Thursday, December 22, 2005
Is David Sklansky a Psychopath?
The entire thesis of the Buffett article I'm referring to above is that the people who often make the best investing decisions are what are referred to as "functional psychopaths". A functional psychopath's inability to feel the normal emotions that other investors might react to enable him to make more rational decisions about selling or buying.
My contention is that this is also true of playing poker. The game is about making correct decisions, and really there are a tremendous number of situations, but there are a limited number of decisions you can make:
- Check
- Bet
- Raise
- Fold
If you make the wrong decisions, you lose EV (expected value), and if you make the right decisions, you gain EV. Many (most?) poker players make decisions based on their emotions rather than on what would give them the mathematical advantage. Some of the emotions that might cause a poker player to make an incorrect decision might include:
- Fear
- Anger
- Curiosity
- Boredom
- Overconfidence
The study that talked about functional psychopaths as investors used a classic gambling situation that's been talked about endlessly in articles about how odds and probability work. The experiment had test subjects who were given $20 each. They were invited to bet $1 on a coin toss where they would win $2.50 if they won, and lose $1 if they lost. (Clearly a positive EV situation, and very much so.)
The rational decision would be to take the bet every single time, since it's a mathematically clear thing to do. But in the test, only 58% of the subjects took the bet. (I hope they all play poker, by the way, and I'm sure Sklansky does too.)
Furthermore, they conducted the same test with some brain damaged subjects who had difficulty feeling certain emotions. In the 2nd test, 84% of the subjects took the bet.
Anyway, I think it's an interesting parallel. Rational investing in the stock market involves determining a business's true worth and the likelihood that it will continue to generate profits over the long term. Then if you buy the business below the actual worth of the stock, then you're relatively guaranteed a profit. This approach made Buffett one of th 2 richest men in the world, and he's maintained a 25% return in the market over the last 38 years.
But people in the stock market buy and sell all the time based on emotions, not rational decision making. This creates opportunities for those who aren't fearful, and it creates losses for those who are fearful.
Poker's the same way. If you make rational, mathematically correct decisions over and over again, in the long run, you'll see a profit. ESPECIALLY if and when you start playing with emotional players who make decisions based on their emotions.
David Sklansky, from what I've read, NEVER makes poker decisions based on his emotions. That and my bankroll are two reasons I wouldn't play with him. (That and he might be mad at me for even questioning whether or not he's a functional psychopath. But even if he were mad at me, he'd probably just ignore me and give me dirty look. He never tilts.)
