How Brokers Wind Down – Part One, Liar’s Poker

As some of you know, I started my career on a currency options desk in Tokyo in the early 90’s. Not quite as glamorous as Wall St but we were serving Wall St banks who were often the market makers for the crazy Japanese banks like DKB, LTC and Sanwa. The Japanese were undoubtedly the titans in the room, often requesting prices in synthetic forwards on upwards of 100 a leg (a $200 million deal) and then lifting offers and hitting bids with a sharp “ALL MINE” or “ALL YOURS” with little regard to slippage. It was a commission game, and to be honest, didn’t require much in the way of intellect. They were just numbers, a lot of shouting, and throwing desk objects at the board boy (sorry Sam!).

It was no scene from Wolf of Wall Street although there were the sporadic bond traders driving Ferrari Mondials to their mansion in Aoyama. Note that what the Japanese call a mansion is usually a small (by Western standards) apartment often referred to as a 2, or 3LDK (3 referring to the number of bedrooms, and LDK -Living/Dining/Kitchen). My boss was a rather eccentric Brit who rode to work on a Harley sporting a WWII German helmet. Cocaine and Margot Robbie were nowhere to be found although we did encounter some weed and “hostesses” at the local dive in Roppongi.

We entertained ourselves during market lulls with stupid antics like offering an OL (Japanese “Office Lady”) $1000 to shave her whole head or taking a pair of scissors to the necktie of a new broker after his first deal. I myself, won a pooled taking of just over $1,500 for eating 20 Cadbury Cream Eggs in 30 minutes.

But often we would get our bills out and play Liar’s Poker.

Now Liar’s Poker, the game, was brought to light by ex-Salomon Brothers bond salesman Michael Lewis in his 1989 semi-autobiographic novel of the same name. Lewis later went on to author bestsellers like Moneyball, The Big Short, and Flash Boys.

The book opens with Salomon CEO John Gutfreund challenging bond trader John Meriwether to a game of Liar’s Poker for $1 million. Needless to say, we usually just played for the bills in our hand.

Liar’s Poker - THE GAME

There are numerous variations of the game but all are similar and entail a mixture of understanding probabilities, statistical reasoning and bluff.

Requirements: 3 players or more + currency in the form of bills of any denomination or currency.

You start by each player taking a random bill from their wallet (we usually went with JPY 1,000 or sometimes JPY 10,000 notes)

Now ignore the letters before or after the unique serial number on your note and just focus on the 6 to 10 numbers which represent your hand and should not be shared until the end.

Next decide the hierarchy of the numbers (usually zero being low, and nine high)

This note on the right for example has One 2, One 3, One 4, Two 5’s and a 7 (not a very good note to play with).

One player would get the ball rolling perhaps by saying:

“One 9” - With this, he is basically saying that there is at least one 9 amongst the serial numbers of all the notes being played. The next person (whether you are going clockwise or anticlockwise) will then call out a higher hand, like “Two 3’s” or “Three 9’s”. This would continue until someone calls “Bullshit” or more politely “Bluff”. So for example, if someone calls “Six 7’s” and is called out, the players display their notes for all to see, and the number of 7’s in each serial number are counted and totalled. If there are six or more 7’s, the guy who was called out wins the note of the caller and if less than six 7’s, the caller wins the other guys note.

Sounds simple right? Where it gets interesting is when you bluff and double bluff your opponent, perhaps by starting off strong by saying with confidence “Five 9’s” when in fact you don’t have any 9’s in your serial number.

I once secured a job on a Fixed Income desk for a major Japanese bank by beating the trader at a round of Liar’s Poker in a pub. I was actually fortunate enough to have gone to the ATM earlier that day and my notes were serialised, all containing four 8’s! – I had no idea at the time my interview would be a game of Liar’s Poker – Honest!

Dean Ashley Owen – Co-Founder, Quimojo Global Campus Recruitment, and 25-year expatriate.

Watch out for –

How Brokers Wind Down – Part Two, The Spot Game