It could be argued that poker is the new golf. But maybe that’s a bad argument. Both are now ubiquitous passions in the world of business, and both are thought of (Michele Wie and Annie Duke, notwithstanding) as male turf. But while golf is all about networking to make deals happen, poker, at least in a business context, is more about learning strategies to make deals happen. And not only happen, but happen in a way that will leave the poker-savvy negotiator a winner.
Letting women in on the basics of Texas Hold-Em, by far the most popular current poker iteration, is law firm ReedSmith’s "Women Only Texas Hold-Em Workshop" on Thursday, November 3, at 6 p.m. at the Newark Club at One Newark Center. Call 609-987-0050 for more information.
The workshop is being conducted by Greg Dinkin (www.pokermba.com), author of "The Poker MBA: Winning in Business No Matter What Cards are Dealt You." Dinkin, who earned a B.S. in hotel administration from Cornell University, holds an MBA not in poker, but rather in finance, from Arizona State University. He has worked in accounting for Inter-Continental Hotels and for PricewaterhouseCoopers. He is also co-founder of Venture Literary (www.ventureliterary), a literary management and production company.
Here is an excerpt from his book:
In poker and business, it pays to keep your cards close to the vest. Letting your opponents know what you’re thinking gives them an edge.
You’re negotiating with a prospect, and your job is on the line to close this deal. In the proposal, you quoted the client a price of $30,000, but you’d be willing to go as low as $20,000. So do you walk in the door and say, "Oh, by the way, we always quote the retail price, but my bottom line is really twenty grand?"
Any good negotiator will tell you that it doesn’t pay to let your adversary know what you’re thinking. An honest person would contend that it’s wrong not to offer your best price up-front. A realist, a poker player, or anyone still in business would tell you that keeping your cards close to the vest is all part of the game. Being crafty doesn’t mean Iying or being manipulative. It does mean keeping a poker face and applying the same techniques that a poker player uses every day.
Few people know how to handle conflict, and even fewer enjoy it. The ones who can conquer this fear are the ones who thrive as negotiators. If you’re negotiating in the first place, it’s because you want to do business with a person, not against him. That’s why the first step is to take the time to step into the shoes of your opponent. The second step is to recognize what motivates people. Fear and greed is the easy answer, but you have to dig deeper and get to know the person before you can learn his hot buttons.
At the end of a negotiation, the key is getting what you want, while still allowing your opponent to get what he wants. You must be willing to compromise and make concessions – as long as you don’t make a concession without getting something in return. The ultimate test of a negotiation is when you can say yes to the following questions: Did I get what I want? And will they want to do business with me again?
You’ve finally done it. After spending eight months on a business plan and another year soliciting investors, you have convinced Victor, a partner in a venture capital firm, to give your company its first $1 million of seed capital. Just before you shake on it, Victor says, "Oh, by the way, we want 35 percent of the equity in the business, not 30 percent."
You’re so shocked when you hear it that you’re not quite sure what to say. Balk at this proposal, and your business may never get off the ground. Accept Victor’s terms and set the precedent for being taken advantage of at every turn.
Throughout your presentation, you were studying Victor’s body language to pick up tells and reading his poker face. He pretended not to be listening at times. He talked about other big projects he was working on. He stressed how few new ideas the firm was embracing, especially after the whole dot-com slowdown. On the surface, things looked grim. Fortunately, you knew the first rule of reading people: Strong is weak and weak is strong.
You read Victor as weak when appearing to be strong, and you were right. He wants to back this deal, but he wants it on his terms. He also saw something in you that makes him feel like he can get away with it. Perhaps in your eagerness to win the deal, you didn’t keep a good poker face and acted like you needed the money. Victor sensed your desperation and went right for the jugular.
The problem is that you have nothing else lined up. You just flew 3,000 miles for your one and only meeting in Silicon Valley, and if you don’t go home with cash, your partner has vowed to go back to his day job. You’re operating from a position of weakness, and Victor seizes the advantage.
You have three options: call, fold, or raise. Folding would mean saying no thanks and walking away – clearly not the outcome you want. Calling would mean taking the deal on Victor’s terms, which isn’t ideal, but still viable. Raising would mean coming back with a deal of your own.
You stop to think about the risks. If you insist on 30 percent, there is the chance that he will play hardball and counter by saying, "If you want to negotiate like that, make it 40 percent – take it or leave it." You decide that based on your previous dealings with Victor, this is unlikely. You further reason that if you just call, you have shown weakness. You know that your "table image" is important and it’s critical to set the tone right now that you are a strong negotiator.
