have nothing to do with the game itself.
When I first started dating my husband, he frequently fact-checked me in the middle of a conversation. In the past, I habitually imbued my statements with a bit more certainty than they deserved. “Are you sure?” he’d endearingly ask. “I think I should look into that.” And he’d reach for his phone or a book to do so. I got better, but I never quite beat it.
It wasn’t until I started playing poker that the process became clear to me. I hadn’t been playing long when I started saying things like, “Well, I’m about 75% sure.” This was the realization of that 2% advantage. I’d realized that I’d relied far too much on rounding, approximating, and deciding, well, it’s close enough, but that probabilities deserved far greater precision.
Consider the Weather
When should you bring your umbrella? Is the chance of rain at 30% in your area? Forty? Fifty? Sixty-five? You most likely have one—and you’re aware that the numbers aren’t the same. As I entered the world of serious poker, I’d seen the consequences of excessive certainty far too many times in my bank account, and I knew I was the only one to blame for my poor play.
Personal accountability, with no possibility of deflecting to someone else, is essential. In fact, one type of lawyer performs far better at probabilistic thinking than financial professionals whose jobs are more explicitly linked to probabilities: lawyers who take cases for a percentage of the eventual settlement. This is because you have a much greater personal stake in calibrating correctly, so you learn to do so. Similarly, meteorologists and horse-race handicappers calibrate risk accurately because they not only deal in percentages but also have immediate feedback on their performance—and no one else to blame if their estimate is incorrect.
Accurate probabilistic thinking is a rare skill outside of games.
Dan Harrington, a poker legend, retired from the game several years ago to launch a successful real estate investment company. He told me about one particular hire that had not gone as planned. He appeared nice and qualified, but his judgment left something to be desired; it wasn’t nearly as sharp as it had appeared during the interview.
He stood out from the other employees because he had a traditional finance background, whereas the others had connections in the poker and backgammon worlds. “My partner said to me, ‘Dan, if we hire a nonprofessional gambler in the future, just give me a swift kick in the ass,'” Dan recalls. “The successful hires understood equity and the decision tree matrix that entails, and they don’t get personally involved in it.” And it stems from gambling. It’s priceless for life.” They never hired anyone again who hadn’t spent some time in the gaming industry.
I’d bet it’s no coincidence that the father of probability—the first person we know of who saw chance as more than an unknowable goddess or otherwise in the realm of the supernatural—was a gambler. Girolamo Cardano was a doctor, a mathematician, and a philosopher who combined his education to develop a more comprehensive understanding of practical probability than anyone before him. Cardano was not a fan of the popular divination methods of the time, such as astrology.
Cardano realized that relying on luck as a sort of higher power was a losing proposition. It was pointless to speculate on whether there was a god, spirit, or other guiding force at work. He proposed another approach: probability prediction. He recalls the realization that he could make certain plays based on specific frequencies being in his favor. He’d lost a lot of money to a man who had duped him into playing a card game with marked cards.
When he was thinking about how to get his belongings back (he’d also lost a lot of his clothes and personal effects), a more mathematically minded approach came to him.
It just so happens that, while pondering how to calculate dice throws and card distributions, Cardano also wrote a description of primero, which many consider to be the earliest form of poker. It wasn’t played with a full deck, and the betting rules were a little confusing, but the essence was similar to what we have now: some cards private, some shared, and a complex interplay between representing the hand you may or may not have and interpreting the signals of your fellow card players. Primero became known as primiera, la prime, and eventually, pochen, a German name derived from the verb “to bluff.” Pochen was transformed into poqué by the French, and the game soon evolved into a new form.
Cardano, on the other hand, lamented one thing. Understanding probability was insufficient to control the luck factor. You couldn’t win consistently unless you cheated, and he spent a long time describing how you could with crooked dice and marked cards. Understand probabilities if you want to improve your odds; rig the deck if you want a sure thing.
Poker is more than just testing the strength of your beliefs. It’s also about accepting that there is no such thing as a sure thing—ever. You will never have all of the information you desire, and you will have to act regardless. Leave your assurance at the door.
Baba Anya Is Not Persuaded
Although poker teaches you nothing is certain, she is convinced I’m going over to the dark side. I realize that nothing I say will persuade her otherwise. With a dismissive hand, she dismisses all of my talk of skill. She has more arguments prepared.
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