Most people dismiss poker as a mere leisure activity, but esteemed entrepreneurs and investors actually learn a lot from the card game. American investor and endowment fund manager Dave Swensen was actually well-known for his passion for teaching and playing poker. The investor who popularized the Yale investment model would play poker deep into the night. This was due to his sheer love for the game and the opportunity to discuss investors' skills and issues with other players.
But apart from being a great learning opportunity, some also play the game to win money. Espen Jorstad is proof of that; he is the most recent winner of the prestigious poker tournament, the World Series of Poker. In fact, he took home a $10,000,000 pot from a $10,000 buy-in. That’s the sort of investment return that anybody in the business would be happy with. However, it didn’t come from sheer luck; there are elements to a game of poker that make some successful and others not. Those same attributes can be found in investment firms across the land, but what are they?
Poker is a simple game of skill and chance, much like an investment. In poker, you can easily stack the odds in your favor despite the cards being dealt at random. For instance, calculating poker odds will allow you to weigh whether a hand is worth playing based on the factors you know. Of course, other elements could affect that hand. But, there’s always a degree of calculation that will help you along. In investments, while there are unknown variables such as future performance, you can make a skilled decision based purely on information you know. You may get hit with unknowns in investing, but often you have signs you can heed. Think about things such as impending inflation. Then, use this as a factor when calculating whether to place an investment or not.
Emotions can be troublesome; they cloud your judgment in poker and investing. In poker, if you let your emotions take over, you may overplay a hand. This is exemplified at the end of the popular poker film, Rounders, where a character called Teddy KGB becomes too emotionally attached to beating his opponent. He stops playing the odds, stops calculating the risk, and loses the hand. The same can be said for investment; after all, making emotion-based decisions can only harm your stock market portfolio and other assets. It's recommended that you slow down with your strategies or get expert opinions to ensure that you won't let emotions cloud your judgement in investing. By maintaining a rational mind, you can accept your standing and make the most out of your hand or your portfolio.
Following your calculations, always be prepared to walk away and not overplay your hand. There’s always potential to wager on a decent hand, only for it to lose value as they reveal more cards. You could chase your losses or ditch and walk away. Much depends on what you have left to play with and whether the hand is salvageable. But, you might have to acknowledge your losses and move on. In investment, if something starts going south, you could lose a lot more money trying to back it further. Or, you can continue to show blind faith and trust. Knowing what money you have left and not overreaching is a fundamental skill.
Poker skills may seem very different from investors skillsets. However, there's a good reason why investors play the game so often. By using your investment knowledge, you can properly manage your bankroll and circumvent the risks to win the game.