"Pokernomics," the title of the fifth chapter of this extraordinary and tantalizing tour de force on high finance and gambling, would have been a more fitting title for the entire tome.
The one given it by Morgan Stanley executive and poker adept Aaron Brown, The Poker Face of Wall Street, risks suggesting to potential readers that it is just a rhapsody on the same ''law of the jungle'' theme explored in Michael Lewis' remarkable 1990 best seller, Liar's Poker.
But Poker Face covers the waterfront of trading everywhere. This book is primarily about demonstrating that gambling, poker in particular but also faro, dice, roulette and other games of chance, have common economic and psychological roots and are governed by similar numerical probabilities.
''Finance can only be understood as a gambling game; and gambling games can only be understood as a form of finance. Many people have no trouble accepting the first part: They believe Wall Street is a big casino. When New York introduced off-track betting in 1971, it chose the slogan: 'If you're in the stock market, you might find this a better bet,' " Brown writes. He is not content, however, with a superficial comparison of making or losing money in New York or Las Vegas. Brown writes that financial products have the same kind of risk embedded in them that goes with craps and roulette.
Brown discounts long-term buy-and-hold investors with diversified portfolios as a small fraction of the action in the stock market.
''No one gets paid a lot of money to sit around worrying about what the average return on equity will be over the next 20 years; no one screams and shouts about it. People do get paid a lot of money, and scream and shout, to trade one stock versus another or buy a stock and sell it. The average investor in the stock market gets the average return; everything else is just gambling.''
It's a tossup which readers will derive the most delight from this book - poker players or financial professionals. Brown is a poker player's poker player, and as much of the book is devoted to explaining poker games, analyzing the probabilities of hands and discussing poker strategy as to financial wheeling and dealing. But some economists may not like it because Brown does not hold their profession in the highest regard. Brown says that two books contain everything he ever found useful in economics - Fischer Black's Exploring General Equilibrium, published in 1995, and John Law's Money and Trade Considered With a Proposal for Supplying the Nation With Money, published in 1705. Law was a gambler.
''In between, you will find some brilliant writing and clever reasoning, and their opposites as well, but nothing I have personally been able to apply with profit,'' Brown writes.
Knight Ridder News Service
