– Alan, you have been an industrial psychologist for a long time and have achieved significant success in the business of advising famous multinational companies. Based on your experience, can you tell us how important is the role of emotions in business?

Much more important than the classical economists think. For a very long time they have been spreading the myth that the decisions that most people make are rational. Because people analyze all the possible alternatives and choose the one that brings them the most benefits, they said. But that's typical tautology, some sort of a vicious circle in the train of thought. If you ask a supporter of this myth, “Why does a person always make rational decisions?”, the answer you'll hear is "Because they make the choice and select that decision." This explanation doesn't make any sense at all, and in spite of that scholars have explained it that way for centuries. But, in fact, we see that almost every decision we make is influenced by a lot of mistakes – emotional and cognitive mistakes, errors of reasoning. You have to admit that a choice from a dozen of alternatives all of which have such mistakes and emotions can hardly be called “rational.”

You can often see how certain businessmen, companies and even entire states get into no-win situations and want to win so much that spend enormous resources on that. As a result, a lot of them suffer losses or even go bankrupt. In essence, the entire business cycle all over the world is an example of how emotions influence decision making. The world is buried in debt because at certain points people refused to think rationally and forgot that these debts will have to be paid back. Greece and Italy are currently experiencing great financial problems. Spain isn't far behind them either. While the consumer debt of the United States of America is already about 8 trillion dollars.

All of that can be explained very simply: when people are on the rise, when things are on the upswing, people think that this is going to last forever. And, similarly, when the business is starting to go down, people panic, and they think that it's going to be bad all the time. And both of these conditions are incompatible with rational decision-making. So it's hard to overestimate the importance of emotions, they are incredibly important.

– You used to provide advice to serious businessmen. And now you advise successful poker players. Is there anything in common between these two types of psychological coaching?

Yes, of course. What a psychologist tries to do is improve people’s decision-making skills. Generally, the steps taken for that are roughly the same. The first step is to facilitate the person's self-cognition and self-understanding, because when people don't understand why they do certain things, why they act in a certain way, they will keep making the same mistakes. And all psychotherapists, all poker coaches, and all business coaches spend quite a lot of time trying to develop their clients’ self-understanding.

The second step is to develop the skills of understanding the situation and understanding other people, which are two very different things. For instance, I know a lot of poker players who play beautiful cash games, but are absolutely terrible as tournament players. And the other way around – I know players who are very good and successful in tournaments, but are not good cash game players at all. Because these seemingly similar situations turn out to be actually very different and require different knowledge and skills.

These three things – understanding yourself, understanding other people, and understanding the situation – are the most important things in terms of psychological coaching both in business and in poker.

After that you can move on to the next step which is learning to understand the optimal strategy of the game/business, as well as to understand how to correlate this strategy with the actual situation at hand, the actual business decision or poker decision. And, finally, you need courage and self-confidence to make the right decision. They are very important because in many cases people know very well what decision is the right one and what they need to do, but at the last moment they decide otherwise because they simply lack self-confidence to do the right thing. And a psychology coach is supposed to help them find this self-confidence in themselves.

– Why is it that specifically poker attracted your interest as a psychologist, and not some other game, like chess or golf, for example?

I got into poker very early, when I was about 13. I was a caddy at a golf course back then, and we used to play poker there quite often. As I was and still am a very inquisitive person, I began scrupulously studying this game and reading books on it. I was gradually making progress, and I ended up making more money at poker than I did carrying golf clubs around the course. I conceived a real passion for poker and played it quite a lot even when I served in the marines. But then I went to college, and my studies started taking up all my time, while poker took a backseat. For the next 20 years I worked a lot; I had to support my family, so I almost gave up playing poker during that time.

I returned to poker around 1996, and I was very fascinated by the similarity of decision-making in poker and in business. Since that time I've been writing a lot on it, and I mostly do that to clear up certain things for myself, such as how poker players think. In a way every book I wrote pursued exactly this goal.

– Can we say that, in terms of studying emotions and psychological states, poker is interesting because here these states are often manifested in their extreme, absolute forms? Such as the absolute inscrutability that is called by the famous term, “poker face.”

