My dad was a stockbroker for 40 years. During that time, he told me a few memorable points about his job. For one, he said he often “played psychologist” at work, meaning his clients talked to him more about their problems than portfolios. Of course, since that time, I’ve become a psychologist. And I love my dad. But he was definitely short-changing the psychology field.
He used to also say how the markets were more influenced by emotional reactions than logic or business. Two emotions, stood out: Greed and Fear. Both are critical, but fear gets the edge. If greed and fear were hole cards, they would be Kings and Aces, respectively. It can take years to move the markets up (greed) but only a few weeks to lose that same amount (fear). Don’t believe it? Just look at the past few months.
Unfortunately, as you grow up, you realize many of the most valuable lessons your parents taught you didn’t come from them at all. Such is the case here. The quote originated from legendary investment guru, Benjamin Graham (1894-1976). (Warning to 20-something internet players: you are about to read something about a man born 100 years before you. This may be a first.) If Graham’s name isn’t familiar, you probably know one of his disciples: Warren Buffett. In the news regularly, Buffett is a billionaire, and widely considered one of the smartest investors in the world.
Graham said that excessive market fluctuations were due to our tendency to “give way to hope, fear and greed.” Well, my dad was close. As Meatloaf said, two out of three ain’t bad. So, who cares? And why is Under the Felt writing about the stock market? Answer: These same 3 emotions can mess with your poker game as well.
Hope: Hope is a troublesome and tiresome poker emotion. You can’t sit around “hoping” to get lucky. You need to play smart and focused—whether you are on a heater, card dead, or somewhere in the middle. Being comfortable, not hopeful, with the inevitable swings of the game is essential. Of course we “hope” to hit our draws, spike the occasional set, and avoid bad beats. But spending excessive energy on hope takes away from more useful emotional reactions and technical moves. Save your “hope” for dinner break. Hope your $14 “Rio Poker Kitchen Burrito” was made in the last few days (credit Karl’s Rant, July – Issue, Blind Straddle).
Fear: Fear is another problematic poker reaction. If you play not to lose (fearful), you’re a loser already. The scared player doesn’t get knocked out first—they just don’t cash. Fear equals overly tight and predictable play. The fearful player folds to any re-raise, unless they have kings or aces. Good luck with that strategy. Good players go for the win while being aware they may lose in the process.
This relates whether to whether it’s ever the right move to fold aces pre-flop. There are situations that would make you think twice. How about the main event either the first hand or one from the money. My answer? Heck no. If you aren’t going to gamble with the best starting hand in poker, why play the game? Fear = losing poker.
Greed: Greed also surfaces in poker, sometimes before the cards hit the felt. Someone may have the bankroll to play 20, $200 buy-in tournaments. This would allow for a reasonable assessment of their skill. It’s what they can afford. Then greed enters the equation. They compare the top prize of the $200 versus $1000 buy-in tournaments and go for the bigger game. Sure, if they win, they cash big. But it’s the wrong move. They have 4 chances, instead of 20, to prove their skill.
Greed also surfaces in our table play. You develop a respectable stack and start to (appropriately) bully the small stacks. But that’s not enough. You want the monster, treehouse stack. You change your game and start playing like a donkey. You think everyone is going to fold to your re-raises. Greed can make you feel invincible. And in poker, nobody is invincible. Greed interferes with rational play, good decision-making, and smart laydowns. All players want more chips. Greedy players just try and get there the wrong way.
The Differences
Of course, there are notable differences between poker and the stock market. In discussing these, a friend of mine deeply invested in the market and high stakes poker made this clear to me recently.
He noted that given a river showdown, in poker, the “best hand” wins. Despite the craziness of the game, poker does have some rationality, some rules. But in the markets, there is no bluffing and the “best hand” doesn’t always win. A company might hit highs in quarterly numbers and should “win.” Yet some random macro data point spills into the public and people get scared, fearful. And this impacts their stock.
He has a point. As tilt-inducing as poker can be when running bad, the market can be even worse. You can analyze everything perfectly, get it right, yet still get killed. Poker isn’t far behind. But for some, it might be the more predictable method of gambling.
Conclusion
Think about how these disruptive emotions have surfaced in your game and your non-poker life. My hunch is they have in multiple ways. They sure have in mine. Finally, until you figure it out, avoid sitting next to someone named Benjamin Graham. He would have been one wicked poker player.
Aaron Rochlen, Ph.D. is a Licensed Psychologist and Associate Professor in Counseling Psychology at the University of Texas. While not at work, in Vegas, or discovering new poker-life parallels, he spends time with his wife and two young children.
