I have written about loss aversion before.Â It is the irrational tendency that people have to prefer avoiding losses rather than acquiring gains.Â I know I have this problem, which becomes highlightedÂ when I play poker.Â I’m sure that if I could deal with it better, I would become a much better poker player.
Why do I believe that I have loss aversion?Â The main reason has to do withÂ “bluffing”.Â IÂ rarely bluff, and when I do, I usually do so with a hand that isn’t that bad, andÂ always on the river.Â Oh sure, I’ll play certain hands aggressively, especially when I have position at the table.Â I do have someÂ poker skills, and I’m not totally averse to losing.Â But willÂ I takeÂ a hand that is absolute crap and bet it big?Â No way.Â That proposition is way too risky for me.Â
There isÂ other evidence besides bluffing that indicates that I have a problem with loss aversion.Â I rarely play forÂ stakes greater than $.01/.2.Â And I dwell on my losses much more than I savor myÂ wins.Â
What’s interesting is thatÂ when I’ve lost most of my money, my loss aversion decreases.Â Â I tend to take much greater chances – still noÂ bluffing.Â Â Although IÂ usually eventually end upÂ needing to reload,Â I thinkÂ this is not so much due to poor playing, but ratherÂ because when I have little money to bet I can’t play too aggressively.Â I actually thinkÂ that I probably play my best pokerÂ when I have very little money.Â I wishÂ I could playÂ thisÂ way all the time, as if I have nothing to lose.Â I imagine that the great poker players do.Â Â Â Â Â Â Â Â Â Â Â Â
Why do I have loss aversion?Â Who knows?Â IÂ know I don’t want to appear weak.Â I know I don’t want to feel like I’ve wastedÂ my time.Â Â Is there a more scientific explanation?Â Â According to some recent brain imaging research,Â the reason may have to do with the activity in the areas of the brain that play a role in the processing of emotions.Â Â When a person is confronted with aÂ situationÂ in whichÂ he or sheÂ is uncertain, as in a game ofÂ poker, these parts of the brainÂ can affectÂ and sometimes “overpower”Â the parts of the brain that have to do with reasoning and deliberation.Â
There wasÂ an interestingÂ experiment conducted at Carnegie Mellon withÂ patients who sufferedÂ damage to the areas of theÂ brain that had to do withÂ the processing of emotions.Â These patients andÂ a control group made up of people with no brain damageÂ were presented with a series of fifty-fifty gambles.Â Â For example,Â they would be offered a fifty-fifty chance of winning $1.5 or losing a $1.Â The patientsÂ with brain damage accepted these types of bets, which are advantageous to take,Â more often than the people in the control group.Â As a consequence the patients ended up making more money than the people in the control group.Â Â This experiment indicates that sometimes it is to your advantage to have brain damage, when the damage is to the part of the brain that has to do with the emotions.
Is there anything that one can do about controlling the areas of the brain that have to do with processing the emotions?Â Â Perhaps you can try to trick the brain with drugs, as was done with people in an experiment using the nasal spray Syntocinon.Â Students were divided up into two groups, and asked to play what economists call “the trust game.”Â In the trust game,Â the players who trust each otherÂ do well, but those who don’t trust each other don’t do well.Â Â The individuals in one group were given theÂ nasal spray Syntocinon, a drug that contains oxytocin, which scientists believes causes “stress reduction, enhanced sociability, and, possibly, falling in love” (see “Mind Games” by John Cassidy).Â Â TheÂ students in the control group were given nothing.Â Guess which group didÂ better?Â You got it.Â Â The group high on nasal spray.
I’m not sure thatÂ trustÂ is aÂ quality that is helpfulÂ to win at poker.Â But perhaps trust goes hand in hand with other emotional states, such asÂ fear, which do play an important role in the game.Â More trust, less fear, less loss aversion.Â Â So perhapsÂ next time I play poker, I should see if I can get my hands on some Syntocinon, and ifÂ I can’t score any, thenÂ a shot of hard liquor might do the job.Â
For thoseÂ of you who say “no” to drugs,Â I believe there is a drug-free way to tinker with brain chemistryÂ to make sure yourÂ reason keeps your emotions in check.Â And this way, my friends, is what AristotleÂ calls “phronesis,” or “practical wisdom”.Â Â It isÂ knowledge of the particulars, such as remembering what hasÂ been bet and what hands can beat you, and this takesÂ practice.Â Unfortunately, the Aristotelian route to mental equilibrium takes a lot more time and hard work.Â But asÂ Spinoza once said, “All things noble are as difficult as they are rare.”Â