In fact, there is no such a thing as "absolute inscrutability", and "poker face" is a term that first appeared about a century ago, and it's usually used to describe people who are very good at hiding their emotions. That means it's just the impression of inscrutability, while actually these people can be overwhelmed with all kinds of different emotions.

There are people, and not necessarily psychologists, who are born with this absolutely incredible capability of reading other people's emotions. And such people make great intuitive poker players. Take Layne Flack, for example, the famous player nicknamed "Back to Back Flack". He got that nickname because he once won two consecutive World Series of Poker tournaments, and that's the most important poker event in the world.

He has never read any books on poker, has never studied the theory of the game, but he has this incredible sixth sense, he is such a good intuitive player that he can very accurately "read" the most seasoned poker players and beat them because of that. He can often feel when you're bluffing or you're scared or you're happy because you have a strong hand. Even if you are hiding these emotions behind a poker face.

Sometimes I even envy him a little – I'd love to have that sort of gut feeling, but unfortunately I don't. I'm a well-trained psychologist, and I can recognize emotions very well, too, but I do that cognitively and consciously. I'm not a good intuitive player, and I lack this feeling that some great players have, like Layne Flack or, perhaps even more famously, Doyle Brunson. The latter is over 80 now, but he still is one of the greatest poker players in history. He says that he relies on his gut feeling 100% of the time, and that he often can't explain why he feels a certain thing.

In poker we see basically the same emotions that people feel in stock markets, for instance. Most stock brokers and analysts say that there are two basic emotions affecting stock markets: greed and fear. When you're up, when you're successful, the dominant emotion is, naturally, greed, and when things go down, fear takes over. Absolutely the same can be said about poker as well. There probably isn't a single poker player in the world, including myself, who has never made any stupid decisions under the influence of these two emotions. Even people like me, who have analytical minds, are susceptible to emotions and often make mistakes and do very stupid things because of them. Fortunately, I was usually able to stop at the right moment, to seize my own arm.

– What is the best way to deal with these emotions?

The best way to deal with them is to be consciously self-critical all the time. During one session of poker I ask myself the same question dozens of times: "How well are you thinking, Alan, how rational are you?" When I understand that today I'm not very good at something (thinking clearly, for example) then I either muster up and try to get my act together or cease playing at all. I say to myself: "Alan, you're being very stupid today, stop playing and go home", and that's exactly what I do at these times.

In fact, it is a big advantage, because most poker players usually don't bother to look inside themselves; they're not very self-reflective. Most poker players tend to pretend they're okay, convincing themselves that they're good to continue playing. But, as you can understand, the same thing can be said about brokers and any other businessmen as well.

You won't believe how many times I told my friends who were playing poker: "Hey Joe, you're on tilt! Stop it; go home!" To which I usually received the same reply: "No, I'm fine, I'm gonna beat them all now!" And everyone around can see that Joe's on tilt, but he alone doesn't understand it. This situation is very typical. Actually, in any big poker room with several poker tables you're bound to find some people who are playing for much lower stakes than they used to, because at some point they got busted and went broke. Tilt is the most tangible and noticeable poker emotion. You could even say that when a player's on tilt it's as if they've temporarily gone crazy because they're acting irrationally and making delusional decisions. But, besides tilt, there are a lot of other emotions too: fear, desire, hope and many other things.

– It's interesting how one of the most difficult things for a poker player is probably to understand when they're on tilt. The player starts acting very strangely – they would never act that way in a normal situation, but at the same time they're not capable of realizing it.

Absolutely right. But the hardest thing is not to simply realize that you're on tilt, but also to understand that when you're on tilt, it's very unlikely that you will quickly regain your composure. In my experience there were players who told me: "You're right, I'm on tilt, but my Z game is stronger than that guy's A game, so I'm gonna beat him anyway."

