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The Poker Face of Wall Street

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The Poker Face of Wall Street

Wiley,

15 min read
10 take-aways
Audio & text

What's inside?

Wall Street and poker have more in common than you might think. Start with risk, bluffing, guts and glory.

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Editorial Rating

8

Qualities

  • Innovative
  • Concrete Examples
  • Engaging

Recommendation

In this unusual study, math geek and poker addict Aaron Brown uses royal flushes as a way to meditate on the oft-overlooked topic of financial risk. Poker and trading share many similarities, he argues, and you can apply similar skills and mindsets profitably to both endeavors. Brown travels from California card rooms to Texas back rooms to Yukon gold mining camps, with numerous stops on Wall Street and in the Ivy League. In lesser hands, such a far-reaching study would have lost focus, but Brown manages to keep making meaty points. Unlike the stereotypical quant, Brown writes clearly and gracefully, making his work rewarding to read. getAbstract recommends his book to investors seeking an edge in a risky world. Your deal.

Summary

Poker and High Finance: Two of a Kind

Economists and Wall Streeters cringe at any suggestion that buying stocks and bonds is similar to playing poker. They especially scoff at any hint that derivatives and other complex products used to hedge risk are akin to gambling. After all, they say, gamblers artificially create risk to amuse themselves, while financial products allow investors to protect themselves from the vagaries of a volatile world. In truth, trading and gambling require similar skills, and many financial professionals love poker. In a famous example from the 1980s, high-rolling Wall Street traders routinely roped lower-paid employees into rigged games of “liar’s poker,” which wasn’t really poker, but nonetheless showed traders’ affinity for gambling. In one similarity, both poker and finance are played not because they’re inherently fascinating but because the stakes mean something to the players, not that poker or the market should be havens for reckless bettors. The best play comes when the stakes are meaningful, but not so huge that they throw off players’ judgment.

The game of poker has many permutations, including Omaha and Five-Card Draw. Today’s ...

About the Author

Lifelong poker player Aaron Brown is an executive director at a major stock brokerage. He writes a column for Wilmott, a quantitative finance journal, and holds degrees in math and finance from Harvard and the University of Chicago.

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