You check Victor’s body language, and it tells you that your grace period has expired. It’s time to speak, and any further hesitation will show confusion on your part. You calmly state, "Victor, the reason I was so thorough in going over the numbers was so that you precisely understood the valuation. Wasn’t it clear that $1 million would buy 30 percent of the equity?"
Depending on the type of poker game you’re playing, there are between two and five betting rounds. Your action in each round is used to set up the subsequent rounds. This type of strategic thinking has bought you some time. Rather than try to strike a deal right away, you have taken the initiative in the next round by asking a question. Good poker players know that you don’t win the hand on the first round of betting. The first round is used to set your opponent up for the final round, when it’s time to win the pot – the equivalent of closing the deal.
Victor doesn’t take his eyes off of you and starts to stiffen up. You sense that he wants this deal and won’t lose it over a few percentage points, but at the same time, he wants to win this little battle. It’s his way of showing his power and putting you in your place.
Poker players often say, "When you win, you lose." Like when you win a big pot, but it so disgusts the biggest sucker at the table that he decides to cash in his five grand in chips and call it a night. Or in business, when you win the bid on a big construction project but, because you underestimated your costs, end up losing money on the deal.
Your purpose is to win in the long run, not win a few hands. If you become so intent on beating him in this negotiation, you just might lose the real game, which is getting money for your business. You decide that you have to find a way to let Victor win this battle, and still get what you want. Doing so means making a concession.
When he again says that he wants 35 percent, you nonchalantly say, "Victor, if you want to relinquish the two board seats and agree to invest another $1 million in six months, you can have 35 percent." You know that this hand is far from over, and you have set Victor up for the next round.
"That’s not possible," Victor responds, and with a laugh adds, "But if you’re going to be such a damn tightwad, I suppose I can agree to 33 percent."
Victor blinked first. Rather than show the patience and strategic thinking that a poker pro would exhibit, he tried to win the hand right there, too early in the game. Now that you are thinking like a poker player, your thoughts have moved ahead to the next round of negotiating. The reason a good poker player doesn’t bet all his chips right away when he has a great hand is that he’s not trying to merely win the pot at this point in the game. He’s trying to position himself to win the most from the pot.
Victor also made the big mistake of giving up something without asking for something in return. You now know you have Victor right where you want him, but you also realize that it’s too early to try to win the pot. You feel like 32 percent is a fair number, and you know you’re going to have to concede something in order to get this deal done. You also know that if you bluff and say you have other meetings set up, you run a high risk of getting caught. And if you lie to ctor about meetings that don’t exist, you very well may ruin your name in Silicon Valley – the equivalent of getting caught marking cards at the Bellagio.
To get Victor to 32 percent, you decide it’s going to take two more rounds of negotiating, and so, after a short pause, you say, "Thirty-one percent if we can get the deal finalized by the end of the week – and I’m never going to hear the end of it from my partner about that one percent." You then reach out your hand and say, "Do we have a deal?"
You stuck to the rule about not giving something up without getting something in return by agreeing to take a smaller percentage in return for a prompt payment. With the statement about your partner, you have introduced a "bad cop" to the scenario. Victor has already made a mistake by telling you, through his actions, that he doesn’t need approval from anyone else. Unlike you, he can’t play the "bad cop" card. Just as you anticipated, Victor says, "Let’s split the difference and make it 32 percent."
"That was easy," you say to yourself. In spite of what you told Victor, you now have a deal that both you and your partner can live with. You also know two very important things:
Don’t give anything away without getting something in return.
Let your opponents feel as if they have won.
Victor isn’t going to feel good about the deal unless he feels like he has won. By agreeing too fast, Victor won’t enjoy his power trip, and worse, he’ll second-guess himself for not negotiating harder.
So matter-of-factly, you answer, "Thirty-two percent and you give up one of the board seats. If not, I can still live with 31 percent."
Victor hems and haws, and finally says, "Look, 32 percent and we keep both board seats – and you’ll have a check for $1 million before the end of the week. Take it or leave it."
You may be able to get him down to 31.5 percent, but know he won’t walk away feeling as good. By staying focused on the important battle, you have accomplished your goal. Now you just have to finish the hand in a way that cements your future. Conceding, you reach out your hand and say, "You drive one hard bargain, Victor. More important than the 32 percent, it’s great to have you in our corner. You got yourself a deal."