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May 2006
From The Poker Table To The Negotiation Table:
How One Set Of Skills Can Help The Other
By Fraser R.
Introduction
Negotiations are pervasive throughout most human beings’ day-to-day lives. When making purchases, deciding where to eat dinner with friends, or helping a client set the terms of a lease, developing and practicing sound negotiation skills will help you or your client best reach goals. Professor Edward Wertheim writes, “In the course of a week, we are all involved in numerous situations that need to be dealt with through negotiation; this occurs at work, at home, and at recreation…You will be constantly negotiating and resolving conflict throughout all of your professional and personal life.” {FN1} In this paper I focus mostly on negotiations in which the negotiator is representing a client, rather than themselves. The focus of the paper is how one can use lessons learned from playing poker, and apply them to become a better negotiator. I also think that the reverse is true—enrolling in the Harvard Negotiation Workshop, I saw that many of the techniques that were presented could also be used to improve one’s poker game.
Like negotiations, there are many, many different types of poker games, and in order to be successful in a variety of different poker games, one must consider the ramifications of the game in which they are playing. In this paper I will focus almost entirely on the game of Texas Hold’em, which is by far the most popular and widely played poker game in the world today. Within Texas Hold’em, however, there are still many subsets of games. Before proceeding I think it will be both necessary and useful to explain the basic rules and differences between the different types of games, and also to introduce some poker terms which I will use repeatedly throughout the paper.
There are three main arenas in which people play poker—casinos (or public poker rooms), home games, and online games. Within any of these three realms, there are four different Texas Hold’em games which are popular—limit cash games, no limit cash games, limit tournaments, and no limit tournaments. While the skill sets are similar for each type of game, there are huge differences in the way the games are played and the adjustments a player needs to make as they switch from one type of game to another. In cash games, players buy in for a certain amount of money, and get chips which have a monetary value equivalent to whatever the player bought in for. Essentially, the chips are just used for convenience—there is no practical difference between trading in for chips and just using dollar bills. A player can leave the table at any time and cash their chips back out for money. In a tournament, however, there is a buyin amount, which is the same for all players, and they are then given a certain amount of chips which do not have any real monetary value. That is, a typical tournament structure might have a buyin of $30, for which each person gets $1000 of tournament chips. The tournament does not end until one person has accumulated all of the chips. Depending on the number of people and the specifics of the tournament, the actual money will be split up between the top finishers. The difference between no limit games and limit games pertains to how much one is able to bet at any given time. In limit games, the only option a player has is whether to bet (or raise) or not. The amount each betting round is fixed. In a no limit game, the player decides not only whether to bet, raise, or fold, but also how much to do so. As I will later discuss, there are huge differences between limit and no limit poker games.
Finally, before delving more into the crux of this paper, it will be instructive to outline the way Texas Hold’em is played and some terms which are commonly used. Before any cards are dealt, there are two people who post blinds—there is a little blind and a big blind. The big blind will put up the full amount of whatever the first bet is, whereas the little blind will put up half the bet. At the beginning of a hand of Texas Hold’em, each player is dealt two cards face down—these are called their hole cards, and one’s hole cards are the only pieces of information that are not available to every player at the table. After hole cards are dealt, there is a round of betting, in which people decide whether they will stay in the hand. Any players beside the people in the blinds can fold for free; the money in the blinds goes into the pot. After the players have decided whether to fold, call, or raise, the dealer will put 3 community cards, called “the flop,” which all remaining players can use to ultimately make their best 5-card hand. There is another round of betting, and if two or more people decide to remain in, the dealer deals a fourth community card, referred to as “the turn.” There is then another round of betting, and once more, if two or more people remain in the hand, the dealer deals a fifth and final community card, called “the river.” The remaining players can use any combination of the two cards in their hand and the five cards on the board to make their best possible five-card hand. Following the river, there is one more round of betting. If two or more people remain in the pot after this round, there is a showdown in which the remaining players reveal their hole cards, and the player possessing the highest hand wins the pot.
What Do They Have and Where Do They Stand?
One crucial, defining characteristic of any poker game and virtually any negotiation is that it is an endeavor of incomplete information. Were this not the case, much of the skill in both fields would be rendered nearly negligible. In poker, a fundamental part of the game is the fact that each individual player does not know the hole cards of their opponents. Before figuring out the best course of action on any given round of betting, it behooves the player to consider the information that is available to them, namely, the cards on the board, the betting patterns that have already occurred in the hand, information on the players garnered from previous hands/experiences, as well as physical or verbal clues opponents may have given away during the hand. While incomplete information plays an important and obvious role in poker, it is interesting to note that this is not a factor in all games. Highly skilled games like chess and backgammon are games of complete information which, by nature involve less deception and misdirection than poker.
Like poker, a central component of most negotiations has to do with the fact that each side is not fully aware of all of the parameters of the other sides’ interests and preferences. If this was not the case, a mutually beneficial agreement would be reached pretty much any time it was possible. That is not to say that all negotiations involve deception. The Harvard Negotiation Workshop goes to great lengths to emphasize value creation opportunities that can arise from negotiating. Certainly many negotiations have a collaborative nature where the negotiators work together to overcome the hurdles of the situation. However, for various reasons, parties in a negotiation are not always willing to share all of their facts and interests. In poker, each hand, and even each reaction to a new community card within a hand gives savvy players the opportunity to gather new information about how their opponents play. Likewise, smart negotiators must practice active listening in order to gauge the other side’s situation and accordingly think creatively about how to use the newfound information to best aid their clients’ interests.
What Are Their Interests?
