Talent Lessons From the World Series of Poker

A few years ago I had the opportunity to meet Annie Duke, who was the first woman to win the World Series of Poker Tournament of Champions, at a group presentation sponsored by Entrepreneur’s Organization (EO).  It turned out that her presentation wasn’t about gambling but on proper decision making or “Decision Science” as she calls it.

Before I share her presentation I’d like to give you some background on Annie.  After graduating from Columbia University she pursued her Ph.D. at the University of Pennsylvania where she was awarded a National Science Foundation fellowship.  One month before completing her dissertation, she dropped out, got married and moved to Billings, MT.  Without a job, she found herself with limited prospects living in a manufactured home.  With encouragement (and seed money) from her brother, himself a professional poker player, she entered the world of professional poker .  15 years later, she retired with over $4M in career winnings and a WSOP Tournament of Champions win in 2004.  She’s bright, she’s exceptionally well spoken, she’s interesting and during her presentation she had my full attention.

After retiring in 2011 Annie reinvented herself as a speaker and authority on the topic of decision analysis.  The night I saw her, Annie’s presentation was on the decision-making processes involved with hiring and evaluating the performance of our employees.  High stakes poker decision-making meet high stakes business decision-making.  (Although the examples and teachings are Annie’s, some of the “lesson” labels are my creation.)

 (Annie and I, June 2012)

Lesson #1 – (Ego Bias).  Most people do a poor job of evaluating the quality of their decisions.  Specifically, most people evaluate their choices based on whether or not they received the outcome that they wanted.  And the reason for the flawed approach? Our egos.  A great outcome = a great choice because well, you’re just that smart.  Unfortunately, bad outcomes are often attributed not to a bad choice but to “bad luck”.

Let’s bring this back to the world of sales.  That sales rep that you hired that is killing it?  Perhaps you hired them for all the wrong reasons and you simply “got lucky”.  You received a great outcome from a bad choice.  The danger with this strategy should be fairly obvious.  Your ego is screaming to you that you are an excellent evaluator of talent.  When you miss on your next few hires, you’ll write off as “bad luck.”  This is a bad cycle based on a bad premise.

The lesson:  Check your ego and ignore the outcome when evaluating the quality of your decision.  

Lesson #2 (Play the Odds).  Annie brought up a flaw in how most managers evaluate their new hires.  In her example, we have two new sales reps.  One just landed a huge contract and the other has yet to make a sale.  Most Sales Managers in this scenario and delighted with their new sales hero and regretting their decision to hire the zero rep.  Looking deeper, our hero has very low activity while our zero is highly coachable and has fantastic activity.  Which sales rep do you think Annie likes?

The lesson:  Bet on a good hand and fold on a poor one.

Lesson #3 (Sunk Cost Theory).  Why do we continue to put time and energy into that consistently subpar sales rep? The answer = Sunk Cost Theory.  She has a short video on the topic –  here.  Essentially your decision to “double down” on a bad hand comes from your emotional need to get something good out of so much effort.  A better framework for good decision making in this situation is to consider the opportunity cost with further investment in this rep.  Time spent with this rep is time (and revenue) lost that could be used to replace them.

The lesson:  Decisions based purely on emotions usually have a bad outcome.  

Lesson #4 (Learn Your Lesson).  Mistakes are gifts.  In her view, we don’t want employees that avoid bad outcomes.  They become far too conservative and worse, rarely learn from the mistakes they do make.

The lesson:  Hire employees that are willing to make (and learn from) mistakes.

Lesson #5 (What’s a Winning Hand?).  Most people think about whether or not they have the best hand.  The right way to think, she cautions, is whether or not you have the best hand enough of the time.  Failure is unavoidable and actually ok.  To quote her, “Maybe winning 30% of the time is enough.” Relating this back to talent, you WILL have mis-hires.  The question isn’t “How do I eliminate them?”  After all, we’re talking about predicting how a human is going to perform in a new environment. You don’t have total control over that outcome.  The right question is “What’s a mis-hire rate that will allow us to hit and exceed our goals.”

The lesson:  Don’t define success by the outcome of any one decision.  Use a consistent decision making approach that will tilt the odds of success in your favor.

Her Final Lesson (The Super Bowl and Hindsight Bias).  As I’m a Seattle guy and an avid Seahawks fan I’ll close by sharing a blog that Annie wrote about my beloved Seahawks. The blog breaks down the Seahawks’ decision to pass on 2nd down at the end of the Super Bowl – Pete Carroll and Hindsight Bias.  I’m in full agreement with her assessment of the situation with one caveat.  Pass on 2nd down? Her logic is sound.  A slant pass directly into the heart of the Patriots defense? Let’s just call it a deflating decision that’s going to take a long, long time for me to get over.