Customer Reviews

The Poker Face of Wall Street

5 star:		(19)
4 star:		(7)
3 star:		(2)
2 star:		(5)
1 star:		(4)

 

 

Anyone who works on Wall Street senses the truth in Aaron Brown's thesis, gambling is a fundamental brick in the foundation of economic and investment thinking.

Brown has done it all: poker player, options trading, risk and portfolio management and finance professor. He draws on this experience, using poker as a narrative spine; he weaves a tale of the crossroads between finance and gambling, economics and risk.

The resulting book is an insightful, thought-provoking, entertaining, yet frustrating. In many ways it is similar to the seemingly filling meal that leaves you hungry as soon as you burp.

For example, on page 96 Brown asserts that the Crash of 1987 was caused by under-priced exchange-traded puts which lead "people to invest in the stock market without assuming risk." This is a unique and provocative interpretation on a subject in which I have a great deal of interest. The subject is dropped. Six pages later, it is re-introduced with the conclusion that "(f)or financial quants, the revelation was that risk has a price."

How we got there, I am not quite sure. I have re-read the section several times and I am still puzzled. You have a long bull market. The public is buying calls and shorting puts. The professionals are doing forward and reverse conversions, which are tied to the money rate. The options trade where they trade, it seems to me. An explanation of how put pricing triggered a six sigma event is lost. It is an intriguing thought; worthy of exploration. Yet, it remains unexplored.

Another example: Brown assets that Hernando de Soto discovered in the lower Mississippi "the most sophisticated and successful preindustrial economy in the world." Raw materials and finished good were distributed over an area of thousands of miles. It was done without money, writing, long-distance communications, common language or culture.

Brown takes a hunch and attributes it to gambling. Interesting, yet no support is offered. We know de Soto did not find Indian Casinos.

After reading page after page of abstractions, generalizations and unsupported conclusions, I got frustrated. The book rates four stars. Despite Brown's inability to construct and articulate a cogent and articulate argument, he is on to something. Stock trading in Germany is regulated under that country's gaming laws.

Brown is entertaining. Unfortunately, his book leaves, as the academics say, room for lots of addition research.

Move over William Poundstone (author of "Prisoners Dilemma" and "Fortune's Formula"). John Allen Paulos (author of "A Mathematician Plays The Stock Market") can read this book and revise his own flawed works with this insight. Michael Lewis (author of "Liar's Poker") can stop typing now. There is a new king of lucidity concerning the nexus of games and game theory, mathematics, finance, gambling, markets, and the simultaneously brilliant and frail humans who engage and advance our knowledge of them all. His name is Aaron Brown.

Aaron Brown's "The Poker Face of Wall Street" accomplishes the impossible, for it is simultaneously a readable and enjoyable narrative work, yet also dense with mathematical and behavioral finance theory. Nearly every page supplies a lucid thumbnail explication of an economic or behavioral finance concept, backs it up with an appropriate example, often offers an alternative view, and then provides an historical anecdote to expand the concept and make it at once both memorable and familiar. Yet this is not a pedagogic work, but a popular offering for a wide audience of those who are curious or love poker, finance, or both.

Brown's method is to use the game of poker as his narrative spine, upon which he weaves the histories and intersections of finance and gambling, economics and risk, information theory and human behavior. He tells the tale of his own love affair with the game, going to the poker dens of 1970s Los Angeles long before there was a World Poker Tour or the Commerce Casino existed. These modest halls (often operating Veterans of Foreign Wars meeting halls) were an anomaly and a pause in history after the saloons of the wild west were tamed and before the leveraged glamour of Las Vegas lured the core tourist and casual poker player away. My own uncle spent his life in such places as a career poker player who made a modest living at the game, but often working ten and 12 hour days to do so, and with not infrequent setbacks. Yet, these nondescript low rise cinderblock buildings were the birthplace of poker as we know it today, and were where the world famous celebrity players of the hour originally honed their skills for today's high stakes televised games from the well of glamour.

Yet this is not simply a memoir of a poker great also-ran, but a sound examination on the dimensions of why the game is rational and irrational, tractable yet inexplicable, simultaneously transcendent and incarnational. Familiar poker personalities appear here and there, often emerging again in the work as other dimensions of their contribution to the game become more famous. But the work is not concerned with a recounting of great memories of a silent Cowboy facing a taciturn Chinese, both bluffing, and both betting all-in. Rather, it uses poker to point to gambling, gambling to point to math, and math to point to risk, and risk to point to investing, and investing to point to finance, and finance to point to economics, and economics to point to gambling. All concepts explained with examples and personalities.