One technique that Harvard’s Negotiation workshop continually reminds negotiators to focus on is that of reframing issues in a negotiation to the other side’s interests. In some cases, if a sports agent is demanding more money for his baseball player client, it might appear to be clear exactly why the agent wants more money for his client—everyone wants more money! However, there is often more than meets the eye lying beneath the surface of even the most seemingly simple demands, and a strong negotiator should always make an effort to ascertain these interests, in the hope that discovering the interest at hand might lead to a value-adding, often outside-the-box solution. Going back to the example of a negotiation between a baseball agent and the representative of the team with whom the agent is negotiating, the team representative would be well-served to try to find out exactly why it is that the agent is demanding the amount of money that they have come up with. Especially with star players, the marginal difference between a four year $60 million contract and a 5 year, $70 million dollar contract is unlikely to make much of a difference in the player’s life. In many cases, the agent might point to statistical analysis showing that, in the market for free agent baseball players, the player’s statistics point to a level of production that simply commands that salary. But there are often more complicated factors involved. Perhaps the player feels as though he is being slighted because he is not the highest paid member of the team. Or maybe he feels as though the team has not been promoting him enough to the media, which is preventing him from obtaining the endorsement deals he feels he deserves. At any rate, it will be well worth it for the team to find out if there are alternative packages, including greater promotional opportunities, guarantees about playing time, or other types of benefits that the team could offer in lieu of increased compensation. These alternative means of compensation could potentially be as or more valuable to the player while costing the team less. Ascertaining information about the player’s underlying interests is a crucial step in determining potentially value-adding terms of a contract.
A very similar train of thought will lead to higher expected profits in poker. Again, this thinking is not necessarily intuitive. One might presume that everyone at a poker table sits down with the same goal in mind—to win as much money as possible. However, particularly in live (as opposed to online) games, this is not necessarily the case. People end up sitting at a poker table through a variety of different circumstances—some are very confident in their skill and expect to earn money, others might want to learn the game, and others might just want to relax while having a free drink or two, particularly if the stakes are such that the money is of minimal importance to them. At any rate, the best poker players need to try to glean as much information about the underlying interests of a player in order to figure out the best approach to take playing against them. The following paragraphs outline a couple different interests poker players might have, showing how the negotiation technique of reframing to interests mentally can illustrate to a clever poker player how their strategy should change in light of this knowledge about their opponents.
Often a poker player will come across another player at the table who plays every hand, almost always raising before the flop with even the most marginal starting hands. This may actually be a strategic move by the maniacal player, thinking the bets have a positive expected value. However it is more likely that the person has other interests at mind—he might be used to gambling for higher stakes at a casino game like craps or blackjack, and find the slow pace of poker boring, leading him to want bigger pots to make it more fun for him. He might want to show off the fact that the stakes at the table are not big enough to make a person of his means hem and haw over what he thinks are minute amounts. Or he might simply be drunk and trying to run over the table. However, players like this generally give most of their money away, but occasionally beat more careful players on hands in which they get lucky. There are a few strategies people want to keep in mind in playing against players like this, whom are often referred to as “maniacs.” Against someone who is raising every hand, you actually want to increase, rather than decrease your starting hand requirements in order to call. Your ideal play is to wait until you get a very strong hand, and then actually reraise the original raiser. Your hope is that you can isolate the player by getting everyone else out—you can usually presume that you will have an edge over the maniac because you have a highly superior starting hand. If you are acting before them, you also want to use the checkraise often, because you know they can be counted on to bet almost every time. The crucial thing to remember is that they will pay you off handsomely when you do have a very strong hand, because they do not want to appear as though they can be bullied from the hand.
There are other players whose play is almost the mirror image of the maniac.
Particularly in tournaments, but in cash games as well, many players really want to maximize the time they get to play. They may have entered the tournament with a bunch of friends and don’t want to be the first one knocked out. Or they might be an intermediate player whose primary goal is to play for a while to gain more experience. In no limit tournaments, in which a player can lose all of their chips on any given hand, people whose primary goal is to lengthen their stay at the table will logically be much more risk averse and less willing to take chances which could result in them being eliminated. Against these types of players, you actually want to be more aggressive than you might usually be—because you know they are much less likely to call your bets and raises. Likewise, when they are in the hand and seem willing to bet, you want to drastically increase your calling or raising requirements, because it is very likely they have an extremely strong hand.
One other consideration that some very solid poker players struggle to understand is that this notion of recognizing other players’ interests and adjusting accordingly should affect not only the way one plays against them, but also quite possibly the way one acts at a table as well. For instance, many, many players see poker primarily as a social, fun way to relax and unwind. These players, who are often consuming alcohol while they play, might have a tendency to play a few more hands than is probably profitable, and may stay in on draws that will not be profitable in the long run. However, as alluded to earlier, there is a huge element of chance in poker (in the short run), and these players will win their share of pots when they hit a lucky card. The last thing that a good player wants to do is disparage a loose, social poker player for getting lucky against them. The good player, realizing that they are likely to win next time they are in a pot with that player, should simply congratulate them on winning the pot. No one who is playing for fun wants to be castigated for the way they played—but it is surprising how often otherwise good players will drive a less skilled player away from the game because their negative comments have made the game a less enjoyable experience.
Do They Really Represent Me?
One problem that can be pervasive in negotiations is that of the principal-agent tension. Often a person will hire an agent or a lawyer because they (the principal) do not feel that they have the requisite expertise to adequately handle the situation themselves. In addition to the fees that the principal will have to pay the agent, the relationship has other costs as well. “Because the agent’s interests may not align with those of the principal, a number of unique and intensely stubborn problems can arise.” {FN2} Informational asymmetries, differing preferences or styles, and incentives can create a gap between the action that will be in the best interests of the agent and that of the principal. While this tension may be difficult, the best way of overcoming the hurdle is for the principal to thoroughly research potential agents in the hopes of obtaining one whom he trusts. Also, the more that the principal monitors the actions of the agent and stays tuned into developments in the negotiations, the less likely it is for the principal-agent problem to lead to inefficiencies.
It is interesting to note that the issue of principals and agents creates problems in the world of poker as well, albeit in different ways. Particularly in high-entry fee tournaments, the practice of staking is common. That is, a staker will put up part or all of an entry fee in exchange for a percentage of the person’s winnings. This is generally done in situations where a successful professional poker player has confidence in a younger player who cannot afford to risk the entire entry fee if paying out of his own pocket. While taking on a backer is an obvious solution to this problem, it brings on host of issues, particularly when the backer himself is also playing in the same tournament, or if other people supported by the same staker have entered. First of all, people who are backed may well feel uncomfortable playing as aggressively as they normally would and shy away from big gambles with a positive expected value out of the fear of risking someone else’s money. However the much graver concern is that of collusion or even the appearance of collusion. One of the central tenets of poker is that once you sit down at the table, it is every man or woman for themselves. When two people are sitting at the same table who are essentially playing with the same pool of money, that underlying principle of poker is undermined.
