The Business Case for Empathy


Sales and Negotiation both require you to step into the other person's shoes and see things their way.

Sometimes, however, what they intend to show you from their point of view is a trick. How can you sort real signals from fake ones?

One of the best parlour game that teaches this skill is Poker. You don't need practice Poker to obtain this skill, but looking at examples and analyzing game will help.

But, this is difficult work because acquiring strategic empathy is hard.  We do have flashes of insight about what others think about us.  Sometimes we act upon those insights with good results -many more times we fold our hands, when we shouldn't have.

Here is a terrific & tough example from the The Art of Strategy, by Dixit and Nalebuff, which we are going to re-write to focus on real versus misleading signals.

There are several things you have to understand about Texas Hold'em and skilled Poker players. (I have made this very simple)

BackGround to Poker

  1. In Texas Hold'em, each player gets 7 cards to make up a 5 card hand. Two cards are hidden from the other players, while 5 cards are community cards -anyone can use them.

  2. A pair of Jacks, JJxxx, will beat a hand that is Ace high, Axxxx.

  3. Poker players are constantly trying to figure out what the other player has based on how the bet. So, they are constantly trying to see how things look from the other player's point of view.

  4. Poker players are some of the most empathetic and completely unsympathetic people in the world. Which accounts for some of their charm.

  5. Finally, Poker players ignore sunk costs. If the size of pot versus the size of the bet -no matter how much they have previously bet- is favourable compared to their chances of winning, they accept the bet.

Rational Judgment & Mere Calculation

Here is the example from the Art of Strategy, with some of the historical material left out. Which is ok, because it appears to be wrong in parts, but not the main result.

Cast of Characters

  1. Randy Heeb, RH, -young professor playing in his first major Poker championship.

  2. Amarillo Slim, AS, - older, very experienced Poker champion, who was the runner-up last year.

The Hand from RH's Point of View.

Round 1 - Draw

RR has JJ $3,800

AS has ?? $4,200

Pot is 0

Betting Round 1

RH bets $175

AS raises bet to $500

RH matches bet

Pot is $1,000

Nobody else is this game, they have all folded.

RH judges that AS has one of two hands

  1. Ax

  1. Kx

RH calculates that if on the next draw, 3 community cards, either an A or K shows, and AS bets, then it will be unlikely his JJ will win. (Rule 1)

Round 2

Community cards - 2 of spades, 3 of diamonds, K of Hearts.

AS to bet

AS bets $1,000.

RH calculates that to win $2,000, he would have to spend $1,000. Pot odds are 1/2.

RH calculates that the chances of JJ beating KK with 2 cards left is lower than 1/2.

RH folds, and never wins the Poker Championship he was supposed to win the next year.

Rational Calculation informed by Empathy

Now, lets look at this reasoning again, but with empathy, or putting yourself in their shoes.

RH sees the K Hearts in the community cards and his face shows disappointment.

AS sees RH's disappointment.

AS bets $1,000.

Empathetic Inference 1: But, RH sees that AS also saw RH's disappointment.

RH sees from being in AS's shoes that AS has likely has RH's Rule 1 or strategy - to fold if a A or K showed and AS bet.

And so from being in AS's shoes having guessed RH's strategy, it is reasonable to judge that AS would fake a signal of having either Ax or Kx by betting large.

Empathetic Inference 2: Finally, RH judges that AS is not seeing things from RH's point of view. RH judges that AS has not realized that RH knows AS knows Rule 1.

RH goes all in, bets his entire stack.

AH matches the bet.

Pot = $7,600

The next two cards are: 8 of clubs and 4 of hearts.

RH's hand of JJxxx beats AS's hand of Axxxx.

RH wins, and the next year wins the championship.  True story. RH never won another championship, either.  Also, true story.

Summary and Questions.

1. How does RH know that AS has been fooled?

2. Why doesn't AS, a better player, know that RH has fooled AS?

3. After the games is played, does AS credit RH with making the superior play or just being "lucky"?

4. How does RH know that AS is playing only on the information that RH was disappointed?

5. How does AS know that RH isn't faking disappointment?