There are a lot of interesting studies on this subject. People tend to overestimate their abilities – they usually think that they can do something much better than they can actually do it. If you do a survey and ask 100 people a question about anything, such as "How well do you dance?" or "How well do you drive?" about 2/3 of those surveyed will say that their skills are above average. But statistically that's impossible, because 2/3 of all people can't be able to do something at an above average level. And there was also another interesting study that proved that the worse people can do a certain thing, the more likely they are to overestimate their skills regarding this thing. That is, the people who showed the worst skills at something of all those surveyed, estimated their abilities as "above average."

Poker is a good showcase in this regards because in this game it's very easy to lie to yourself about how well you can play. Contrary to games like golf or bowling where you get some objective results, in poker luck plays a very important role, and not just any luck, but short-term luck. That’s why poker players tend to attribute their losses not to playing badly, but to bad luck or to their strong hand being accidentally beaten by an even stronger hand (these are called "bad beat stories"). This can be described by the phrase: "The reason of my wins is my extraordinary skill, and the reason of my losses is my bad luck." But that's ridiculous nonsense, of course: if you're a strong player, you may lose a hand, you may lose a day or even a month, but if you lose a year that means you're probably doing something wrong. I know some people who have been playing for over 20 years and they keep losing all the time. And that doesn't stop them from seriously claiming they're good at poker.

– Have psychologists developed any behavioral methods to control the tilt state?

To be honest, most poker players, like most psychologists, do not know how to deal with tilt. When you're on tilt, there is only one possible clever thing to do: stop playing immediately. Because it's very serious. Only a small handful of people are capable of making this only right decision when on tilt – stop and not play anymore on that day. In some cases this is explained by the fact that, even if the players realize that they're on tilt, they will still not want to admit that because that would mean acknowledging your weakness, and poker is a game with a very macho culture. There is also another thing: if you realize that you're on tilt, you have to react as fast as possible. The longer you delay it, the harder it is to make the right decision.

There is probably only one reasonable alternative to stopping playing immediately. Tilt is usually manifested in wild aggression, and, consequently, you need to compensate for that aggression with something, and that means that you have to get extremely careful, as careful as possible. But the overwhelming majority of people are not capable of that. This is due to what psychologist Daniel Kahneman calls "Prospect Theory.” Kahneman is the only psychologist to win The Nobel Prize in Economic Sciences. I've written a lot about him and numerous times quoted his saying that the pain of losing is about 2 times stronger than the joy of winning the same amount of money. So when people start losing, their desire to get even is much stronger than the desire to win that they had before the game. They really want to get even. That's why when someone says, "I need to get even, I just have to", this almost always means that this person will take unnecessary risks and do some stupid things. So if a player is not capable of becoming super careful, they should stop playing.

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– Mistakes that a person makes under the influence of emotions are, naturally, not limited to poker. You can see them everywhere – in business, sports, everyday life. We even have two aphorisms about that: "Take a counsel of your pillow" and "Revenge is the dish best served cold". And the advice here is basically the same as your advice for a player on tilt: stop, "cool" your head and continue only after you calm down, all your emotions go away and your mind is "sober" again. And by the way, just like in poker and for the exact same reasons, very few people actually follow this advice, ending up doing things that they later regret.

I absolutely agree with both aphorisms. There is probably no poker player or not even a single person in the world who hasn't said to themselves at least once: "How could I be so stupid! If I had stopped to think for just another minute, I would have never made that bet, invested into that business, bought that thing, married that person, got into that fight, etc. How could I do such a stupid thing?" And the sayings you quoted illustrate this very well. Here in America we also say: "Before making a decision, count to ten". Because if you simply count to ten, the ten seconds it would take you will often be enough to come to your senses and refuse to make a stupid, reckless decision. But unfortunately, when we're overwhelmed with emotions, we don't want to count to ten, we don't want to let revenge get cold. We want it hot, we want to act right now.

Strong emotions always imply some tension, and people have to get rid of this tension, to spill it out. Very often the release of this tension is the most important thing in the world at the moment, and for many people in that very second it becomes more important than their work, family, money or even their own life. There have been a lot of cases when people basically committed suicide by getting into a fight with someone they don't stand a chance against. There are also a lot of people who committed virtual suicides for their business when they were so angry with something that they made immediate decisions that led them to a financial collapse.

