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One of the most widely held misunderstandings about the game of poker is that outcomes (i.e., winning or losing) are somehow governed by luck. Many people believe that, in some insidious or magical fashion, good luck is the cornerstone of success in the game. Expert poker play is no more about luck and magic than stock trading is about throwing darts to pick the next investment. Stock trading, like poker, is a highly risky activity, of course, and costly miscalculations do occur even for the best in the business. But in stock trading, as in poker, the point of the game is to minimize the effect of negative results caused by the operation of chance. Minimize your losses in order to win.
In order to discuss the operation of probability and chance effectively, we need to provide a few definitions. First, let's look at the terms themselves - probability and chance - which we will use interchangeably. In statistics, the probability or chance that a certain event or outcome will occur is calculated by taking the total number of times the specific outcome can occur and dividing by the total number of all outcomes possible.
For example, shuffle up a 52-card poker deck without looking at the cards. Set it on the table. What is the probability (or chance) that the first card on the pile is the ace of spades? That probability is calculated as follows: There is one ace of spades in the deck, so the number of times the outcome can occur is one. There are 52 cards in the deck, so the number of possible outcomes is 52. The probability, then, is 1/52 or 0.01923.
Now let's talk about the idea of expected value. What if I offered you $50 if the first card was the ace of spades? Say you had to put up $1. So, if the first card is the ace of spades you get $50. If it is not, I get $1. Would you be willing to take the bet? Your decision should be based on the expected value of the bet. Expected value is found by multiplying the payoff of the bet times the probability of winning the bet. The expected value of this bet then is the payoff of the bet ($50) times the probability of winning (0.01923, which we calculated above): $50 times 0.01923 equals $0.9615, or slightly less than $1 (the cost of the bet). If you made this bet with me repeatedly over a long period of time, eventually you would go broke because the expected value, or return, is less than the cost of the bet.
Every decision you make, no matter the venue, has an expected value. In economic terms, you will be financially successful in life if the cumulative expected value of your decisions exceeds the cumulative cost. This type of thinking is particularly relevant, not only to playing poker, but to making any type of business decision involving economic consequences. Every winning poker player understands the concept of expected value and applies it to every betting decision every time.
Good players do calculate expected value intuitively based on a host of factors: the cards, players, position, etc. On occasion, the outcomes of betting decisions that ordinarily have positive expected values can, and will, be negative because chance does not operate evenly or exactly. For example, your pocket aces may get cracked (beaten) three or four times in a row in a given game. That does not change the fact that playing pocket aces aggressively has a long-term positive expected value.
The key to success in business, and in poker, is training yourself to assess situations accurately enough, using the information available, to gauge when your expected values are positive. At the bottom line, the core objective is providing you with the tools to do this assessment in the moment, when and where you need to do it, with as much control over your emotions as you can muster.
In our opinion, the whole reason for developing yourself into a superior poker player is that the attitude-control skills, decision-analysis skills, and people-management skills required to play winning Hold'em are the same skills that are absolutely needed in order to be a superior business, career, wealth, power, and relationship decision maker.
Every poker game is a concentrated slice of life. Playing a hand of poker is experiencing the essence of the thrill of risk, the sweet taste of success, the bile of failure. We believe this aspect of the game explains in part its popularity. If you take learning the game seriously, you will increase your chances of overall success in life.
In order to win over the long run, the concepts of probability and expected value must be kept in the back of your mind when you play. Bad luck occurs when you consistently ignore the rules of probability when making betting decisions.
There is one simple, basic, critical principle underlying all success. That principle is: playing decisions (poker, business, career, wealth, power, and relationship) must be made in light of expected values. Positive values should be bet; negative values folded. Any improvement in your ability to bet when you should bet, and to fold when you shouldn't bet, will improve your outcomes. In short, you will get luckier!