Could We Do Just A Little Bit Better?
In a speech at the beginning of the Negotiation workshop, Prof. Bob Bordone made the assertion that he could take almost any existing contract and add ten percent value to it, meaning that he could add new terms such that no party would be worse off and total utility would increase by ten percent. Without debating the viability of that claim, the point is clear—many times, due to time constraints, unfamiliarity with the nature of the contract or with the clients’ needs, or lack of creativity, negotiators fail to take value-creating measures that would be in the best interests of both clients. One source of this problem lies in the fact that negotiators are often reluctant to be completely forthright about their client’s complete schedule of interests and preferences, for fear that the other party will not share their interests similarly and will exploit the newfound information born from the first negotiator’s candor. Robert Mnookin writes “Without sharing information it is difficult to create value, but when disclosure is one-sided, the disclosing party risks being taken advantage of.” {FN3}
There are, however, some tactics that a negotiator can use when dealing with someone who is taking a hard stance in focusing more on the distributional components of a given negotiation. One methodology is to take a step back from whatever offer or demand is on the table and asking about the underlying interests of the other client that are leading to the particular demand. Getting to the core of the interest might be a way to come up with a solution that would satisfy the other side while giving up less value from your own client’s end. Another tactic, in the face of a take-it-or-leave-it, hardball offer, is to say—“look, I see what you are trying to do, but my client is eager to draw a line in the sand also, so if we want to even think about coming to an agreement, we are going to have to brainstorm and think outside the box here.” One of the most fundamental contentions emphasized in the Harvard Negotiation Workshop is that negotiators need to come into a negotiation with a focus on enlarging the entire pie, not just their clients’ piece of it. Those negotiators who focus purely on distributional gains are likely to leave a lot of value on the table.
While there are far fewer opportunities to add value to all sides in a zero sum game such as poker than in a negotiation, the notion that you need to avoid leaving value on the table (in this case literally) is crucial to maximizing your profits in poker as well. In his famous song, The Gambler, Kenny Rogers sang “You’ve got to know when to hold them, know when to fold them.” {FN4} But it is important to note than you need to know when to raise them as well. Ironically, this point has an opposite effect in poker than in a negotiation. Here the element of not leaving value behind is purely a distributional one—one wants to make sure that they are winning as many chips as possible from the other players at the table when they have a winning hand.
It is of course of fundamental importance to know which preflop hands are valuable, and which should be discarded immediately. But good poker players must understand that, particularly for players who are playing fewer than average starting hands, one must capitalize on their winning hands by extracting as much value as they possibly can for them. This means playing aggressively with a strong hand, often entailing making a lot of raises, something which makes novice players uncomfortable at times. But raising is a fundamental part of the game—any expert would agree that it is impossible to be a strong poker player without raising frequently to gain maximum profit out of one’s winning hands. Check-raising (the practice of waiting for someone behind you to bet, only to raise him once it is your turn) is a particularly effective tool in building a pot up when you have an excellent hand but you sense that someone else has a hand that is at least strong enough to bet. Playing passively and winning small pots, even with very strong hands is every bit as big of a mistake as calling with a losing hand. In poker, more often than not, aggression is rewarded.
It is important to note here that, while it is rare to find an opportunity to add value to all sides in poker, it is not impossible. One situation in which utility-enhancing deals are often struck comes at the end of poker tournaments, when it is not uncommon for the last few players remaining to strike “a deal,” rather than playing the tournament out. To understand how it is possible to create a deal which makes everyone happy, it is important to think about the dynamics of most high entry-fee tournaments. Let’s use the example of a tournament where the entry cost is $10,000, and there are 1000 people in it, creating a prize pool of $10,000,000. Once there are only seven people remaining, the prizes might range from, say, $200,000 for 7th place up to $3,000,000 for first. Also, the remaining players might include professional poker players who win or lose hundreds of thousands of dollars each day, rich businessmen playing for fun, and poor students who qualified for the tournament by winning a series of much smaller online tournaments where the ultimate prize was a seat in this larger tournament. Obviously, these differing people are likely to have dramatically different levels of risk aversion. Therefore it might well be possible for these players to come up with a solution that divides the remaining prize money according to such factors as chip count at the time of the deal, the perceived skill of the remaining players, and the eagerness and wariness of the remaining players to make a deal. Very often deals are made at the end of a tournament, and the very fact that each player at the table is willing to settle for whatever payment they are awarded in the deal rather than gamble by continuing to play it out is indicative that the deal has served a positive purpose.
As a sidebar, while I do believe that deals at the end of a poker tournament do serve the interests of players agreeing to it, effectively raising net utility, it is interesting to note that the previous idea of interest framing weighs heavily on how good of a deal a player remaining in the tournament can negotiate. If only two players remain in a tournament, and Player A senses that Player B is extremely risk averse, he may well be able to convince Player B to split the remaining prize pool, even if Player B has a minor chip lead. Because chip stacks can move very quickly in no limit tournaments, particularly in short-handed games, Player B might be more than happy to agree. This will be a windfall for Player A, but does not really represent a loss for Player B, for by making the deal he is indicating that he prefers the guaranteed middle payout rather than a binary chance at a lower and higher one.
Let’s Figure Out A Process
In settings with multiple negotiators on each side, logistical concerns will often slow things down. Often one person will be reluctant to agree to a clause or specification without being sure that his co-negotiators would agree to it as well. One way to negate this problem is to specify a process at the beginning of a negotiation so there are predetermined breaks at certain times. While this might sound like a superficial solution, it enables groups to caucus amongst themselves and go over the most recent events in order to come up with a unified response. Agreeing on predetermined breaks also alleviates the concern that wanting to separate to discuss something might indicate that the latest information on the table represents a crucial breakthrough or emergency.
This idea that it can be valuable to set up a process and stick with it throughout a negotiation has a parallel in what is a very useful poker tactic. Beginning poker players should make a habit of setting up a process for the way they act at a poker table. Once you have looked at your cards, other players at the table will scrutinize your reaction for information about your hand. The more information you convey, the more likely it is your opponents will be able to correctly read your hand and play accordingly. Thus, poker players should make an effort to check, bet, raise, and fold in the same way each time they take one of these actions. Likewise, players should refrain from acting very quickly for even the easiest of decisions—for doing so will make it clear in later hands that the player has a difficult decision, which in of itself will be somewhat indicative of the type of hand he is holding.