I have a lot of friends who are lawyers, so let me tell you a story about one of them. I once asked a lawyer relative of mine for advice to decide whether I should sue someone. He said: "You know, Alan, my typical advice for my clients is: If you can avoid suing, don't sue, because it will often cost you much more money than you can possible win.” But he also told me that in the majority of cases, when he advises his clients against suing and suggests that they find some alternative, like to forget about the entire thing, to try and settle it out of court, or anything else, the clients still say: "No, I want to sue anyway!"

I think that even right now, as we speak, the following conversation is going on at dozens or even hundreds of law firms around the world: the lawyer is discouraging the client to sue, but the client is knocking his fist against the table and yelling: "No, I wanna sue that son of a..." A lawyer can try to talk some sense into the client, tell them that it's going to cost them a lot of money or their reputation, but the client simply won't listen: "I wanna sue," period!

Of course the best thing to do in this situation is to sit on it for a while, to take your time, and also maybe to speak about that to someone who is smarter than you. It doesn't have to be someone who is smarter than you in general, just someone who knows more about this particular situation and subject, or even someone who is just a good listener. And here this historical case comes to mind: Abraham Lincoln who was the president of the USA in what probably was the most difficult period of our history – the Civil War – had a relatively uneducated friend. Before making some important decisions, Lincoln would invite this friend to Washington. The friend would take the train, arrive in Washington, and Abraham Lincoln would talk to him and pour his heart out to him. After that he would go sleep for a night and only then would make the important decision. Despite the fact that this friend had much less education than Lincoln had, he still consulted him.

– Poker players who have mastered controlling their emotions and stop whenever they need to stop, can probably do the same in their everyday lives, too. How else the skills and knowledge you get from poker can be useful in mundane life or, for example, in business?

Probably the most obvious lesson one can learn from poker is to treat money the way poker players treat chips, that is as some expected value that needs to be maximized. This is a psychologically subtle approach that means that you have to treat money as an abstract thing: not as your money, but as money in general. Let me give you a practical example: let's say you have 100 dollars at stake, and there is a 55% probability that you win it – this means you should take the bet. And it doesn't matter at all how much of these 100 dollars is yours – a half of it, 25% or only 10% – you should think of it as an abstract amount of money. Because as soon as you start thinking that you have bet 50 of these 100 dollars, then you will immediately be afraid of losing this money. And you give in to your emotions and start making mistakes and in the end you can lose even more.

If we use the economics vocabulary, we could say that money is fungible: it doesn't matter where it came from – you or your opponent, it doesn't matter who made that bet – you treat it as an abstract value regardless. A situation when a businessman invests money into some project is not different from this at all. If you as a businessman are only concerned about your share then in any uncertain situation you will start to panic, argue with other investors and try to withdraw your investment. And, as you can understand, this will not lead to value-maximizing, but to losses.

Poker teaches you to think logically and rationally (about what you can gain, what you can lose, what's the probability of a win and a loss), to analyze possible actions, possible solutions and to choose the most rational one, the one that is more likely to lead you to a win. I'd like to add that this sort of thinking starts to play an important role in a lot of spheres. This approach is becoming popular in medicine, for example: what a patient can gain, what they can lose, what is the probability of a positive outcome, what are the risks, and whether or not it makes sense to invest in a certain kind of treatment.

If I owned a store, I would do the same when I’d think about whether I should invest into expanding the store: I have to calculate all the possible options, all the possible benefits – what I can gain, what I can lose, and how likely the successful outcome is? Even if you're applying for a job and choosing whether you should apply to company A or company B, you analyze: what you win, what you lose and what are the chances for your success in each of the places? Of course, these are quite obvious questions, but you must be able to answer them, and the experience you get from playing poker allows you to do it very successfully. Simply because poker is based on this sort of thinking, it's built around the philosophy of expected value. But still the most important idea here is how you treat money – you should treat it objectively, analytically, as expected value: in poker everything is expected value.