The idea that poker could be used to overcome psychological investing problems came to me after the confluence of three events. In the fall of 2005, I was working on a story about investing psychology (see Battle of the Binge) about the same time I went to poker camp for a compilation of stories on camps for adults. The third event was the arrival of a biofeedback gizmo.
To prepare for the Las Vegas poker camp, I read a couple of books on Texas hold ’em and started playing poker online -- in my case, Texas hold ’em on America Online. The games are free and move quickly, so it’s possible to play dozens of hands in an hour. Like any beginner, I lost a lot of “money” at first.
The camp (www.wptbootcamp.com) was terrific, and I learned a great deal about the fundamentals of the game.
When I got back, my winning percentage increased and I started accumulating fake money. But I noticed I was making the same familiar mistakes over and over again. They mirrored the problems I’d written about in the investing-psychology story. What’s more, I realized that I was playing emotionally -- in particular, I’d get overly excited on potentially good hands, and despondent after losing -- and that was getting me into trouble.
As I said, a biofeedback device had arrived in my office that fall. Called Journey to Wild Divine, it’s software and a device that you hook up to three fingers to measure your heart rate and perspiration, both of which can indicate stress. You just load the software on your computer and attach the device to a USB port. The monitor leads you through a series of exercises designed to promote relaxation and stress management (the program features wellness guru Deepak Chopra and is very New Age-y). Journey to Wild Divine is $300 on Amazon.com, but you can buy simpler packages that measure perspiration and heart rate for about $60.
So, on a whim, I hooked myself up to the device to measure how excited I was becoming while playing poker. In one exercise, a ball rises as you experience stress. You try to lower the ball through simple breathing and relaxation techniques. My resting heart rate is about 60 beats per minute, and it would rise to 90 or more when my poker-stress level rose. So before playing, I relaxed and dropped the ball as best I could. Then I joined a poker table. Sure enough, if I had a great hand, or if I got in a betting battle with one of my on-screen opponents, the ball would rise, sometimes dramatically.
The investing-psychology story I was working on involved neuroeconomics. This science looks at which part of your brain is working while you make decisions. If your prefrontal cortex is fired up, you’re making logical, analytic decisions. If it’s your limbic system, you’re making instinctive or emotional decisions. I figured that when the ball rose, I was thinking emotionally, not logically -- a suspicion some of the experts I interviewed for my story confirmed.
In fact, I traveled to Princeton for the story and had my brain scanned while making financial decisions. After the experiment, I saw these different parts of my brain lighting up on a screen.
Getting back to my biofeedback device, at first I simply stopped playing if the ball rose beyond a certain point, no matter how good my hand was. My winning percentage improved. Then, I started trying to activate the logical part of my brain by calculating odds and thinking of playing partners’ past behaviors. It wasn’t easy at first, but after a few hours of lunchtime practices, I could keep the ball down consistently while playing.
My winning percentage rose dramatically.
I started investing more dispassionately and logically, too. (I even sometimes hooked myself up to the Wild Divine device when making investment decisions.) In the past, for example, when an investment was soaring, I tended to let it ride, even though it would often come crashing down. I was just so excited by the gains. That got me into trouble during the Internet bubble, as it did with many other investors. Now I’m much better at rebalancing my portfolio, which effectively forces me to cash in some of my gains. Plus, I started cleaning up at my neighborhood poker game.
And that’s how a device featuring Deepak Chopra and much spiritual mumbo jumbo helped my investing and poker playing. If you’d like to improve your winning percentage at both, I recommend giving a biofeedback tool a test while playing poker and making investment decisions.