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Liar's poker is a game of strategy and chance that was very popular on Wall Street in the 1980s. Despite the name, the game is not played with cards, but rather by using the serial numbers on dollar bills. The game was popularized in a book by Michael Lewis called Liar's Poker that documented the culture of Wall Street in the 1980s in a very frank way. Upon release, the book was a sensation, as it exposed the parts of Wall Street that are usually hidden from members of the general public.
In liar's poker, people issue a series of bids, guessing the number of instances of a number across the serial numbers on the bills held by all players, such as “three sixes” or “four sevens.” The goal is to be the one with the highest accurate bid. Liar's poker requires a knowledge of statistics, to calculate the probabilities in the game, along with some luck, as well as boldness. As Lewis documented, the game was very popular among Wall Street traders in the 1980s.
Liar's Poker demonstrated that traders gambled on almost anything, from when associates would fall asleep to the movements of the market. Lewis suggested that gambling was used by some traders to relieve the stress of the high stakes, high pressure world of Wall Street trading, but that it also contributed to reckless trading decisions, as traders started treating their work like another gambling game.
This game rewards people who are clever, somewhat sneaky, and willing to go out on a limb when it comes to placing bids. The same holds true for trading on Wall Street, where people who make bold moves have a potential to win big, although they can also fail spectacularly. Liar's poker is a reflection of the traits and attitudes that dominated Wall Street in this era, and some traders working in later decades suggested that not much had changed about Wall Street culture, with traders continuing to gamble with their trades and anything else within reach.
Numerous exposes from books to Congressional hearings have criticized Wall Street's reckless, high stress culture, suggesting that brash attitudes among traders led to hazardous trading decisions, including decisions with far-reaching impacts on the economy. Traders continue to be trained to be aggressive and daring and are rewarded by their firms for taking gambles that turn out well. While spectacular failures tend to be highly publicized and discussed among traders, they are not necessarily taken as object lessons.