If you’ve ever played poker, you know what it’s like to be on “tilt.”
The phrase comes from the warning sign on pinball machines that lit up whenever a player tried to “tilt” the machine to get the ball to move a certain way. In other words, it’s a pithy way of saying “off balance.”
When a player goes on “tilt” it’s because he’s overreacting to the results of previous hands, and is now letting that emotion dictate his moves. His decision making has lost all balance.
It’s a condition that, sadly, is not unique to the poker table. It also affects lenders.
What are the different types of tilt? This Pokerology.com article describes six forms, several of which may look familiar to lenders:
Berserker Tilt: The most commonly known type. This is the guy who’s had a stretch of bad luck, or has perhaps lost a hand to someone who made all the wrong moves but somehow won the pot anyway. Now the Berserker is frustrated and playing far too aggressively. He’s mad and gosh darn it, he’s going to get all his money back NOW.
Berserker Tilt (Lending version): Lose a couple of deals to the bank down the street and you can find yourself in “Berserker” mode, hell bent on winning the next one, even if the logical part of your brain is desperately trying to tell you that the numbers don’t add up.
Lily-Liver Tilt: This poor guy lost a really brutal hand – maybe his full house was beaten by a better full house, or his king-high flush was bested by an ace-high flush. The “Lily-Liver” now sees losses around every corner. He’s playing scared, folding every hand unless it’s absolutely certain he has a winner. (And it almost never is.)
Lily-Liver Tilt (Lending Version): You got burned by a deal that was structured well but went south later, through no fault of your own. Now you’re in “Lily-Liver” mode, avoiding making those deals even though, again, there’s sound reasoning to do just the opposite.
Winner’s Tilt: Proof that tilt isn’t always brought on by losses. This player’s won a few hands and suddenly he thinks he’s invincible. Most likely he’s confused luck with skill and thinks he had something to do with the dealer giving him just the card he needed. So in future hands, he’ll ignore all the warning signs and just keep betting because past results tell him HE IS THE MAN!!!
Winner’s Tilt (Lending version): You’ve brought in some deals with shaky fundamentals and they actually worked out in the end. Now you’re on “Winner’s Tilt” and you’ve mistakenly decided that this a viable formula going forward.
Frustration Tilt: This poker emotional state is brought on by, well, nothing. The player hasn’t had any cards to play all night so finally he just decides, “To heck with it, let’s make something happen!” That approach does indeed “make something happen” … it’s just usually not something good.
Frustration Tilt (Lending version): It’s a slow time in your market, so you decide to force the action. You offer loans at significantly lower rates, or you close deals with higher risk ratings, because hey, shaky deals are better than no deals, right? And maybe enough of those shaky deals will hold up to make your gamble pay off, right … RIGHT?
These are all, of course, terrible ways to play poker and terrible ways to make loans.
Every semi-serious poker player understands the basic rules of probability – that the outcomes of previous hands have no statistical relation to what will happen in the present hand (or in the hands after that). The “Tilt Guy” is attempting to defy those rules and it almost always ends badly for him.
Does Cool Hand Luke look like a guy who lets emotion affect his decisions?
Banks need lenders to be like the guy at the poker table who regularly takes Tilt Guy’s money.
We’ll call him “Cool Hand.” (Paul Newman’s character picked up that nickname during a poker game in the classic “Cool Hand
Luke.”)
Cool Hand has the ability to view each hand (or in this case, deal) in a vacuum. He also has the ability to ignore the lizard part of his brain, which triggers quick, thoughtless responses to what’s just occurred. Instead, Cool Hand makes decisions devoid of emotion, based only on the information he has available.
He knows sometimes he’s going to lose deals he deserved to win and other times he’ll be lucky to win deals he probably should have lost. Neither result affects his equilibrium. Cool Hand knows that if he keeps making the correct decisions – based on the right data – he’ll eventually come out ahead.
Mike McDermott? Not a “Tilt Guy.”
So ask yourself, “Are my banks lenders Cool Hands?” You need to be able to quickly and definitively answer “Yes” to this question. If you’re not sure, then remember this helpful piece of advice from Matt Damon’s character, Mike McDermott, in the movie “Rounders.”
“Listen, here’s the thing. If you can’t spot the sucker in your first half hour at the table, then you ARE the sucker.”
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