Why bankers still need to play Liar’s Poker
Twenty years ago, if you asked any banker, “When was the last time you played Liar’s Poker?” the answer would probably be sometime in the previous month. Maybe due to the name, a cultural shift, or just cycles of popularity, many incoming analysts and associates don’t seem to be that interested in the game, which is a shame as the next generation of bankers is missing an opportunity to master some key skills.
If you haven’t played it, Liar’s Poker uses the serial numbers on dollar bills, and while there are several variations of game play, basically each player selects a bill at random and one person makes a bid on how often they believe a particular digit appears in the collective serial numbers. Following players can either increase the bid or call the bidder’s bluff. If the bidder is incorrect, he has to pay each player a dollar. If the bidder is correct, everyone else has to pay him.
I believe one of the reasons Liar’s Poker is popular with bankers, especially traders, is because it draws on many of the same skills that are important to develop in finance: handling negotiations; remembering vast amounts of information; staying cool under pressure.
At the negotiation table
In Liar’s Poker, maintaining a poker face is important, as is being able to read your opponents to know if you’re being misdirected with an errant bid. Nowhere are these skills more important than at the negotiation table. As a banker, you are responsible for negotiating the best terms of a deal possible on behalf of your client. Part of negotiating is being able to maintain a neutral expression and not give away “your hand”. In the game, when players are trying to guess your numbers, and you in turn are trying to guess theirs, the person who does this best is the one who gives nothing away. In a deal negotiation, the same is true: keeping your body language neutral while picking up signals from your opponent can be instrumental in knowing how to direct the conversation and ultimately settle on terms agreeable to both of you.
It’s important to note here that a poker face does not equate to lying or even it’s more refined relative, bluffing. As I’ve written before, blowing up a relationship or potential deal for a quick win is not worth losing the “trusted advisor” status you are working toward.
Keeping track of numbers
Banks are filled with smart people who can perform advanced financial calculations and understand complicated mathematical relationships, but some folks, even with advanced mathematical skills can’t really add up or keep track of numbers. Simple arithmetic and memory is just not their strong point. To be successful at Liar’s Poker you need to be able to remember numbers as the game progresses, mentally tracking everyone else’s hand, their bidding pattern, and previous bids. Being able to hold and move numbers in your head is incredibly useful in banking, from being able to recall numbers in presentations (is the information on page 23 the same as page 54?), to quickly processing and making decisions based on the numerical information thrown at you. It requires concentration and focus to be able to do it, and serves you well across all facets of finance.
Making decisions under pressure and with limited information
The bidding process in Liar’s Poker relies on making a best guess within the parameters of actual knowledge. For example, you may know the person to your left has at least a six and a four, but everything else is still on the table. To be good at the game, you need to remember what you know, what you’re assuming, and what you’re guessing, all three of which are different things. Staying cool under pressure and not making a rash decision is as important to staying in the game as they are to banking. Often you’ll be called upon to make a quick judgment call, decide on a direction based on missing information, or make educated guesses about future market movements. This is not to be confused with taking on undue risk but is about avoiding dramatic cash losses and maximizing smaller gains. Recognizing the differences between information driving informed decisions vs. pressure driving impulses are important elements of the job and critical to gaining and keeping your clients’ trust.
Are there other games you think help banker’s practice necessary skills? Email me at firstname.lastname@example.org.