Joining PokerStars last year had one unexpected side benefit, learning poker skills that makes me more effective. Shortly after starting at PokerStars, I had two of our resident ex-pro poker players give me a crash course in Poker so I can understand our products better. While I am still far from a good player, several of the principles they taught are equally important to succeeding professionally.
The first thing I was told was never to bluff. This advice is equally valuable in the workplace. Do not threaten an action if you do not plan to follow through. Once you do and the other party calls your bluff, you no longer have any credibility. Moreover, you can put yourself in a weak position if you are bluffing and the other party has a stronger hand than you believe, then they may raise (challenge you) and you will not be able to respond.
This principle does not only impact negotiating with other companies but also handling your career. I remember several years ago an employee coming in threatening to leave for another offer if we did not give him a significant raise. Unfortunately, their work did not warrant a raise and we wished them luck with the other position. It turned out that they did not actually have another offer and were left unemployed.
Don’t assume another player is bluffing
A corollary to not bluffing is never assume your opponent (or in this case a company you are negotiating with) is bluffing. In most cases, the counter-party actually has a strong position. Thus, determine your best course of action under the assumption that they are in a strong position. That may mean making a deal with them that is sub-optimal for you but still better than no deal, rather than pushing too hard and ending up with nothing because they have strong alternatives. As my Yoda said, “take the word bluff out of your vocabulary.
Be aggressive with a strong hand
While you should avoid acting like you have a strong hand when you do not, be aggressive when you do have a strong hand. That is the time to get the best deal for yourself or your company. You do not get many fantastic hands in life (the equivalent of a royal flush), so when you do you need to make up for all the times you folded because you did not try to bluff or assumed your opponent was not bluffing.
I spoke earlier of a situation of a person with a very weak hand trying to bluff their way to a higher salary only to lose their position; I also saw someone with a very strong hand play it into security for life. In the latter case, a colleague was responsible for a very successful game, one that positioned the company for success. Rather than simply smiling and accepting a nice (guaranteed) bonus check, they threatened to leave unless they got a new contract that guaranteed them financial security and creative control effectively for life. They could do this because the successful game not only made them critical for their company but meant they could go virtually anywhere they pleased. He thus used this strong hand to not only secure his future but that of his children.
The need to only play strong hands (derived from not bluffing), but play them powerfully, also creates a need for patience. In poker, you have very few strong hands, probably less than one out of five. That means 80 percent of the time you need to fold and sit back and watch everyone else play.
This patience is much easier said than done. Most people, myself included, do not like to wait. You are anxious to play, you feel you are letting yourself or your company down by not acting. Most of the time, though, the optimal strategy is folding until you have a strong hand that you play aggressively. It may not be the most fun but it is the most effective.
Don’t bet your entire bankroll
Another key principle is to never bet your entire bankroll. Even if you feel you have a strong hand, you should not risk more than 25 percent of your bank roll. Rather than a hard number, I have heard you should not bet more than you are comfortable loosing.
Launching a great new product is a good example. You may have a product that has been testing well and you believe in strongly. Rather than bet your entire company on the success of the product, you need to keep resources to support the rest of your business. Elon Musk has shown this with the launch of the Model 3. While Tesla clearly believes this is their breakthrough product, they continue to develop the Model X SUV and improve the Model S. While you may think your new product is the future, a competitive product can undercut it or the market may not react the same as it did during testing.
Information is critical
In poker, good players leverage data to optimize their chances of winning. This data can come from knowing the odds of what hands are likely, watching how other players are playing (see below) or pulling data on opposing players from various data sources. They also do not provide information when not required. They do not show what cards they have if they folded or if the other player folds before showdown. Less is more when disclosing information.
In the business world, success is also driven by information. If you are trying to do a deal with a company and know that they are about to have an important earnings call and word of your deal will help stock price, you can extract better terms than if you treated the negotiation as if it was happening in a void.
Watch and listen
The final, and possibly most important lesson, was to spend most of your time studying your opponents. By understanding your opponent, anticipating patterns in their behavior, translating their body language to future action, you can decide on the best course of action.
An example of the power of observation is a story I was told about a professional poker player who won a tournament purely based on observation. The player never once looked at his cards. Instead, he folded, called and bet based on what he saw of his opponents. Never underestimate the power of observation.
- Remove bluffing from your vocabularly. Do not try to bluff your opponent in business and do not assume they are bluffing.
- When you are in a strong position, push your advantage.
- Observe everyone you are interacting with and use those observations to put their actions into context.