How Winning At Poker Causes Greater Risk: Winning Can Mean Losing in Poker and Life
“It was in the course of crunching all that information that he found the strangely inverse relationship between the number of hands won and the amount of money lost. He also noticed that it was novice players who lost the most.”
Introduction (Via Time)
You can learn a lot about gambling if you’re willing to analyze 27 million hands of online poker. Don’t have time for that? No worries; sociology doctoral student Kyle Siler of Cornell University has done it for you. His counterintuitive message: the more hands you win, the more money you’re likely to lose — and this has implications that go well beyond a hand of cards.
Siler, whose work was published in December in the online edition of the Journal of Gambling Studies and will appear later this year in the print edition, was not interested in poker alone but in the larger idea of how humans handle risk, reward and variable payoffs. Few things offer a better way of quantifying that than gambling — and few gambling dens offer a richer pool of data than the Internet, where millions of people can play at once and transactions are easy to observe and record.
Lessons (Via Time)
So what does this have to do with you if you don’t gamble? It’s the wrong question because, actually, you do. Investing, driving, buying a house and merely crossing the street are all acts that involve discernible risks and uncertain rewards. The more small returns you get from your small investments in stocks, the likelier you are to make — and lose — a big investment. The more times you get behind the wheel and speed a little bit, the likelier you are to speed a lot — with deadlier consequences.
“These kinds of calculations are made every day,” says Siler. “Adultery is another good example. People get away with it countless times but they get caught just once and they lose everything.”
Most Important Lesson(via Time)
Organizational malfeasance in general depends on this kind of risk analysis,” says Siler. “Look at a place like Enron. People took a lot of small chances and won, then took big chances and lost big.” Indeed, Siler points out, during the recent financial crisis, an entire nation — Iceland — went bankrupt in a similar way, trusting high-risk, high-reward investments that quit paying off.
