But it is such an important topic that I reflect on it periodically, and recently came across some additional evidence and good reading on cognitive bias. In this case, related to poker.
Poker players know better than most that life is subject to randomness, you are supposed to focus on the process, not the results, and you should value wins and losses the same. For example, great poker players refer to their chips as “units” while pedestrian poker players, like me, refer to them as “dollars” – this allows them to disassociate the emotion of losing money from the process of making a wager. Also, a great poker lesson is about adding randomness to your play by selecting between two equal options depending on if your watch second hand is currently between 0 and 30 or between 31 and 60.
In fact, you can learn a lot about how to overcome cognitive bias and bad decision-making by getting deep into poker, and following really good poker players on blogs, articles, etc. If you want to know some basics about types of cognitive biases, this article on BusinessInsider.com is a nice primer: “20 cognitive biases that screw up your decisions.”.
But even in poker and even with the best players, it is hard to fight the bias off all the time. I spent more of my summer than I’d care to admit watching the WSOP Main Event on ESPN getting ready for the November Nine final table, and just in a few episodes I saw:
• A player, who properly folded an inside straight draw on the flop after some heavy betting, grimaces in visible pain when the next card would have made his straight.
• An announcer salutes a player for folding AK preflop (when it was the best hand and an all-in could have easily been justified) when the board runs out and that hand would have lost, meaning the end of the tournament for that player.
• A former Main Event final table player making another deep run, attributed his success this year (after a few off years since his final table appearance) to going back to wearing the same sunglasses he wore the year he made the final table.
I was going to focus on the last one and title this post “superstition and cognitive bias” but I realized it would have been more of a blog about me since I tend to be a bit superstitious. But all of these show some form of outcome bias. So even these players who are always calculating odds, and have no problem risking their entire bankroll on a bluff if the situation calls for it, can struggle with cognitive bias.
I have written about ways to overcome bias. For this article about poker, I will focus on a great technique that is actually easier to apply in business than at the poker table. Good poker players pay attention to every hand, even ones in which they are not involved. They learn about other players’ tendencies, mannerisms, etc. In many cases, you can relatively easily determine what is happening in the hand – who holds what range of cards, what bet will occur next, etc. Then it is your turn to be in a hand…if you are subject to too much cognitive bias, you will forget everything you learned and make a bad decision, like calling with a losing hand; while others at the table will be thinking how obvious it is you should fold.
How does this apply to business? Business is a team sport, unlike poker. If you are deep in negotiations for a merger, for example, you don’t have to rely on yourself to make a big decision; you can ask your team for help; you can get an independent view from someone who has been observing but isn’t emotionally invested.
I am hoping to do more of this with my team – establishing a routine of having a “devil’s advocate” for example, or ensuring we seek feedback from everyone to make sure we don’t just listen to the loudest among us.
At the poker table, on the other hand, I will continue being visibly uncomfortable when bluffing twenty “dollars” because I didn’t wear my lucky hat and I figure the other players always knows I’m bluffing when I stack my chips with my left hand.
Rick Arpin is the Senior Vice President and Corporate Controller at MGM Resorts International. Mr. Arpin’s responsibilities include oversight of the company’s Finance Shared Services Center and all aspects of external reporting, along with assisting in corporate finance matters. He was recently named to Treasury and Risk Magazine’s “40 Under 40” list.