What Exactly Does That Mean?
This idea of maintaining a consistency of actions throughout a poker session leads into a topic that is vastly important in both negotiations and in the game of poker—the interpreting of nonverbal clues. In poker, these are referred to as tells. In the classic poker movie Rounders, the protagonist is able to take all of his rival’s money because he discovers his tell—that eating the Oreo cookie rather than playing with it indicates a very strong hand. While that is certainly an unusual (and perhaps far-fetched) tell, there are many ways that poker players accidentally convey information at the table that can be useful to other observant poker players. One of the classic tells include looking disinterested or impatient, which is usually indicative that the person intends to fold their cards. The way people handle their chips is usually telling also—a long pause followed by a mechanical placing of chips is usually the sign of a very good hand, while a rushed, sloppy bet often indicates a bluff {FN5}. People who look at their chips after seeing their hole cards or the flop generally have made a strong hand also. It is worth mentioning the way that the advent of online poker relates to this topic. Many players who are used to playing online (where, of course, you can jump for joy when you have a good hand because no one can hear you) find the transition to a real poker room more difficult because they are not used to having to conceal any information. Thus a generation of poker players who play more online than in person has not developed the “poker face.” On the other hand, the option to play online is a huge asset for those players who struggle to conceal their emotion when playing, and who find it tedious to take the necessary steps to avoid conveying information.
Nonverbal communication is tremendously important in reading people’s visual clues in negotiation settings as well. In an article on the New York State Dispute Resolution Association’s website, Robert Steinberg, an accomplished mediator, outlines some major types of body language and the attitude that they generally indicate {FN6}. Amongst the most important are leaning forward, which indicates a high level of interest, the interlacing of fingers, associated with self control, and sideways glances and the avoidance of eye contact, which shows suspicion. Good negotiators want to mentally place themselves in the shoes of their counterparts. Therefore deciphering clues about attitudes through unintended communication will be useful in determining how best to proceed in the negotiation. Like the option of playing online in poker, there are alternatives for negotiators who feel unsatisfied with their physical presence—they can try to set up communications through telephone or email, so nonverbal communication does not play as significant of a role.
Did You Do Your Homework?
Throughout Harvard’s Negotiation Workshop, participants worked on a number of different mock negotiations. One lesson whose importance was consistently reinforced was the value of preparation. Put simply, it becomes overwhelmingly clear in a negotiation who has done their homework and who has not. It is certainly necessary to be familiar with all of the relevant background in order to represent your client as well as possible. Particularly when there are a lot of numbers with which to grapple, it will be far less effective to try to come to terms with statistics during the negotiation than it would be to have done it beforehand. Furthermore, coming to a negotiation unprepared will likely annoy the other negotiator, who will rightfully perceive that their time is being wasted by a person who is not taking their responsibility seriously. Coming into a negotiation with only a crude understanding of the relevant information makes it far less likely that an agreement will be reached—or even worse, that a poorly thought-out agreement will be reached hastily. All in all, it will be nearly impossible to come up with value-creating solutions to a problem without a vast understanding of all of the facets of the situation. Negotiators who shirk on preparation, hoping to make up for it with superior negotiating skills do a grave disservice to both themselves and their clients.
Likewise, the value of preparation in poker cannot be overemphasized. This preparation should take place on a number of different levels. The first and most obvious step is to learn the fundamentals of the game—the rules, hand selection, pot odds, etc. While it takes a lot of practice to become more comfortable and confident in the game, reading a book or two will provide someone with the information needed to attain competency at low stakes tables. After that, it is crucial after sessions to review the way you played, thinking about the way hands unfolded and what mistakes you might have made. In online poker, there are relatively inexpensive datamining systems that make it very easy to gather hand histories (which are available on all major poker sites). From there one can analyze statistics like the percentage of times they stay in to see the flop, how often they play the hand in each seat position, how often they are raising, etc. It is important to note that the most widespread of these data accumulation systems, called Poker Tracker, not only gathers and sorts statistics for you, but also for all of the players with whom you are “sitting” at a table.
Therefore, you can easily gather information about the players whom you are up against. This is extremely useful, particularly if you are playing a lot of hours at the same stakes—for you will be able to gather enough information on other players so that it will be statistically significant. There is now even the technology to superimpose the statistics of other poker players over their onscreen icon while you are playing against them. This will be extremely helpful—as you can be much more wary of a preflop call from someone who sees the flop 15% of the time than you would from someone who called 40% of the time.
Of course, for more casual players who either don’t play on the Internet or who don’t want to invest the time in complicated data systems, there is other preparation to do. Particularly if you are playing with the same players repeatedly (as in a weekly home game), it is important to take notes of the way people play certain hands and think about how you need to adjust your game accordingly. In general, the idea is to have as much knowledge as possible about your opponents at the table as possible in order to maximize your chances of making astute decisions predicated on this information.
Stay In Control Of Your Emotions At All Times
One crucial skill that is integral to both negotiation and poker is the ability to keep your emotions in check. Throughout the Harvard Negotiation Workshop, on many occasions, two sides failed to negotiate a potentially mutually beneficial agreement because of frustration or feelings that the other party was being unreasonable. The interesting thing is that this situation usually came about as a result of planned strategy on both sides. In a negotiation, there is always the question as to who will “anchor” first. Anchoring is the idea of making the first offer to establish the range—almost all negotiators, when anchoring, will pick a level which represents a superior outcome to what they expect they will eventually be compelled to settle on. There are advantages and disadvantages to anchoring—that is, to throwing out the first offer. The chief advantage is that you allow yourself to establish the ballpark range. Another benefit is the opportunity to gauge the other side’s reactions to the anchoring offer, which might enable you to glean some information as to how they feel about it. The obvious disadvantage, however, is that you tip your hand first, you are giving the other side information about your position that they have not given you. This led, in the Harvard Negotiation Workshop (and I would imagine this happens in real life negotiations frequently as well), to people often clamoring to anchor with figures which were too unreasonable to be taken seriously. This often led to an unreasonable counteroffer. Sometimes the two sides were able to hash it out and meet somewhere in the middle range, where in all likelihood both believed they would end anyway. But another phenomenon which often manifested itself was that people would grow frustrated with what they perceived to be an unfair offer. This could have the potentially crippling effect of breaking down open, collaborative idea creation, which is generally the key to reaching a mutually beneficial agreement, particularly when the zone of possible agreement (ZOPA) is small. Particularly in negotiations which are likely to be hostile, where there is a large degree of sentimentality involved (like a divorce settlement), it is absolutely crucial for negotiators to be able keep both their emotions in check, as well as to use their best efforts to help their clients not let their emotions interfere with rationality. The ability to stay even-keeled in the face of what one might believe to be an unreasonable negotiator is crucial in order to prevent frustration or anger from getting in the way of coming to an agreement.
