The poker game as a microcosm in everyday business life
BY ANJA FAHS
(Published in The Produktkulturmagazin issue 4 2018)
What makes a decision a good one? Can this be computed on a purely rational basis? What role does luck have to play in this? Stephan Kalhamer is a mathematician – and a professional poker player. He coaches top managers and teaches them what risk management means in very specific terms: He describes the optimal situation in the game of poker – and in everyday business life: ‘The mathematics have to be on my side; then there is no more luck, and my wager works for me’. He tells us what constitutes smart negotiating, and why poker is not a dubious gamble but rather a mental exercise for strategists.
Mr Kalhamer, what does poker mean to you?
Poker is not a card game. Poker is a financial competition that is waged psychologically and based on game theory. Above all, poker means grasping one’s environment holistically and taking manageable risks in a focused and resolute manner.
How much ‘poker’ is there in our everyday lives?
In poker, the actual game occurs at the level of communication. I glance at my cards and feel something. Joy. Greed. And occasionally fear or disgust. Based on this, a plan is worked out. I act accordingly by submitting, accepting or rejecting a calculated offer. So my game is a microcosm of our everyday lives. Where are we at the moment? Where do we want to go? And how can we accomplish this? I have faced such questions millions of times, and fortunately I have often responded well enough. I’m grateful for that, and I like to describe this path to my audiences.
You also coach business customers at the poker table. Based on your experience, what would you say are the most common errors managers make?
A ‘classic error’ is a lack of focus on tomorrow; the result of this is often that no decision is taken. Naturally, ‘non-decision’ is also a decision, but this is often the result of the wrong motives. No matter what I do, there’s always a certain risk involved. If I wait too long, I will not be the one who exerts pressure and asks questions, but the one called in for interrogation. That is why I can only permit fear to a certain, healthy degree. Then I have to go forward in spite of incomplete information and pretend that what I am doing is correct and as clear as daylight. At the same time, I have to summon up the courage to act and the humility to recognise my own fallibility.
What can you do to help here on the basis of your poker world? What can people learn?
First: Always stay calm and indeed cool. What has happened has happened. The next challenge is waiting around the corner. Second: Be able to consider a matter done and dusted. I only look after the things I can influence. And third: Learn to assess. I focus on the tightrope walk between stability and change.
Is it always about nothing but winning?
No, certainly not. Victory is always just a snapshot – whereupon the game immediately resumes. The next decision awaits. There’s always a next game, a next day, a new financial year. Wherever you go, the point is not to withdraw from the game – to remain capable of acting, in other words, to just stay ‘alive’.
You say playing poker means grasping one’s surroundings holistically. What do you mean by that?
Every decision, whether in business life or an everyday setting, is contingent on many factors. Some of these factors I know – and some I don’t. Some of these factors I can influence – and some I can’t. That is exactly what is involved here: being aware of your power as well as your powerlessness, and always acting with prudence and foresight. In poker, I do not decide on the basis of my cards; instead, I enlist the profile of my opponent, our shared history to date, our capital structures, and the level of information; I then weigh these factors and make my decision based on my perception of the situation. So what I do is essentially scan all the information available to me in order to go on to make a logical decision. All that matters is your own attitude with regard to awareness and consistency.
Poker is not just about assessing your opponent – it’s also about knowing yourself. Often, however, business executives have a false self-perception – at times combined with excessive self-confidence. How do you help people like these get to know themselves better?
Excessive self-confidence comes about particularly if you’ve had the good fortune to spend a long time on ‘victory lane’. It’s the champion’s privilege that he or she has something to lose! I underscore this idea. It motivates humility as the mentality of a true winner. In Germany, we have been doing very well for a very long time. It has been a long time since we have had to ‘look up’ or chase ‘a doubler’. We have reached the summit. We have the privilege of managing our level and living well in the process. And that is the source of the danger we face. We must not get too complacent, should accept reasonable risks in time before we are ‘surprised’ to see ‘some kind of adventurers’ overtaking us on the right.
Making the right decisions is the name of the game – in poker and in the business world. How do I learn to make the right decisions, particularly in conditions of uncertainty?
There are easy decisions. I can’t delve into them in depth, as they are so easy by definition that I don’t even notice I’ve made a decision. Then there are the decisions that are too difficult – I can’t solve them anyway. No matter how many parameters I add to try to solve them – things don’t get any better, as I simply don’t know the answer. Hence: Accept your own humanity and consider the matter done and dusted. Don’t waste any more resources on it. That creates genuine benefits. Because the difficult decisions still remain. So I use my energy to find optimal solutions for these. I try to make a decision based on the situation and the opportunities and risks involved. But I incorporate everything I currently believe I can perceive to the best of my knowledge and belief, and then I pull the trigger.
Let’s talk about bluffing – what is the right way to deploy ruses?
Bluffing is overrated. Of course one is tempted by the approach of ‘making something of nothing’. What does a bluff require? Nothing but courage and a bad hand. Both are essentially always available. I compare bluffing with enjoying a good wine. It’s okay. You can do it occasionally. But if you drink every glass of wine that comes your way, that’s when you begin to run into trouble. Bluffing, just like drinking wine, should be done for a genuine occasion – and these occasions should be given careful consideration. One must never lose sight of the actual nature of the game: the point is to recognise lucrative spots and present only these. So for the most part, I also reject ‘inverse bluffing’, which in poker is known as ‘slow play’. In terms of game theory, having to camouflage a strong hand as a weak one is a suboptimal situation. A good poker player knows the appearance he or she projects. As soon as he or she enjoys too much respect to be paid, that person is bluffing. By doing so, that individual is adequately modulating his or her credibility and is immediately prepared for the next good hand, which can then be presented straightforwardly.
What personalities would you like to play a round of poker with?
With Michael Jordan, Her Majesty the Queen and Donald Trump. I have tremendous respect for the first two, and I would just be delighted if I could witness at the poker table the sharpness of thought, vision and empathy that I assume they have. And I’d like Donald Trump to teach me a lesson. Because we should all hope, not least for the sake of our own safety, that he deserves much more respect than I can personally pay him.
Stephan Kalhamer has a degree in mathematics and works as a poker coach, speaker and author. His Gaming Institute is the largest school for live poker in Germany. Formerly active in the sport of poker, he has been the president of the German Poker Sports Federation [Deutscher Poker Sportbund] since 2009. For him, poker offers a reflection of real mechanisms of economic decision-making. ‘Payers gamble. Experienced players calculate’ is his motto.
Picture credit © D-Keine/Getty Images