Brown's elucidation of the gambling economy of the Mississippi delta Native Americans and how effective it was at distributing goods across vast territories in a moneyless society is the first treatment of the topic I have seen outside specialist historical texts, typically only known to Mississippi natives such as myself. The irony of a gambling economy trying to be supercharged by colonial economic presumptions, which were themselves being advanced by famous gambler John Law through his Mississippi Company, is a hilarious accident of history that Brown walks us through with deadpan seriousness. All the while pointing to goods and trade being advanced by gambling.

The short detail above is just one example of the countless dimensions that Brown has managed to weave into this work and provide its density. Well chosen history and anthropology buttress Brown's memories and economic and financial comments, yet in the same breath he points to gambling and poker. One puts this work down with the feeling that finally all previous works you have read concerning probability, finance, gambling, history, psychology, economics and mathematics have been tied together with a clarity never previously experienced or imagined possible. This is an excellent, satisfying work that merits immediate rereading. You will not be disappointed.

I almost wish this book was less good. I have a huge pile of readings that I must read, but I keep picking this book up because it's so fascinating. The author uses poker as a framework to tell fascinating stories about risk. It is extremely accessible to the layperson, but the information within is of practical worth to the professional. I have no real interest in poker, but it is a perfect metaphor to illustrate that people's perception of risk is just as important as calculating numeric probabilities. From the beginning, the author provides a framework for taking calculated risks, and illustrates this framework with amusing stories from recent history. I would recommend this book to anyone who wants to better understand the decisions that professional money managers make every day.

I've seen a couple of negative reviews on this page that said something strange about not wanting to see these concepts in print. What a strange comment! In an odd way, it is the highest praise that one could give this sort of book: that its contents are so valuable that they should not have been given away. In any case, the author is not only an executive director of Morgan Stanley, he's also a well known personality in the world of quantitative finance, with an outstanding reputation for helping novices learn to apply their minds to solving problems. Perhaps those other reviewers could provide more than vague insinuations? Perhaps the most honorable thing would be to simply remove themselves.

A review of a book is somewhat or mostly dependent on what you were looking for initially. With that said and with an introduction by Nassim Taleb, I was looking for discussions and insights about risk, the market, and human psychology. Though some of these topics were present in some sections of the book and discussed, I unfortunately mostly read of poker strategy and game theory. However, if my selection of this book came from a solely poker perspective vs. the title and the introduction teaser, my review would have been higher.

However, one would have to agree with Mr. Brown's thesis that without risk takers the market would not work systematically as it does. Without the street to add "risk additives" to a continual flow of financial products, this would not keep the interest of the risk takers.

Good points - The discussions of the Mississippi Valley's economic network was great and on any next edition, I would highly recommend further discussions on this topic (i.e. the Planters vs. the Adventurers). However, I assume this topic was somewhat limited due to other's published work as noted. Also, the chapter on Soft Banks and its impact on the settlement of the West was interesting. In addition, the many references to other books was highly appreciated.

All in -- A good book, but a little too much on the game theory. If you are a "Poker Affectionado", enjoy.

I have now read this book three times and I feel I am beginning to understand it. Even on the first encounter, I found it fascinating. The author is a very interesting fellow and his stories involve many fascinating characters. I came away from it with a new way of looking at human behavior (and therefore poker, markets, politics...name your game).

But on the third slog, I am starting to really appreciate how deep Aaron Brown is. This book really does collapse the distinction between financial trading and gambling - and goes on to conclude that both are (in some circumstances) socially-beneficial. Markets and poker games are both financial ecologies - social games seasoned with risk. Long-term success in either context requires that the player find more than a strategy - he must find a "niche" - a way of profitably existing with others over time.

The problem is that the author is just too damn smart, and his editor did not reign him in properly. The poor editing makes the -highly technical- argument difficult to follow.

Admittedly, Brown has set himself a unique challenge: to translate concepts associated with both poker and finance into layman's terms. This was apparently intended to be a book of general interest, simultaneously an introduction to finance for the poker player, an introduction to poker for finance student.

I understand basic finance, but I had no prior knowledge of poker. Brown attempts to dumb it down by defining his terms at the outset, but he is so smart that he keeps slipping back into the "shop talk" of both disciplines. Example:

On page 54 he tell us -in passing- that professional poker players "often exploit their tax advantage by high-variance play, the kind of thing that leads to random-walk results with large standard deviations."

Then, on page 55 -the very next page- he defines a "good" (as in "goods and services").