The ability to keep one’s emotions from distracting you from the task at hand is of the utmost importance in poker as well. In fact, the inability to control one’s emotions from getting in the way of their game is a problem that even the best players in the world suffer from. This is not shocking. As much as poker, in the long run, is a game of skill, there is also a huge element of luck. Even the best players have many, many losing sessions. Poker is a game of inches, not miles—that is, for people who play in cash games, almost no one will consistently win more than 1-2 big bets per hour. It is very unlikely that someone playing, for instance, $10-$20 hold ‘em at a live table will consistently win more than $40 per hour. Thus a poker session with a few more “bad beats” than usual can easily turn a winning session into a losing one. The key factor that poker players need to remember is that tracking poker sessions needs to be looked at only through a long-term lens. Dwelling on a recent streak of bad luck is short-sighted—If people are getting lucky against you and beating you on hands where you were the clear favorite but they caught a lucky river card to win, the longer you play with them, the more likely it is you will get your money back. However, there can be a tendency for even experienced, knowledgeable player to suffer a few tough losses, and then start playing like a total maniac, under the theory that the game is all chance and there is no reason to continue in their normal, prudent fashion. Consider two ways to handle the following situation, and the likely ramifications for the two courses of action:
Hero gets dealt KK, raises preflop, gets 3 callers. The flop is 23K. Hero bets, Player 2, a relative newcomer to poker who has been drinking steadily for the last couple of hours, raises, Player 3 folds, Player 4 folds, Hero reraises, Player 2 calls. The turn is Q, Hero bets, player 2 raises, Hero reraises, Player 2 calls. The river is a seemingly innocuous 5, Hero bets, Player 2 raises, Hero calls. Player 2 shows 46 for a straight, beating Hero’s 3 kings in a somewhat shocking fashion.
Reaction 1: Hero glares at Player 2, announces loudly to the table that someone would have to be a complete moron to stay in for a raise with 46, let alone to continue to stay in chasing and chasing a miraculous river card. Hero then proceeds to whine about how much money is in the pot, and what a stupid game it is that an obvious rookie like Player 2 could win money from a seasoned veteran like Hero who clearly has a much better understanding of the game. Player 2 looks back at him, thinks to himself, Hero is a jerk, but he is probably right—I probably will lose my money if I stay here with all these more experienced players--why not collect my winnings and go have more fun playing a different game with more pleasant people. He picks up his drink and his chips and leaves the table.
Reaction 2: Hero mucks his three kings, momentarily (and silently) bemoans his bad fortune that hand, says “nice hand” to Player 2, and moves on to the next hand. Player 2 stays at the table for a while, continues to put chips into the pot in situations when he is a substantial underdog, and eventually loses most of his chips to various players at the table, including Hero.
While this might be overly simplistic, the point is important to understand. One cannot control the cards that come on the board in poker. Someone who plays a lot of poker will lose hands in the most surprising and heartbreaking of fashions. But players can control how they handle these losses. Just like keen negotiators will not let frustration or anger impede their ability to zone in on coming to an agreement, great poker players will not let a string of bad luck cause them to make poor decisions. In this example, the absolute last thing a player wants to assume is that because this player got lucky against him once, he will continue to do so. A smart player will, instead, do whatever is most likely to lead Player 2 to continue to play in the same fashion, and welcome a future opportunity to get his chips into the pot with a substantial advantage.
Ideally, a poker player should train themselves to be almost indifferent to short-term swings. A solid, confident, skilled player knows that he will eventually win money playing the game—whether he does so on any given day should not be important to him. However, if players know they have a tendency to play imprudently after a really tough hand, they should consider walking away from the table for a minute or two to cool off and collect themselves. Otherwise there is a temptation to think—I should have won that last hand; that big pile of chips should be mine—I’m going to make it up by bullying people this hand and winning some of the chips back. That strategy is faulty for two reasons—the first is that, presumably, you have a style of playing that works well; you should not stray from your normal decisions because of your haste to win chips back immediately. Poker is a marathon, not a sprint—and impatience is the downfall of many a player. Secondly, because it is so common for people to go on tilt ( a poker term describing reckless play) after a tough loss, other people will have less respect for your raise. They will sense that you are just playing your anger, rather than your cards, and will act accordingly. Therefore you are less likely than normal to bully people out and steal a pot. If you know that you are prone to this common mistake, it might be a good idea to stand up and sit a hand or two out every time you lose a tough hand on the river. That can be an effective way of ensuring that anger from the previous hand does not spill over into poor future decision-making. But the general principle is clear—much like poker players should dedicate a lot of time to learning proper poker strategy, they should also take proactive measures to make sure that their emotional outlook is a positive component of their overall game, not a negative one.
That’s No Fair!
Another interesting analogy between poker and negotiation pertains to notions of morality and fair play. One of the most interesting mock negotiations in the Harvard workshop had to do with a set of fictitious facts in which a woman with a terminal, sexually transmitted disease, did not alert her boyfriend that she had it. After the relationship ended, she wrote him a letter telling him of her condition. He soon after wrote back that a home testing kit came up positive and informed her that he planned to sure her for the cost of treatment, as well as for pain and suffering.
