Profiting from poker is mainly based on taking advantage of your opponents' mistakes. Our mind is responsible for all the decisions that we make and for this reason we should have a basic understanding of human psychology, why we behave the way we do.
One of the most important features of a good player is the ability to control their own game. In order to do that correctly you have to get to know certain mechanisms that will disturb the process.
At the beginning lets deal with the phenomenon called “lost money effect”. In order to understand it, let's analyze it outside a Poker room.
Let's imagine the following bidding, with 3 principles in place.
1) Good price of an object
2) A raise limit
3) The participant pays the amount he bid regardless whether he has won or lost
American psychologist, Allan Teger proposed to a group of people to bid on a 1$ bill. The starting bet was 25 cents, which was also the amount people could raise by.
His findings are really surprising. Teger has shown that under such circumstances one of the participants will usually quit if the amount exceeds 7$. All of the participants would be much better of if they had quit right at the beginning. Why don't they do that then? They fall a victim to so called “lost money effect”. Although the earlier investment should not affect their evaluation of the current situation, unfortunately it does, and it does to a great extend. If you are thinking what to do in the future, you cannot forget what happened in the past.
The “lost money effect” may amount to extremely large sums of money. Here is an example: Let's say you are a CEO of a big airliner and you're thinking of getting a new airplane design. The investment has cost 9 billion dollars so far but you need another billion to finish the project. It turns out that your competitors are just implementing a much cheaper and much more economic design. What will you do? Will you take the loss of 9 billion dollars, or you invest another billion and build the new plane? If you're thinking like most people are, you will sacrifice another billion. This way you will not lose 9 but10 billion instead. A similar situation happened in real life. When Concord was being built, government experts from France and England were caught by surprise by Boeing. The decision to finalize the project went against the economic rationale. Why did that happen? Many of you probably think how it squares with Poker.
Tha basic mechanism triggering the lost money trap is the human aversion for sustaining losses. “Not to lose” is the basic principle of all stock market players and business people. For Poker players this principle is pretty much the same. By losing games, you are losing your money plus the amount that was in the pot. When we are losing money on our investment, we very often don't come to grips with our loss and we are blindingly trying to recover money to at least break even. Unaware, we'll lose more and more, multiplying our losses.
It doesn't really matter whether we're talking money here or something else – the lost money effect will not allow us to think rationally. I was a witness to situations where very good players were falling in this trap, losing their entire bankroll in the end. Bad beat will never allow them to leave the table. Although, they started the game, thinking of winning, now they only wanted to break even. Their frustration was growing. After losing their next hand, now they had no choice but to play. Now they didn't want to break even but only to recoup some of the losses and reduce them a bit. Although the should have taken their loss and left long time ago knowing that it's only a game and losing is part of it, they kept on going on this destructive path until they had hit the rock bottom. Even when they had managed to recover a large sum of money, they kept on playing thinking it was just the beginning of their lucky streak. Almost always will this type of game lead to a defeat. This phenomenon in the Poker world is known as “tilt”. Tilt describes a player who is frustrated by the losses and is playing against their own strategy. For example, when a player has lost a lot of money, he is trying to desperately get it back (he looks extremely relaxed). Very often he will stake a lot of money on cards that don't warrant this type of risk (raising with J9 or T9).
This human aversion for losing is a most frequent cause of players going on tilt. One of the skills that a good player should possess is to avoid this type of emotional state. Knowing that such a phenomenon exists will not be much of help. Most our decisions are automatic. Our earlier actions provoke our later ones regardless whether they make any sense or not. To protect ourselves from the “lost money effect” means to reflect and to consider what decision would be the best and the most rational in a given situation.
We should always focus on a current situation and try not to think about how much money we already have put in. If we feel that it's not the day and we are frustrated by the situation, it's better to stop. Tomorrow is another day and we have to remember that sometimes those weak players have to win too. As always it's much easier to give advice than follow it.