One player described poker as "hours of boredom punctuated with seconds of outright terror." Those hours of boredom are the most important part of the game. Most of the time, if you're playing correctly, you're just throwing your hands away. But you're supposed to spend your time paying attention to what the other players are doing when they're playing their hands. You're making mental notes of the strategies they use, and when they use them. For instance, on a simple level: as you're beginning to make a bet, from your mental notes you know that a player is ready to put his money in the pot. Among some players, that tells you you'd better have a good hand when you bet. Among other players, you know that the person's not going to put the money in the pot; he's trying to stop you from betting. If you notice these tendencies in people, you gain a big edge when you get to play a hand with them.
In gambling there's a formula called the Kelly Criteria. You figure out what your edge is -- say it's 1% -- then you can bet 1% of your bankroll on the next bet. If you do that, you have a very low chance of ever going broke. A lot of players are better than I am, or at least as good. But they always seem to have no money. Why? They overbet their bankroll. Greed takes over. They've won some money, assume that it was totally due to their superior play, and that it will continue. Of course, that's not the case. If you see studies of blackjack or any gambling where there's volatility involved, like the stock market, it doesn't go up in a straight line. It fluctuates. If you have an insufficient bankroll for the stakes that you're playing, then all it takes is one of the fluctuations and you're out of the game. It's OK to invest in a risky venture. But it has to be a relatively low portion of your capital. And if you're going to do it, it probably pays to invest in 10 or 15 different ventures at the same time so that if one comes through, it pays off for all the others.
Psychological studies show that people latch on to adjectives; they don't latch on to statistics. You get a hand that's visually appealing, you know it has won so many pots for you in the past, you have to call. Under normal circumstances you know the hand cannot win. You're supposed to say, it's no good, these guys have my hand beat, I've got to throw it away. But you get caught up in it. You look at the hand and you're attracted by the adjective that you see in that hand. It happens in business all the time. Take Apple Computer. Their profit margin was so appealing they couldn't give it up, despite the need to cut their high prices and increase market share. Even though they knew it was detrimental to their survival, they couldn't give it up.
Arguably the greatest mathematician of this century was John Von Neumann. He extended the theory of Marginal Utility to game theory: the more you have, the less you should gamble. People like Ted Turner or Rupert Murdoch have other considerations. There's ego involved. They've gone beyond just wanting to win the money; they want recognition. They take risks I would never consider taking. At the final table of the World Series, it was heads up between me and Howard Goldfarb, a real estate developer from Canada. Afterward, the tournament director said, "I knew you were going to win. Because when we brought out the $1 million and we brought out the gold bracelet, your opponent went up and looked at the gold bracelet and you fondled the $1 million." A lot of people are there for the glory. I'm there for the money. You can keep the glory.
A famous tennis player was practicing with his inferior opponent. In the middle of the point, a train went by behind them. His opponent lost the point and asked him, "How could you play with that train going on behind you?" He said, "What train?" When I was at the final table of the World Championship, when there were six places left, I knew that in the space of three-and-a-half hours the difference between sixth place and first place was $914,000. That's a lot of money to be decided in three-and-a-half hours. I told myself -- it was my chess training -- don't focus on the surrounding circumstances. Focus on the problems that you face when you're sitting at the table. Pay close attention to the technical details. Because if you focus on the right thing to do, the other things will take care of themselves. At the final table, I focused on, "Am I making the right play in this situation?" I didn't focus on, "God, if this play loses, it's going to cost me $500,000." You could find yourself fairly stressed out at that. That's your mantra: focus on the problem at hand, not the consequences of the problem.
Alan Deutschman (deutschman@aol.com), a former writer for "Fortune," is now gambling on a career as a novelist and freelance writer in San Francisco.
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