This negotiation was difficult for many reasons—it is of course an inherently difficult subject matter to discuss, ripe with painful facts and alternately sympathetic and unsympathetic clients. However, complicating things was the fact that both sides had secrets—the woman had just received news that she was going to inherit a large sum of money that her ex-boyfriend did not know about. Likewise, it turned out that, unbeknownst to either the woman or her attorney, her ex-boyfriend, upon visiting a doctor, found out he did not in fact contract the disease—the home test had been wrong. But he still told his attorney that he wanted to proceed with the suit, since he found her behavior so contemptible and had indeed suffered a great deal of emotional distress. Of course, as representatives for the clients, neither side knew the other had a secret, and both sides had to figure out the appropriate level of information to share and withhold. Afterward, when the group reconvened and people shared their individual stories, many people (from both sides) felt shocked, angry, and disappointed with the way they themselves acted. Others also felt as though they would never have acted in as deceitful a manner as they perceived the other side to have done. All in all, it prompted a lot of questions as to the level of propriety in the way people handled the disclosure of information. Lawyers are, of course, obligated to follow their states’ Model Rules of Professional Conduct, but there is often a large gray area in these rules. There was very little consensus amongst the class in terms of what constitutes appropriate behavior in tough situations like these. My personal feeling is that each person has their own sense of morality, and as long as no model rules are broken, people need to act in a way that makes them feel comfortable with their representation of their clients. However, from this experience, it is clear that different attorneys will draw this line in different places.
The issue of appropriate behavior at a poker table is something that comes up frequently as well. This may seem surprising, since there are relatively few rules in poker, and most of them are fairly straightforward. But inevitably, there are ways to try to game the system, some of which teeter on the brink of what is considered acceptable behavior. One common maneuver that people make in live cardrooms is a fake bet—this usually occurs when people are bluffing after the turn or river—someone trying this would hold their chips and motion as if they were about to bet, but then not place the chips down beyond the line and instead pull it back if the other person in the hand looked like they were going to call. While this move is a bit backhanded, it is really the fault of the other person who has given an indication that they were going to call before the initial person’s betting motion was complete. There are rules to what constitutes a bet, and as long as someone has not verbally expressed a bet or placed their chips down, all other players should not make any assumptions. However, playing in a tournament recently I witnessed the following event, which caused quite a bit of controversy at the table. It was in the middle stages of a no limit tournament, with three players involved. The details of the hand are somewhat unimportant; only what occurred after the board was complete is significant.
There were three people left in the pot after the river card was dealt—Player 1 made a rather small bet into a large pot, and both Players 2 and 3 called. Player 1 announced “two pair,” without turning over his cards, upon which player 2 threw his cards into the muck. Player 3 then said, “OK, let’s see them,” upon which Player 1 sheepishly turned over his cards, which in fact indicated not two pair, but rather a missed flush, with no pairs. Player 3 turned over his hand, which indicated a low pair, which won the hand. However, Player 2 announced that he had folded the winning hand as a result of Player 1’s misrepresentation. He was (I think rightly) very upset. However one fundamental rule of poker is that once a hand has been mucked, it is dead. The dealer announced this, and gave the chips in the pot to Player 3. The other people at the table seemed to have mixed emotions about the lie told by Player 1. Several were of the position that “cards speak,” and that he was free to say whatever he wanted about his hand; that Player 2 was at fault for folding his hand without visual confirmation of the hand that Player 1 had announced. Others felt as though it was clearly violative of the spirit of the game, and that Player 1 should be disciplined. I’m not sure what punishment could really have been doled out, but I do think that the move was unfair. It might seem silly to condemn such a move in a game that constantly rewards deception and misdirection, but there seems to be a noteworthy difference between trying to fool people during a hand and lying about the results of a hand in order to obtain chips which another player “earned” by making a correct call.
I have no doubt that this is a move that Player 1 has used countless times, often successfully. I think this is illustrative of the fact that, in both poker and negotiation, many experienced people will have dramatically different opinions about what constitutes fair play. Of course, with most negotiations, the final arbiter will be a judge, and the consequences of behavior deemed inappropriate could have legal consequences. In poker, the arbiter will be the dealer, or the casino, and the consequences are unlikely to be more than losing a pot which may or may not have been yours to begin with. Still, I found it interesting that despite the existence of rules and guidelines in both endeavors, there are still many unanswered questions as to what obligation of morality exists—clearly the line of appropriate behavior can be hazy in both poker and negotiation. Both negotiators and poker players will be well-served to think about their own personal code of ethics to ensure that they don’t make decisions that they later regret.
Use Your Decision Trees
As discussed earlier, one of the biggest similarities between negotiation and poker is the idea that there is a substantial amount of missing information. This is true in two important ways. In poker, you do not know what your opponent’s cards are; in a negotiation, you may very well not know the other side’s interests, financial position, motivations, etc. But beyond this, in both endeavors, a participant does not know the impact of future events which have not yet happened. In poker, this often means the community cards that have not yet been seen. In a negotiation, future unknowns can affect present decision-making in a host of ways. But what is interesting is that the analysis of unknown information should be made in similar ways in both poker and a negotiation.
Many poker outsiders assume that poker players make their decisions mostly on instinct, gut, or feel. To be sure, the best poker players do have some sort of instinctual ability to size up opponents and make a read as to what type of hand their opponent might be holding. But decision-making in poker is generally much more complicated than simply going on instinct. There are a number of factors that go into the final calculus of whether to check, call, bet, raise, or fold. The best poker players are able to very quickly think about what types of hands their opponents might have, what the rough probability of each holding is, how their own hand compares with these holdings, the probability of certain types of cards coming on the board in future betting rounds, the impact of these cards, and how much money they are likely to win or lose depending on the outcome. The notion of pot odds is very important throughout this analysis—pot odds describe the ratio of money you will win to the amount of money that you have to put in to the pot to stay in. If you have to call a bet of $20 after the river card has been dealt, and there is $100 in the pot to win, your pot odds are 5-1, meaning that a call is proper if you believe you will win the hand 20% of the time—this is because you will put $20 in 5 times and get back $100 once. Anytime a player gets a chance to put money into the pot with favorable odds, the bet has a positive expected value. An example of a mock hand illustrates the way some of these factors mesh together.
Player A and Player B are playing in a no limit cash game with $2 and $4 blinds. They both have roughly $300 in chips. Player A, from the little blind, raises preflop to $12. Player B is in the big blind with JJ, and decides to reraise to $40. Everyone else folds. Player A blind, thinks for 30 seconds, and then pushes all of his chips into the middle, making a raise of $260. Player B must decide whether to fold or call.
