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On Poker: When academic thinking processes apply to poker

September 23, 2017 GMT

When poker is examined by geniuses, albeit indirectly, everybody wins. When John Nash arrived at Princeton in 1948 as a Ph.D. student — yes, that guy who was the subject of the 2002 Oscar-winning film “A Beautiful Mind” -— he created a hypothetical situation where two prisoners had to face the ultimate decision. It was dubbed “The Prisoner’s Dilemma.”

According to the account printed in author Adam Kucharski’s 2016 release “The Perfect Bet,” Nash places two suspects of the same crime in separate cells. They were given the option to either stay silent or agree to testify against the shenanigans of the other, with various consequences that would affect the length of their prison sentences.

If both subjects failed to utter a word against the other, they would each be given one-year sentences. If one talked and the other remained silent, the talker was released immediately and the silent prisoner faced three years in confinement. And if both players talked, they each were given a two-year sentence.

Now, this is some serious high-stakes poker — a game of incomplete information.

Nash believed that since the players couldn’t communicate with one another, it was always the better gamble to talk, because getting released had the overall best result versus three years in prison. Even though staying quiet would have been the best option, the risk was too great that the other would talk.

This train of thought was the basis for Nash’s Ph.D. thesis, in which he argued that gamesmanship (he called it “equilibrium”) can prevent the best outcomes from taking form.

Another academic, named John von Neumann, was a quirky poker guy, and he geared some mathematical research directly to it. He took two players, and they each were dealt a single card that had a number 0 through 10 printed on it. Both players had to ante in a dollar, and they were given the option to fold and sacrifice the money, check, or bet another dollar based on the strength of their hand. The opponent then had to react to that decision.

Von Neumann discovered that since bluffing was part of the game, the best decision was to bet if the card had either a very low number or a very high one. All of the confusion was in the middle numbers. And that remains the case today in games like Texas Hold ’em, where you may have middle pair.

He proved that bluffing was a legitimate winning strategy in many scenarios, and tied it into business thinking processes in his 1944 book, titled “Theory of Games and Economic Behavior,” which he co-authored with Oskar Morgenstern.

There are lots of additional historical goodies in Kucharski’s book, but it’s easy to see how it ties into the concept that aggression is king.