When it comes to management, can the principles of poker be applied successfully? Beware the metaphor’s blind spots. – By: Paul Schoemaker & J. Edward Russo, business professor at Cornell University
Poker has gone from smoke filled backrooms to high stakes television shows in recent years. It has drawn the interest of scholars at Harvard to better understand the mind, and educators use it as a way to teach critical thinking and prepare students better for life.
Tom Peters and Bob Waterman praised poker in their classic book In Search of Excellence as an apt metaphor for new product development.
“Experimentation … resembles nothing so much as a game of stud poker. With each card, the stakes get higher and with each card, you know more, but you never really know enough until the last card has been played. The most important ability in the game is knowing when to fold.”
When we share this analogy with managers, they agree that it is a good metaphor. After all, with most development projects, you never know for sure until after the fact whether it has been worthwhile. And, as the project gets rolling, each major step becomes much more expensive than the last – making it harder to quit psychologically. The crucial management decision is whether—and when—to fold and to cut your losses.
Knowing how to revise the odds in light of new information is crucial as well. Just as in poker, players possess both private and public information, with the latter increasing over time (like new cards being turned.) Finally, you need the poker player’s mental toughness to fold quickly and start over again whenever the current hand stops looking promising. Read More.