How would Player B make this decision? The answer lies in a combination of different factors. He first wants to think about what he knows about Player A—is he a sneaky player who might make this raise with almost any 2 cards? Is he the type of player who only raises with high pocket pairs? Does the fact that his initial raise (to $12) was fairly small indicate anything about his hand? Say that Player B decides that the most likely hands that Player A raised with are a high pair (say QQ, KK, AA) or two high cards (say AK, AQ, AJ, KQ), and ascribes a 10% chance of each of the previously described 7 hands, a 20% chance that he has a pair lower than JJ, and a 10% chance that Player A is on a complete bluff, with 2 cards, each lower than a jack. Player B would then want to estimate the probability of each of those types of hands eventually beating his hand once the final cards were dealt. To illustrate what I mean by this, let’s use a poker odds calculator (which are available for free on a number of different websites) to show the odds of each of these hands eventually beating Player B’s JJ.
AA, KK, QQ (30% likelihood)—Will beat JJ 80% of the time
AK, AQ, KQ (30% likelihood)—Will beat JJ 45% of the time
AJ (10% likelihood)—Will beat JJ 30% of the time
Lower Pair (20% likelihood)—Will beat JJ 20% of the time
Two undercards (10% likelihood)—Will beat JJ 20% of the time
Multiplying each of the percentage likelihood by the chance of winning shows that, combining the range of potential hands and their outcomes, there is a 54% chance that the JJ will win the pot. If you add to that fact that Player B would need less than 50/50 odds in order to make the call (because he would be putting in $260 in order to win the $340 already in the pot), Player B should decide to make the call.
Note, however, that if Player B thought that that Player A was an extremely conservative player that almost definitely had AA, KK, or QQ, and if not, AK, then a call would probably be incorrect. The basic point, however, is that good poker players must be able to fairly quickly perform a rough, decision-tree like analysis in their head in order to make prudent decisions. This example was actually a fairly straightforward one, because the idea of implied pot odds did not come into play. Implied odds factor not only the money that is already in the pot, but the money a player is likely to win or lose in future betting rounds if they continue to stay in.
It is interesting to note that lawyers often employ a similar thought process and similar analytical tools in deciding whether to come to an agreement in a negotiation. For instance, let’s say that a real estate group is trying to decide whether to buy a piece of land near the water in order to try to develop a new beach resort. Before they can begin to estimate exactly what the land might be worth to them, they would need to calculate rough likelihoods of a number of different events manifesting. There might be a concern that the land is not suitable to build on to begin with if it is in a swampy area. They might also need to apply for a rezoning permit if the area is not designated for business use. There may be other real estate groups clamoring to buy land in the surrounding area that would make it economically unviable for this particular resort to succeed. There might be concerns that predicted future weather patterns would preclude the resort from operating all year long after a certain time period. All of these factors, in addition to the likelihood that the resort would be able to turn a profit when operating, would have to be ascribed a likelihood. Furthermore, if one of the negative contingencies did manifest and the land ended up useless to the real estate group, they would have to estimate how much they could re-sell it for, as well as how long it would take and the opportunity cost of the money invested. While the factors are certainly more complicated and vast than in a poker game, the methodology of the analysis is quite similar. Both situations involve constructing a decision tree and assessing the likelihood of both present concerns and future events.
Less Is Best
Another similar facet of both poker and negotiation is the value in efficiency. Everyone has heard the familiar adage “Time is money,” and it certainly applies to both negotiation and poker. In a negotiation, the ultimate goal is to represent your client as well as possible. This means doing a thorough, successful job while not plowing through the utility you have created because it was so time-consuming that it cost him exorbitant hourly fees. Of course, many agents in a negotiation are paid some percentage of the contract they obtain, so it will be in their best interest to use their time efficiently as well.
Likewise, in poker, most knowledgeable players refer to their statistics in any given session or time period in terms of “big bets per hour.” Obviously, to win any given amount in a shorter amount of time is a better accomplishment than winning that same amount in more time. This is one of the reasons I think Card Player Magazine’s Player of the Year rankings are faulty. While it is generally considered the benchmark in terms of evaluating top players, to the best of my knowledge, it only really factors in tournament prize winnings. So beyond the obvious flaw that it doesn’t factor cash games (my guess is that many of the top players would be dismayed if their cash game winnings were available to the IRS), the other imperfection is that it rewards players who enter every major tournament—thus it does not factor in overall success rate, or even total profit, as much as it measures total prize winnings. Clearly this does not take the idea of poker efficiency into account in the rankings.
Do You Know Your ZOPA?
In negotiations, people often use the term ZOPA, which stands for zone of possible agreement. This refers to the range of possible solutions that would be acceptable to both sides. For instance, if Buyer is willing to pay up to $10,000 for a used car, and Seller is willing to sell it for as low as $9,000, the ZOPA is the range between $9,000 and $10,000. Any time there is a ZOPA, in theory, an agreement should be reached, for there exists a solution that would make both parties better off. However, sometimes the negotiators might not realize that a ZOPA exists because they have been reluctant to indicate their clients’ true interests, or exaggerated their clients’ position in an effort to gain distributional advantages, or because their own clients have not been honest with them. Of course, there will be some situations in which, in fact, there truly is no ZOPA. If Buyer is only willing to pay $8,000, in this example, and Seller is still demanding a minimum of $9,000, there is no ZOPA, and clearly any negotiator would have made a mistake if he came up with an agreement.
This last example leads to a related and important way in which this notion of ZOPA can be applied strategically to poker, particularly no limit poker. At any given juncture of a poker hand, one person has the best hand at the time (or is tied with others for the best hand). But of course, all that matters is who has made the best five-card hand once all the cards on the board have been dealt. It follows that many players will continue to put money in the pot even if they know they are losing at the time, if they believe they stand a reasonable chance of making the best hand by the end. In limit poker, where players have the chance to bet, raise, or fold, but cannot choose the amount, someone with a good hand does not have that many ways of trying to compel others with good drawing hands to fold. This is of course because the betting amounts are proscribed. However, in a no limit game, where one can choose the amount they bet, there is more that a bettor can do to force others to fold, or to make a poor call.
