Catching Butterflies

What does it mean to find the cause of an event? In the aftermath of the actions of Kweku Adoboli there will be a trial and doubtless more than one investigation by UBS and the FSA each concerned with apportioning reasonable blame and establishing the facts with a view to preventing such events from ever happening again. But how effective will such endeavours prove to be? And what on earth do the opinions of a poker player count for in such a debate?

I played poker professionally for much of the three years between 1999 and 2002 before eventually tiring of it and setting up a video production company which I ultimately sold five years later. A lot of people ask me why I started playing in the first place but more ask me why I stopped. My first answer to such a question is that it’s hard to compress the emotions of nearly a decade ago into a satisfying soundbite but that eventually it was the chaos that did it for me in the end. Over any given long term period it was clear that I was earning a living but the results of each night were clearly much more dependent on factors outside of my control than those within.

Specifically, in poker, you can’t control the cards. Naturally, everyone rationally understands that but as someone who now uses poker as a metaphor to teach the subject of risk to corporate clients I’ve lost count of the number of times I have seen a table applaud someone who just got dealt four of a kind. It’s a perfectly ordinary emotional reaction – to congratulate the player who just won the hand – but actually it’s crazy.

There is no skill in getting good cards dealt to you. And conversely getting bad cards is no evidence of ineptitude. But try rationally processing that in the middle of a bad night when card after card comes down, killing your bankroll one hand at a time. Interestingly it’s not the bad hands that you have to worry about. It’s second best hands that destroy you. Hands that start off great but suffer from freak outdraws in the later stages which ship the pot to your oblivious opponent.

The simple fact is that the turn of about 5 river cards are largely going to dictate your results for that night. 30 cards will define your week. 100 for the month. Results don’t start to become statistically significant until at least a school term of daily play. Until then the length of the dealer’s nails as they riffle the cards together between every hand will have a greater impact on your finances than all the great reads and raises that you make!

In order to stay sane and play great poker one needs to rationally understand that the way something actually happened is no indicator of the way that something was necessarily likely to happen or somehow “meant” to happen. In and of itself it doesn’t necessarily mean anything. It’s just what happened to happen on that occasion and there isn’t always anything that anyone can learn from it or change in order to prevent it happening again.

The butterfly effect is 50 years old this year. Officially discovered and named by meteorologist Edward Lorenz it derives its title from an image created by plotting the Lorenz attractor for specific values which happens to resemble the wings of a butterfly. Partly as a result of this, it is often understood to refer to the mindboggling mechanism by which a single butterfly flapping its wings in somewhere like Brazil can somehow cause a rainstorm in Reading.

This is not technically misleading although it does obscure the real lesson of the butterfly effect which, more generally, is that it is confluence of a myriad unknowable events which feedback into each other to cause the sum total of events which impact all our lives. More profoundly, I think, is the inverse implication that the incidents and episodes which affect us all profoundly find their origins in events too insignificant to calculate.

If Mohammed Bouazizi hadn’t had his face slapped in a Tunisian market in December of last year, he probably wouldn’t have set fire to himself when he did and inspired a people to rise up against their unelected dictators at that precise moment at the start of this year. Would they have done so anyway? Maybe. But not in the way that they did, and not with the exact consequences and impact on all our lives that this particular revolution will turn out to have as enacted in this way.

Another thought: If Warren Buffet had been able to retrieve messages from his mobile phone he would apparently have received a message from Bob Diamond proposing terms for a deal to buy out Lehman Brothers a day before it finally went under. Asked later if he would have gone for the deal he suggested that it was “entirely possible”. Would the systemic crisis have occurred if one man had been slightly more tech-savvy? Perhaps. But not in precisely the way that it did. The same people probably wouldn’t have lost their jobs. They wouldn’t have impacted those around them in the way that they went on to do. Your world might now look very different. We’ll never know for sure.

Try this one: if the five of diamonds had fallen on the river of a particular game of Texas Holdem in Las Vegas I would have won the jackpot of $150,000. I know for sure that I would not have met my girlfriend later on that day; wouldn’t have stayed in Vegas for the length of time I did; wouldn’t have met my business partner and set up the production company at that point in time; would not have been commissioned by the University of Nottingham to produce a promo and would not have been assigned a representative of the student union to work with – one Kweku Adoboli.

Kweku and I spent a couple of weeks working on that project. I was a thorn in his side for far too long: getting him to show me all the most picturesque locations of the campus; pestering him to get me students for the crowd scenes when he definitely had much better things to do. Who knows what effect I had on his life: the lectures he missed, the people he met and phonecalls he made that he otherwise wouldn’t. Would he have gone to work for UBS had he not met me? Quite possibly. But probably not in quite the way he actually did.

He might have said different things in interview. Met someone else on his first day. Ended up living somewhere else; going out for different drinks with different people; learning different things and perhaps – most importantly – not hitting “buy” when he meant “sell” at the precise point when he is alleged to have done so at the beginning of this whole sorry business. Whatever he went on to do, or not (and it’s important not to prejudge the results of the ensuing criminal trial) he almost certainly would not have gone on to do in exactly the same way. Kweku was by all accounts (and for what it’s worth my own personal experience confirms) a thoroughly decent man who may have ended up doing some bad things.

But as Nick Leeson is at pains to point out: you don’t set out to commit such fraud. You make one wrong decision and find yourself a victim of events to which you react in a totally unacceptable way. Like any hand of poker, it might all have been so different, if a card had flipped over in the shuffle in a slightly different way; if a butterfly had flapped its wings at a different time. The way that Kweku’s life went on to happen is no indicator of the way that it was necessarily likely to happen or meant to happen. In and of itself it doesn’t necessarily mean anything. It’s just what happened to happen on that occasion and the challenging truth is that there might not be anything that anyone can learn from it or change in order to prevent it happening again. But that probably won’t stop us from trying.

A lot has already been written about Kweku’s actions and much more will be said before it is forgotten: about UBS and The City generally and the morality of the people who work within it. Hopefully the investigations that take place will be fair and thorough and make reasonable and constructive recommendations because I’m not saying that there necessarily can’t be anything to learn as a result. That would be bombastic, dogmatic and, frankly, well beyond the remit of a humble poker player.

I’m just saying that of all the factors that people identify as having caused these sad events, no one will blame that five of diamonds for not coming off the deck. And why would they? It is just one of a myriad butterflies; an incalculable number of unknowable events which feedback into each other to cause the sum total of events which impact all our lives. But if it’s that impossible to truly understand the exact causes of an event, how possible is it to truly prevent a similar – or analogous – event from ever happening again?

We do our best. As we should. But we may as well try catching butterflies.

Posted 04:20pm by Caspar and filed in Risk, Uncertainty