Now, if you don't know enough economics to know what a "good" is, then my guess is that you will be utterly lost on the statistical tax strategies of professional poker players.

This sort of thing is pervasive throughout the book. I found myself extremely frustrated with the rambling chapter introducing the rules of the various games of poker. At first, Brown is lucid in setting forth first principles: "Poker is a family of games that share hand ranks and betting rules." But he very quickly gets ahead of himself, devoting a large section to the downside of "calling" without ever defining the (poker) term. (I thought he was talking about options trading at first.)

That said, this is a book that repays close attention, and -if you have the time- it is very well worth the effort.

I'm an investment professional with a casual interest in poker, but have never played at the level (stakes, skill) described by the authors. While I can't speak to the book's value to players seeking to improve their outcomes at the poker table, this book should nonetheless be of real interest to many on Wall Street and others who are interested in learning how the spheres of poker and investing overlap. It's well-written, a fun read and provides lots of fascinating anecdotes.

Written in an intellectual but comfortable style that doesn't require too much work to decipher, yet still inspires "light bulb above the head" thought from the reader. The author obviously intended on having the book placed on shelves between "Fooled by Randomness" and "The Education of a Speculator."

While it definitely belongs in the same section, this book lacks the artistic genius of those other two works (which both operated around a central theme and masterfully completed an argument for something not quite definable but undeniably present). Poker Face fails to magically tie everything together and leaves one wondering what the moral of the story is a little.

That being said, the ride is quite enjoyable even if it doesn't really go anywhere. The discussions of the role of risk in economic development are epic. The story of Liar's Poker on Wall Street and how the author is single-handedly responsible for defeating it as a hazing ritual is triumphant. Analysis of earlier break-through works by icons such as Black, Thorpe, Sklansky, and others I never knew about is educational and well worth studying.

If you are looking for trading ideas forget it - there are three or four pages explaining some options arbitrage tactics but that's it (those few pages are the best discussion I have read on the subject, though). If you are looking for poker strategy prepare for an exciting discovery, as the author puts on paper some of the greatest stuff written to date about winning poker - and he does it without mentioning poker hands or even specific poker games. Your heads-up play will be taken to a new level if you are able to grasp it and impliment it.

Aaron Brown's work will make you a better risk-taker, and give you a different kind of appreciation for all things financial. You may even develop a firm commitment to leave the ranks of the sterotype middle-class, in one direction or the other. Hey, maybe that was the point?

I am a serious poker player and am well read in finance (CFA), so i assumed the book would be a natural fit for my interests. However, I have to agree with the other reviewers who said "the book is confused" and the author's "editor did not reign him in properly". It feels like the author is just rambling on without a specific point or idea. It covers too many topics (off the top of my head: hand values, poker history, put-call parity, utility curves, psychology, horse races, society and wealth, then he adds some personal stories). All those topics may have been feasible if they were weaved together better. Unfortunately, he covers some topics superficially and some in painstaking detail. Some areas are written for an audience unfamiliar with poker/finance, then other areas dive into advanced nuances. The book is just not edited well enough to be a satisfying read.

In this book, Aaron Brown illustrates why the probabilistic and game theoretic considerations that are often touted as the foundation of poker theory, have in fact severe limitations when predicting or even explaining actual play.

Similar problems surface when applying game theory or utility theory to predict the decisions of economic agents, for example in the context of financial markets. This is exactly the link between poker and finance and it is also the reason why poker is very different from other casino games.

Brown illuminates the market microstructure of the poker table by analyzing table dynamics and player strategies and he demonstrates how to successfully find and exploit temporary inefficiencies in the micro economy of the poker table.

Overall, this is a valuable book for serious poker players.

This book was interesting, and If I were as passionate about poker as I am about investing, I would have learned a lot.

Brown assumes a deep knowledge of the intricacies of poker in his reader. (which I do not have)

He also assumes that "wall street" means Trading futures and options.

He is insightful about both, trading and poker, though perhaps most insightful about Psychology and deception.

I never knew how deep of a game poker was.

Brown's Idea of a community poker game as an early frontier community bank and a venue for establishing trust in a community was eye opening for me.

As to whichever Financial Times journalist prompted me to buy this book based on a rave Review about its valuable insight into Wall Street and investing, Shame on you.

What I learned could have been put into a two page article, and what I could not learn could have been remedied with a glossary of obscure poker terms.

Traders and poker players, Enjoy.

If wall street to you is a place to look for value and cash flows, as opposed to poker games and technical charts, steer clear of this book.