For my book report, I am reading “Liar’s Poker,” written by Michael Lewis. For my first part of my book report, I will be summarizing and analyzing the first chapter of the book. While the chapter is short, it pretty much describes the subject of the rest of the book, and I feel that it is necessary for it to have its own report. The rest of the chapters are more inter-related, and ergo will be the subject of later reports. The first chapter of the book is entitled “Liar’s Poker,” and starts by introducing the setting of the chapter, which was Wall Street in Ney York City in 1986. The author, who is an employee of Salomon Brothers, one of New York’s biggest investment banks, tells a story he will never forget; a story of what exactly liar’s poker is. The author gives the profile of John Gutfreund, the chairmen of Salomon Brothers. One day he decided to challenge John Meriwether to one hand of a game called Liar’s poker. Meriwether was considered the cream-of-the-crop in terms of bond salesmen within the company, and in the entire city of New York. In addition to this prestigious title, he also served on the board of Solomon Brothers, and was considered the king of Liar’s Poker. He made hundreds of millions of dollars for the firm from trading bonds. His astounding success can be credited to his daring personality, and ability to hide his state of mind.
The author then describes what exactly Liar’s Poker is. Each participant would hold a dollar bill against their chest, and try to fool the other players as to what the serial numbers on the dollar are. A player would start by making an initial bid by saying something like “three fives.” This means that every bill that is being held has at least three fives in the serial number. The next bidder can either bid higher by saying something like , “three eights, or five fives,” or challenge the pervious player’s bid. Bidding persists until all players agree to challenge one individuals bid (Liar’s Poker 17). Ultimately, players want to bluff others into believing they have don’t have a good hand, when they actually do, or bluff that they have a good hand when they really don’t. Players have to determine probabilities, risks, and profitability when making decisions during the game.
Gutfreund entered Meriwether’s office and challenged him to a hand of Liar’s Poker, with the loser to pay $1 million to the winner. Meriwether was quite shocked by Gutfreund’s offer, since Gutfreund was always an outsider to the game. Meriwether decided to subliminally play Liar’s Poker with Gutfreund by raising the stakes of Gutfreund’s offer from $1 million to $10 million. Clearly Meriwether was bluffing, but since Gutfreund was an amateur Liar’s Poker player, he was quickly defeated by Meriwether and decided to reject his offer.
As I read this chapter, I could not help but think that the game of Liar’s poker possesses many characteristics that the Carter Racing Case had. In the game, players have to calculate probabilities of winning, just as we had to calculate probabilities of certain outcomes such as obtaining the tire sponsorship, or retaining the oil sponsorship. We evaluated the probability of success fully obtaining the desired results. We also had to decide if out decisions were smart risks, just as players of Liar’s poker have to. Players of Liar’s Poker also have to decide who is bluffing, and who isn’t, much like how we had to decide which information in the case was reliable, and which was not. In the case, each team had to decide whether the mechanic’s data relating to his prediction as to why our engine had previously blown up was legitimate or not. Most groups determined that data was irrelevant, which would represent a bluff in Liar’s Poker. I would venture to say that even the choice to play Liar’s Poker is similar to the decision we had to make in the racing case. If one chooses to play Liar’s Poker, he or she is risking a sum of money in hopes to earn even more money. If one chooses not to play, they are taking the safe route and are comfortable with the fact that they will not make any extra money. Similarly, in the racing case each team had to decide whether to negate the possibility of engine failure by risking everything and racing, or decide to play it safe by not racing and accepting their current financial situation. I feel that in terms of my group, we would all choose to accept Meriwether’s new Liar’s Poker offer because we all decided that the best decision the team in the racing case could make was to risk everything and race
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