There are a lot of ties between business, investment, and the game of poker. While poker should not be thought of as something entirely similar (in that for most it is not a reliable way to seek income), it is plain to see that the game involves strategies that apply to business and investment.
This is evident largely due to the fact that countless prominent businesspeople, CEOs, and investors are known to espouse the benefits of poker. A piece at Inc.com cites successful founders of companies like Nootrobox, OpiaTalk, and FattMerchant all as notable poker afficionados –– with Nootrobox’s Geoff Woo calling the game “a perfect microcosm for business.” Meanwhile, we’ve also seen major investment and venture capital figures out of Silicon Valley frequenting poker tables; Yammer founder David Sacks, Inside.com’s Jason Calacanis, and SurveyMonkey’s Dave Goldberg are known to be enthusiasts.
The list doesn’t end there, but the connection is clear: Hugely successful investors and businesspeople see benefits in poker. But what are those benefits specifically? What can you learn from poker that you can apply to an investing or business strategy?
Below, we’ll supply a few general answers to those questions….
Invest Without Emotion
Poker players learn swiftly that playing with emotion often results in losses. A bet gone wrong cannot lead to a hasty “rage bet” on a subsequent hand; a large pot won cannot lead to elated feelings of invincibility. These types of reactionary plays are based on emotion rather than analysis and strategy and as such are less reliable. And where this point is concerned, there are direct parallels with business and investment. While successful business professionals do learn to “trust their gut” to some extent, they also know to make decisions in calm, reasoned, analytical fashion. Investors, as respected as Warren Buffett, have gone out of their way to recommend that others stay calm and avoid emotional decision-making, just as poker players learn to do at the tables.
Determine Your Risk Tolerance
Our article asking “How Do People Get Rich From Investing In Stocks?” spoke to the importance of defining your “risk appetite” as a trader. This basically means assessing your financial situation to determine what you’re able to risk in the markets, and then forming a strategy based on that amount. Here again, poker players essentially learn the same skill. For those who wind up winning over the long term, it is almost second nature to play within a budget –– to determine what they can lose (and thus what they’re able to play with), and base betting aggression on that bottom line.
Take A Mathematical Approach
Unlike blackjack, poker cannot be figured out via card counting, math, and pattern recognition. However, a skilled player can improve their odds of winning each hand by taking a mathematical approach. As Poker.org puts it, knowing if you’re “getting the right price to make a call” is crucial to success –– whereas making “mathematically incorrect decisions” will result in long-term losing. In poker terms, this means understanding the pot odds (the amount in the pot divided by the bet you’re facing) and your odds of hitting the best possible hand with the cards you have. This information helps you to make an informed, numbers-based decision on when to call or fold. In business and investing, more factors are at play, but those with experience in poker will know to take a similar general approach. Decisions should be based on all of the numerical information it’s possible to gather for the best odds of a positive outcome.
Know Your Sweet Spot
Another experience that most successful poker players have is that of finding their “sweet spot.” They play different varieties of poker; they experiment with low and high table stakes and varying numbers of opponents; they try different sites, play in tournaments, and determine their own styles. This can take time, but ultimately it leads a poker player to understand –– based on numbers and results –– where and how to play to be most successful. And this too is a process many in business and investing need to go through. In fact, it even lines up with the primary advice from one of the most famous investors in the world. Per Entrepreneur.com, billionaire Mark Cuban advises people to leverage their “knowledge advantage” and “grow what they know.” In other words, invest where you have knowledge. It can take time to figure out where that is, but as in poker, the process can lead to better results.
Given these lessons, and how closely they align with reliable investing and business principles, it’s no wonder that many see poker as sound preparation for more serious financial endeavors.