Suppose you had to pick one of the following two options:
(A) A guaranteed $1,000,000
(B) A %10 chance of getting $2,500,000, an %89 of getting $1,000,000, and a %1 chance of getting $0.
Which option would you pick?
According to Gregory Bassham and Marc C. Marchese (B & M), the authors of “Don’t Play on Tilt! Avoiding Seven Costly Critical Thinking Errors in Poker,” most people would choose option (A) even though the expected value of option (B) is $140,000 higher. Why? It is because most people suffer from what is called “loss aversion,” which is, according to B & M, ‘the tendency to prefer avoiding losses rather than acquiring gains.”
B & M’s essay can be found in the collection of essays called Poker and Philosophy: Pocket Rockets and Philosopher Kings, edited by Eric Bronson. I have already commented on two of the essays in this book. See here and here.
B & M’s essay discusses seven costly thinking errors, loss aversion being one of them, that poker players make, and that the good players make less frequently than the players who are not that good. The other six thinking errors that are mentioned are (1) Self-serving Bias (2) Short term Thinking (3) The Availability Heuristic (4) The Fundamental Attribution Error (5) Superstitious Thinking and (6) The Gambler’s Fallacy.
I begin with loss aversion, because it is a tendency that my poker game particularly suffers from, but I eventually plan in future posts to say something about some, if not all, of the other thinking errors.
I prefer to avoid losing money rather than winning money, in large part because losing money, at least the kind of money I lose, bothers me a lot more than the joy I gain from winning money, at least the kind of money I win. Take today, for example. I was playing $.05/.1 no-limit hold’em (5 players) at Dream Poker, and I was up at the table about $5 when I was dealt pocket kings. I bet these cowboys hard, and everyone folded except one other player, who kept on calling. I don’t remember what all the community cards were. I believe that at the turn that there were a pair of threes, no flush or straight possibility, and nothing higher than a jack. I do remember that on the river an ace showed up, and it was then that my opponent makes a relatively large bet, his first bet that wasn’t a call. He makes the bet quickly, and I tend to think that when a player makes a quick bet on river he may be bluffing. For some reason, which I’m still trying to figure out, I folded. After I told my opponent what I had, he said he was glad that I didn’t call. Aaargh! I was so annoyed at myself. I lost a nice size pot, one that I should have won. As a result of my error in judgment, I stewed for a good long while. I know that the positive feelings that I would have had had I called and won would not have lasted nearly as long.
There are times when I win a hand and feel good about it, for exammple, when I win an all-in or a pot because of some lucky draw. But these happy feelings don’t last very long, and nowhere near as long as the angry feelings last when I sometimes lose.
I think that part of the reason for my strong aversion to losing is that I think the other players think of me as a fish, a sucker, a newbie, you name it. However, when I win, I never think that the other players think of me in a positive light, as a shark, someone who knows what he’s doing. Is this rational? I doubt it.
Another reason for my strong aversion to losing is that I know that I spend many hours – too many hours – playing poker for a measly few dollars, and when I lose, I tend to reflect on this time spent, questioning whether it could have been better spent. I rarely indulge in this sort of thinking after I win.
B & M write that “[p]oker players afflicted with a bad case of loss aversion tend to become “rocks,” that is tight, passive players who fold hand after hand, bet cautiously, and in general play very conservatively…In the long run, however, such a strategy is bound to increase losses.” Yes. Yes. Yes. I have the affliction. I play extremely conservatively. And I often do pay the price.
Fortunately, my case of loss aversion isn’t terrible. I can loosen up and play aggressively frequently when the time is right. And this is why I believe that I am overall up. B & M quote Alan Schoonmaker, author of The Psychology of Poker, who says “nearly all successful professionals are tight and selectively aggressive.” B & M support this idea by saying that ‘to win money over the long haul, you’ve got to win big pots. And to win big pots, you can’t be held back by loss aversion.”
I know that I won’t get better at poker until I get better with my aversion to loss.