How does this pertain to the notion of a ZOPA? It is of course, not the exact same concept as in negotiation, but it is similar. That is, there are certain bets where both the bet makes sense for the bettor, but the call also makes logical sense for the caller given the pot odds. These types of bets constitute a poker ZOPA. Thus, the best strategy for the bettor in a no limit game, particularly once a pot gets large, is to make a bet large enough that drawing hands would be making a mistake by calling, thereby forcing callers outside the ZOPA. I believe that an example will make this more clear. Note that for explanation’s sake, I am going to pretend in this example that both sides actually know what the other player holds. This is, of course, unrealistic, but it significantly simplifies the situation, and does not change the fundamental point. The same theory would be true if the players were making an educated guess of a range of hands that the other held.
First let’s assume that the two players are playing in a $6/$12 limit poker game where the blinds are $3 and $6. Everyone folds to the blinds, and the little blind raises to $12 with AsKc. The big blind, already in for $6, has Td8d. Note that the big blind would be right to call here, because he is calling $6 to for the chance at the $18 in the pot—so he only needs a 33% chance to win in order for the call to be proper. Since AsKc is only a 60% favorite to Td8d, the big blind has a 40% chance, and would be right to call. So now there is $24 in the pot. Say the flop comes Kd7d2h. The little blind player has flopped a pair, and is winning the hand. The big blind player, however, has flopped a 4-card flush. There are many cards that could come on the turn or river that will be winners for the big blind. With this board, AsKc will win 61% of the time. However, what is worth noting is that, in a limit game, the little blind cannot make a bet large enough that would induce a mistake for the big blind. Certainly the little blind player should bet with such a strong hand, but note that the big blind, again, because he would now be putting in $6 to call a $30 pot, he only needs a 20% chance of winning to make the call, whereas he in fact has a 39% chance of winning. Now the dealer deals the turn, the 9c. At this point the big blind has both a 4-card flush and an open-ended straight. Once again, the little blind is still winning, and will (should) bet $12. However, once again the big bind would be correct to call, since he is calling $12 into a $36 pot. This call is a good one, because he needs a 33% chance at winning to justify the call, whereas in reality he has a 34% chance. What is interesting is that, despite betting on each round with the best hand, because of the betting structure, the little blind has not been given the opportunity to induce a bad call ( a call outside of the theoretical ZOPA) in order to prevent the big blind from continuing to draw on him.
Now let’s take a look at what would happen in the exact same situation, but in a no limit game. Say the blinds are still $3 and $6, and the preflop raise is the same, as are the cards on the flop. Now, however, the little blind player has the option of betting any amount he wants. Knowing that there is $24 in the pot from the betting round and that the big blind has a 39% chance of winning, the little blind should make a bet that is higher than, and thus, outside, the ZOPA—that is, a bet large enough such that the big blind, if he does call, is making a mistake. If the little blind, for instance, decides to bet $80, the pot would then be $104. The big blind has a 39% chance of winning the pot, so in theory this 39% chance at $104 is worth about $40. But because he would actually have to pay $80, rather than $40, in order to call, he should clearly fold. Thus, in no limit poker, unlike in limit, there are many more opportunities for a player with the lead to either win the pot earlier, or to compel a mistake which he would welcome. The idea of a ZOPA is important here, though it again cuts in opposite ways from negotiation to poker. While it is of course desirable in a negotiation to meet in the middle and form an agreement, the goal in a poker game is to make it difficult for your opponents to play properly and still win the hand.
Kill Them With Kindness
Like many other aspects of life, people will find that, in both poker and in negotiation settings, relationship-building and generally being a pleasant person will usually help them tremendously. In both negotiation and poker, many people have a natural tendency to take a surly disposition for fear that any showing of kindness or flexibility might make them look meek. However, taking an overly demanding, aggressive tone from the outset of a negotiation is going to put the other side on the defensive immediately. This will likely compel them to adopt a harder line as well, which is much more likely to lead to a frustrating (and time-consuming) stalemate, and is far less likely to stimulate collaborative value creation. Furthermore, based on my experiences in the Negotiation workshop, other negotiators will try harder to convince their client to bend their position a bit if they feel as though they are dealing with a reasonable negotiator.
Similarly, it is unwise for a poker player to be hostile or cold to other players at the table. Beyond the obvious reasons why there is generally utility in being a kind, pleasant person, it will also help you maintain advantages that you already have by being a good player. Most poker players play the game for fun and see the game as entertainment rather than a way to earn money. These people, on the average, are not as likely to be as strong players as those who are playing as their means of earning income. By helping to create a friendly atmosphere, you are making it more likely that these social players will continue to play in your home game or at your table. A second reason is that, in the long run, it is likely to save you bets. Simply put, there are players that feel badly betting against someone else at the table that they have been chatting amicably with. While that strategy is questionable for the player who is missing out on the bets, it is certainly a benefit to the kind player who will sometimes get to draw cards for free as a result.
Conclusion
Knowing that I would be writing this paper, I went through the Harvard Negotiation Workshop with a special eye towards similarities between poker and negotiation. Luckily, without stretching too much, I found that there do seem to be a great deal of commonalities between the two skill sets. Of course, the fundamental difference still exists—poker is a zero-sum game, whereas much of the skill in negotiation requires value creation. However, from both an analytical and a social angle, I believe there is a great deal to be learned from each of these pursuits and applied to the other. Ideas such as interest-framing, emotional outlook, capturing value, morality, efficiency, preparation, aggression, active listening, and perception of visual clues are all concepts of central importance to both poker and negotiation. I firmly believe that thinking through these concepts will help experienced negotiators improve their poker game, and also help strong poker players develop and cultivate their negotiation skills.
Footnotes
- See Wertheim, “Negotiations and Resolving Conflicts: An Overview,” reprinted at http://web.cba.neu.edu/~ewertheim/interper/negot3.htm
- See Mnookin, Beyond Winning, p.74
- See Mnookin, p.17
- Taken from Kenny Rogers, “The Gambler”
- See Caro, Caro’s Book of Poker Tells
- See Steinberg, "Chess vs. Poker: What is Your Style of Negotiation?” reprinted at http://www.nysdra.org/articles/article_details.asp?ID=57
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